Last night I had the opportunity to a attend a great presentation in Toronto, with my business mentor Leanne Grechulk and another amazing female entrepreneur, Kate Northrup Moller (yes, she’s Dr. Christiane Northrup’s daughter). The energy at the event was incredible – the room was filled to capacity, in fact there were probably almost 40 people standing during the presentation. What I enjoyed most of all was the opportunity to spend an evening out of the house with good friends and to be inspired. It’s amazing how different my perspective is now that I have a child.
One of the parts of the presentation that really stood out for me was when Kate talked about Robert Kyosaki’s Cash Flow Quadrant. Many of you have probably read Rich Dad, Poor Dad by Kyosaki. I have read it a few times, although it’s been a few years. One of the most interesting concepts that he talks about is the Cash Flow Quadrant. Kate talked about the quadrant in detail, but I’ll just summarize here. I suggest reading the book for the full picture. The first quadrant, E is the employee quadrant. This is probably where most people fit. You work for someone else, who pays you a salary or hourly wage. A few benefits of this quadrant include paid vacation, medical benefits and possibly (though more rarely now) a pension. A few disadvantages are that you have to work for someone else, on their schedule and you will never earn more than the boss.
The second quadrant is for those people who get tired of working for someone else, so they become Self- Employed. I am a self-employed French tutor. The advantage of this are that I don’t have a boss, I can choose my clients and my work hours. The disadvantages are that I basically own a job – without the vacation or benefits, because if I don’t work, I don’t get paid. And if I’m sick or my clients are sick, I don’t get paid. And when one of my clients cancels or decides they no longer want lessons, I’m out looking for new clients again.
The third quadrant or Business Owner quadrant is where we can start to enjoy a little bit of freedom. Here, you own a business that has a system that works for you. There are many examples of true B businesses, including network marketing, franchising or being a best-selling author or platinum artist. All of these types of businesses allow you the opportunity to make a passive or residual income, through your system. I also own a B type business in network marketing that pays me a residual income and as I continue to build it over the next few years, I look forward to being at a point of true freedom – meaning that my residual income is greater than my monthly expenses, so that whether I work or not, my lifestyle is paid for. How cool is that?
The fourth quadrant, I, is the investor quadrant, where you money is working for you. It takes a successful B quadrant business in order to have the cash flow to really participate in the I quadrant.
Take a look at where you stand right now, are you in the E, S, B or I quadrant. Perhaps, like me, you are in two quadrants already. I’ve been in the E quadrant before and for me, it’s not a place where I am happy. And although it’s difficult to find accurate stats, anywhere from 20-55% of you aren’t happy being an employee either. As much as I like being my own boss as a French Tutor, for reasons explained above, this is not a business that will ever allow me to have freedom.
And that’s what this is all about – True Freedom – do you have it? Do you want it? Does you really understand what that means – and the definition may be different for many of us. I’m working towards the freedom of having a residual income that is larger than my monthly expenses – and then, we’ll be free. We can work on building wealth from there. What do you think? What is True Freedom for you? Do you agree with Kyosaki’s model? Check in below, I’m looking forward to your comments.