I recently read the book Cash Flow Quadrant by Robert T. Kiyosaki (of the Rich Dad series) at the recommendation of my mentor coach. It was a very interesting read and one that is crucial if you are to understand your own financial mindset and how that influences your ability to accumulate wealth.

In the book, Kiyosaki breaks down the quadrant as follows:

E (employee) B (business owner)
S (self-employed) I (investor)

These quadrants represent the distinct ways you can earn money. Each also represents a particular mindset and set of behaviors that accompany people who are successful in each quadrant. No one quadrant is inherently “good” or “bad”, but he contends that the only way to truly accumulate wealth and experience financial freedom is to be successful as either a B or an I.

Why is that? Well the main reason is that for the E and S on the left side of the grid, they must work hard for their money. They literally trade their time (and skills) for money. There is a limit to the amount of money you can potentially earn because there is a limit to your time (24 hrs a day X 7 days a week X 52 weeks a year, etc…). He also makes the distinction that the those folks on the left side of the quadrant work for their money while those in the B and I categories have their money work for them. Clearly this is a good and preferable thing!

What he explains at great length and I totally agree with is that there are certain traits and personality styles to the folks that fall into the quadrants. For instance, an employee is driven by the need for security. After all, is there any other reason someone would want to toil for a big corporation if it wasn’t for the promise of consistent cash flow in the form of a paycheck and ongoing benefits? Even today when a “secure” job is far from being “secure” like it was 30 years ago, it is still far more predictable than building your own business or becoming a venture capitalist. That doesn’t mean to imply that the B or I individual embraces all kinds of risk and randomly throws money around. That couldn’t be further from the truth. A truly successful B or I does a lot of due diligence, is highly educated in the laws of money, and hires experts to be part of her success team. They are just more willing to take a risk, potentially fail or even succeed, and then bounce back onto bigger and better things without having a coronary over it.

Based on your current career, in which quadrant(s) do you fall? (Oftentimes we span multiple boxes and that is just fine). Where would you like to be? And, what is your personal mindset with respect to money? Have you been taught that there is only one way to make a living (for instance, work hard every day for a big employer until you retire or die, whichever comes first)? Or, are you open to experimenting with new ways of doing business and making money? I know for me busting through the belief that my family and those around me instilled in me – you need to work for a good company – has been a big mental hurdle to overcome as I build my own business. Maybe you fall somewhere in between.

Regardless of where you are now or where you yearn to be, Rich Dad points out that the single most important thing you can do to accumulate wealth and start having your money work for you is to invest. That doesn’t mean speculate. It means a consistent, ongoing system to pay yourself first and then get the proper advice as to how to best invest that money. That is certainly sound advice and a strategy everyone can put into action right away even if it is a small amount of money each week. Over time that money will grow and grow as it starts working for you.