Robert Kiyosaki is one of my all-time favorite investment gurus. In fact, it was his Rich Dad, Poor Dad series – especially the first book in the series – that motivated me to start buying multifamily rental homes as an investment strategy. It’s no wonder he’s sold more than 20 million books worldwide!
Importantly, the Rich Dad, Poor Dad series does not present a step-by-step blueprint to start buying realestate, so if that is what you need then you’ll be better served looking elsewhere. Conversely, the Rich Dad, Poor Dad series is more about a philosophy of making money, one in which the traditional rules of the game no longer apply.
The embedded video below focuses on these non-traditional rules; specifically, what the rules are, and how changing your mindset around these rules can empower you to take action. So if you want to get out of the proverbial rat race, I would highly recommend that you spend 10 minutes or so and check out the video right now!
THE CASH FLOW QUADRANT DIAGRAM
Robert Kiyosaki uses a diagram he calls the Cash Flow Quadrant Diagram to illustrate the core foundation of his philosophy. As the name implies, the diagram consists of 4 quadrants.
The first quadrant (E) represents an employee. Someone falling in this quadrant has a core value of security, and as such will gravitate toward seeking a safe, secure job with benefits. The second quadrant (S) represents the small business owner / self employed. You might hear someone in this quadrant saying: “If you want it done right, you have to do it yourself!” In this case, the S does not stand for self-employed or small business owner; it stands for “solo.” The third quadrant (B) stands for Big Business. Someone falling in this quadrant is most concerned with finding good people, establishing an efficient system, and facilitating a strong network. Unlike the S’s, the B’s do not want to run their company themselves; rather, they want to find good people to run it for them. Finally, the fourth quadrant (I) represents investors.
Basically, you will want to be on the right hand side of the diagram – either in the B or I quadrant. These are the people that build and own assets, whether they are rental homes, commercial realestate, online businesses, or something similar. The people on the left hand side – the E or S quadrant – work hard their entire lives to make people on the right hand side rich. Thus, people in the E and S quadrants work hard for their money, while the people in the B and I quadrants let their money work for them; in other words, the core value of B’s and I’s is not security, it is freedom.
Of course, what Robert preaches is not a get rich quick scheme by any stretch of the imagination. It takes time and hard work to build a business. Yes, once you have income-generating assets that are successful, you will start enjoying passive income from them. But it can take years of hard work to reach this payoff point, so you must be fully committed. And you cannot be fully committed, whether your goal is to buy 1-2 rental homes or build a realestate empire, unless your overarching philosophy and core values change. And that, my friends, sums up the video nicely.