Cashflow Quadrant - Guide to Financial Freedom is a classic book of Rich Dad Poor Dad series for popular over 20 years. The author Robert Kiyosaki introduces a unique and clear concept about the magic of cashflow of money to overview 4 types of making money. This is a MUST READ book for building up the fundamental of personal finance.

The book is divided into three parts, namely:

1. Four quadrants of cash flow
2. How to take advantage of
3. Seven Steps to Success "B" and "I" Quadrants

1. Important concepts - the four quadrants of cash flow, also known as the four quadrants of wealth.

"E, S, B, and I quadrants" are the core values that this book has always mentioned. These are people with different cash flows. Usually a person will be in one or two roles, and this also determines your source of cash. They mean:

E General employees, wage earners: working for others (employed by others, that is, people who receive a salary)
S Freelance worker, expert: you work for yourself (on the left side of the quadrant with ordinary employees)
B Entrepreneur: own independent business (hire employees to do more important things for you)
I Investor: Use money to make money (what to invest in? People who invest in B)

This is a concept defined by the author's understanding of the financial world.

There is no right or wrong in which quadrant you are in. This is not a black-and-white relationship. Everyone can choose the quadrant that suits them, or even be in different quadrants at the same time. Just like a person can be a son, a husband, and a father at the same time.

What is important is that the author uses the definition of quadrants to let us understand the language spoken by people in different quadrants, that is, the values hidden behind what a person says. When a person cares about something, he will do it → Belief determines action.

2. Play to your strengths

to be, to do, to have
Be, Do, Have

This paragraph is more inclined to reiterate the mentality and methods that the author should have in "B" and "I".

Among these three processes, I think the most critical one is "becoming". For me, this concept is also self-identity.

Become: Find your passion in life, establish your goals, and build a system step by step.
Do it: stay patient, keep learning, think rationally, be brave in practice, and keep repeating this process
Possession: In the end, something will definitely pay off!

3. Seven steps of B&I quadrant

It is also a paragraph where methodology is interspersed with mentality.

In the process of self-study, these methods have been slowly ingrained in my blood and put into action.

The seven steps of the B&I quadrant are listed below:

personal financial report
Set 1y/5y financial goals
Pay off debt + pay yourself first
Continuous learning
Find a mentor
small scale action
keep the faith

The conclusions of the book are:

1. Rich people don’t work for money

Robert Kiyosaki discovered from the words and deeds of his rich dad that "the middle class works for money. But the rich don't work for money, they make money work for them." I really like the spirit behind this passage. It provides two great ideas about how rich people view money.

First, rich people do not make money without working.
Many rich people love their jobs even more than the middle class. Rich people continue to grow and expand their knowledge through many challenging jobs. They gain more inspiration, insights and business thinking through work. What they look at is not only the "current price" of job salary, but also the "future value" of improving themselves through what they learn at work.

Second, the rich value investment rather than consumption.
Although my rich dad was rich, he was very frugal. He drove a cheap car and lived in a cheap house. On the contrary, the middle class often falls into a vicious cycle. They take out loans to buy nice cars, houses, and luxury goods. They seem to have a prosperous material life, but they spend their whole lives in exchange for wages through hard work. Rich people concentrate on investing money in assets and use the interest and surplus generated from the assets for consumption.

2. Develop financial IQ: assets, liabilities, cash flow

What impressed me most about this book was that I understood the concept of "cash flow" and further improved my financial IQ. Robert Kiyosaki distinguishes the things people own into "assets" and "liabilities." He defines "Assets are things that put money into your pocket, and liabilities are things that take money out of your pocket."

The poor's cash flow is roughly equal to their income and expenditure. They cannot accumulate enough assets and find it difficult to borrow from banks. In addition to spending money on consumption, the middle class's cash flow must also pay many loans. Without the concept of accumulating assets, they are likely to fall into a cycle of relying on labor to repay loans throughout their lives.

The rich accumulate assets as much as possible, use the interest generated from the assets (such as interest on stocks and bonds, rent from real estate) to support their lives, and reduce liabilities as much as possible. "The poor only have expenses. The middle class buys liabilities they think are assets. The rich buy assets." This concept is enough to broaden your financial horizons and allow you to think about the financial quadrant you are in from a different perspective.

3. Work to learn, not for money

Although Robert Kiyosaki's words are full of ridicule of the "employed" middle class, the concept of "working for learning" is worthy of careful consideration. What we can be wary of is whether we have put in labor and time purely for the salary of work, but without any growth in the process? However, rich people often have more intentions than just money when they work.

The author encourages readers to break through the framework, break away from the obsession to delve deeply into an industry, and have the courage to try different company businesses, or even switch between different industries. The focus is on being exposed to different stimuli, constantly learning new things, and allowing yourself to master more cross-domain skills through analogy. For example, do you think Robert Kiyosaki is good at investing? What he actually knows best is marketing his own books and courses.

4. Buy assets instead of liabilities

The major difference between the rich people and the poor people is the rich people BUY ASSETS which means they buy things that bring cash in their pocket while the poor spend money to buy things make them more poor.

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