Robert Kiyosaki’s book, Cashflow Quadrant: Rich Dad’s Guide to Financial Freedom, is an inspirational and compelling guide to breaking free from the earnings “rat race”, by moving from the “left side of the quadrant” where most people work to the “right side” and ultimately financial freedom. Kiyosaki outlines how those of us locked into jobs or self-employment can get ahead by becoming financially literate and consistently building financial assets that generate income; freeing ourselves to spend time doing the things we truly enjoy.

This book largely picks up where the classic and wildly successful Rich Dad, Poor Dad left off. His first book taught readers how to think about money like the rich and that wealth can only be achieved by “paying ourselves first.” In this second volume, Kiyosaki argues that the road to true wealth is not to be an employee or self-employed, but to slowly build businesses and invest.

The Cashflow Quadrant

Kiyosaki’s Rich Dad was in fact his childhood best friend’s father who was a successful entrepreneur, and as Kiyosaki grew, taught him how the rich think about money and cautioned that the way people think about money dictates how financially free they will be as they grow older. To illustrate this point, his Rich Dad taught him the cashflow quadrant.

E S
B I

Think about almost any job and it probably fits into the Cashflow Quadrant. On the left side lives 99% of people who are in what Kiyosaki calls the rat race — the race to make more money and obtain more possessions that leads to even more work, more stress, and less time for the things that really matter. On the right side of the quadrant live those who earn their money passively. They put other people’s money and time to work for them and as they become more successful have more time for the things they want.

Left-side (almost everyone)

E: Employees
Most of us are employees. Employees value the idea of financial security over the risk of financial freedom. We make money for B’s and S’s who get rich off of our hard work. While working harder in this quadrant will earn us more money, it often leads to an unhealthy lack of time for things that truly matter such as family and leisure.

S: Self-Employed
Most small business are owned by the self-employed. The self-employed are the “If you want it done right, do it yourself” crowd. They value control and are often perfectionists. If the self-employed left their business for a year, there would often return to find no business left to come back to. They are the cog that keeps the machine moving.

Right-side (the wealthy)

B: Business-Owners
Some small businesses and almost all large businesses are owned by B’s. These people value creating systems of people that make money, more than “doing it right”. They understand the difference between the product and the business model. While quality may be important, profitability is paramount. Because they build systems and move out of an active role in operations, if these business owners left their business for a year, they would find it as or more profitable than when they left.

I: Investors
The pinnacle of financial growth is becoming a successful investor. These people are able to use their money and other people’s money (OPM) to make themselves even more money with very little physical work. They are the people that give B’s the money to create and run businesses. While many E’s have investments in the form of retirement accounts, I’s actually live off their investments today.

While he admits that living on the left-side as an E or an S is easier for awhile, over the long run investing in the future pays out greatly. To quote the book, “The only difference between a rich person and a poor person is what they do in their spare time.” It is also important to stress that Kyiosaki does not advocate wealth for money’s sake, but to allow us to spend the time with those things that truly matter such as our family and work that we are passionate about.

Not Your Garden-variety How-to Book

This is not a how-to book, but more importantly how-to-think-about-it book, much like Rich Dad, Poor Dad. There are no detailed instructions on how to become a successful investor or how to build a business; he admits that is not the point of the book. (I’ve recommended some books below that will help get you on the right track) Instead he outlines the steps needed to become financially free and hopes to instill the values of delayed gratification and dedicating yourself to your own future.

Much about this book, and in fact many books about personal finance and entrepreneurship, may be described by some as “common sense.” In fact, many people confuse common sense and easy to understand. While the principles in this book are not difficult for many to grasp, they provide a new way of looking at the world, and honestly the key to success in life is not on how much one understands but how one views their world.

Wrapping it Up

The Cashflow Quadrant teaches the steps one must take to become financially free. While it doesn’t offer instruction in any particular skill, it will guide you to the skills you must learn and the obstacles you will likely face to your ultimate goal. This book is a must read for those who are already interested in learning more about the process of becoming financially free. I would also recommend that if you haven’t already read Rich Dad, Poor Dad, you pick that book up as well and read it first. If you’re already interested in this book, you’ll certainly enjoy the first book and what it has to offer.

Rating: 4.5 out of 5 stars
Best Suited For: Those, especially employees and the self-employed, who want to learn more about business ownership and investing.

Additional Reading
The Automatic Millionaire. David Bach. Bach teaches simple ways to transform your personal finances and achieve a retirement you can be proud of.
The E-Myth Revisited. Michael Gerber. Using the ideas of With this book, learn how to turn your S business into a B business.

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