From ” Steps To Finding Your Financial Fast Track” in part 3 of The Cashflow Quadrant™by Robert Kiyosaki.
Steps 2 – 4
Step 2: Take Control of your Cash Flow
This step in the book The Cashflow Quadrant™ is a critical one. As Robert Kiyosaki says, more money will not solve financial problems for someone if cash flow management is the problem. It is very common for people when they get a pay rise or increase their income to spend it. Most people adjust their spending up or down to fit with their income, never getting ahead.
In this step Robert explains income and expenses and understanding financial statements. Most people do not take the time to do this. It is critical however if you are serious about being a Business Owner or Investor to learn how to read financial statements – especially your own!
There are also some action steps as part of this step. This is my summarised version:
1. Review your financial statements.
2. Determine which quadrant you currently earn your income from.
3. Determine which quadrant you want to earn the majority of your income from in 5 years.
4. Begin your Cashflow management plan.
a) Pay a percentage of each pay check into a savings account – and don’t touch it until you have enough to invest.
b) Focus on reducing your personal debt.
There are some great tips that follow in the book to help you reduce debt. I suggest you read it.
Step 3: Know the Difference between Risk and Risky
Robert says it so well – “I often hear people saying, ‘Investing is risky’. I disagree. Instead I say, ‘Being uneducated is risky’.”
I agree with this 100%. It is very risky not to know where you are financially and not to understand real risk. It is risky to keep working hard with your head in the sand and not really know where you are going.
Step 4: Decide What Kind of Investor You Want to Be
In this step Robert adds a distinction to the 7 levels of Investor covered earlier in the book. He defines three different types of investors:
Type A: Investors who seek problems
Type B: Investors who seek answers
Type C: Sgt. Schultz investors: “I know nothing”.
The name Sgt Schultz has been taken from the TV show Hogan’s Heroes. I think the name says it all. If you do not want to learn anything Robert suggests you may need to marry someone rich or win the lottery 😆
Type B investors are typically people who want someone to advise them what to invest in. They should seek out a good financial planner.
Having been a financial planner and employed many of them over the years, I do know there are good and bad. Do you homework, get a good one and learn the options available to you.
Type A investors look for problems usually caused by someone getting into financial problems. This is where investors can make significant returns. It does require you to become educated.
A current example of this is in the USA where there have been many foreclosures and prudent investors are moving in to take over the properties. This includes investors from Australia where I live.
As Robert says “problems lead to opportunities”. Learning to solve problems whether it is in business or investing will put you on the fast track.
Please leave me your feedback below. I will back soon with the final steps.
Adam Robinson says
Ultimately, you can say that there’s no guarantee that you will profit from any investment. As we all know, the market is very competitive. You’ll have to be very careful otherwise it’ll leave you broken-hearted and broke. Getting an edge over your competitors is actually quite simple. Work hard and learn as much as you possibly can! Again it’s that simple but try not to associate the word ‘simple’ with ‘easy’. One must really work hard at it.