Understanding The Cashflow Quadrant™

The Cashflow Quadrant™

The Cashflow Quadrant™ is Robert Kiyosaki’s second book and I believe his most important.  To me it is  essential reading for anyone building a business.  Big statement I know!

I have written about The Cashflow Quadrant before on this blog but it was way back when I first started blogging and did not have many visitors.

The Cashflow Quadrant

This diagram represents the Cashflow Quadrant

The letters in each quadrant represent:

E   for employee  – An employee has a job and often needs safety and security. It is what school prepares us for – study hard and get a good job.

S   for self-employed  – A self employed person wants to do their own thing and be their own boss.

B   for business owner  – B are true business owners who unlike the S surrounds themselves with smart people.

I   for investor – I are the Investors who make money with money. They often do not work as their money works for them.

“The Cashflow Quadrant explains why some people work less, earn more, pay less in taxes and feel more financially secure than others.  It is simply a matter of knowing which quadrant to work from and when.” Robert Kiyosaki.

Very often people can be in more than one quadrant at once. For example you do have a job and at the same time are building a business;  or those that are moving to the I quadrant over time while working in one of the other quadrants. You may be working in a combination of quadrants.

Lets have  look at each quadrant in more depth

The Cashflow Quadrant

E –employee
Most of us grew up hearing advice that we should study hard and get a good job.  In The Cashflow Quadrant™ Robert Kiyosaki describes the E (employee) as someone who seeks security and benefits. He says for employees the idea of security is often more important than money. (Robert wrote this book in 1998 and clearly job security has changed since then).

It is common for people to work hard to try and increase their salaries. They often study to get some extra qualifications also with a goal of increased income. They count on their retirement fund as the nest egg that will provide them with a living when they no longer can pick up a paycheck.

Many people consider having a job as the only way to make money. The GFC seemed to come from nowhere for the majority of people.  It shook the core belief of security for  employees as jobs were lost around the globe. Retirement funds also plummeted putting in question the whole system.

The Cashflow Quadrant™ was written in 1998 and since that time I have heard Robert Kiyosaki predict the events that eventually did happen at the end of 2008.

The concept of a job for life has gone. Employees need to think of other ways to build their nest egg and have security.

S – Self –employed
Robert calls them the “do it yourselfers”. These people often do not like their income to be dependent on other people. They like to take control of their finances by doing it all on their own. This group of people is very wide and includes professionals such as accountants, doctors and lawyers as well as tradespeople, hairdressers and many others.

They often think no one can do things better than them. They usually work very hard and are often perfectionists.

In my experience, having been one and knowing many,  I think it is perhaps the most difficult quadrant. Self employed people do not get sick pay, holiday pay or the other benefits that go with being an employee. They often work longer hours and take few holidays. It is a very difficult way to get ahead and they often kid themselves they are building a business.

Advice for E and S
It is possible for anyone working as an E or S to get ahead if they build a business or investments alongside their E or S income. They must be building a passive income.

If you are an employee now stay committed to building that business so that you can eventually quit your job and build your business full time.

As many of the readers of this blog fall into the S category like I currently do. I  ask you to think about what you can outsource, how can you leverage your time?

B – Business owner

Robert describes a major characteristic of the “B” as someone who likes to delegate and has an attitude of “why do it yourself when you can hire someone to do it for you, and they can do it better?” (I love that thinking).

To be a “B” requires both the technical skills of business and the essence of leadership.

Many people who start a business end up with an “S” type business and not a “B”. The major difference between a true B and an S is that a B can leave their business for a year or more and return to find their business more profitable and running better than when they left it. In an S business this would not happen and most S’s cannot leave for very long at all. The main difference is because an S owns a job and a B owns a system and has hired competent people to operate the system.

In my years as an accountant and financial planner I worked with many “S” mentality business people. After I first studied with Robert Kiyosaki I learned to coach my clients in a different manner. This is mainly because I personally had learned so much. The financial planning practice I was an owner in was anything but a true Business and relied heavily on the owners skills. We transformed it to system driven business and were able to take long vacations for the first time.

I – Investor
Investors make money with money. They can choose not to work because their money is working for them. You can make your money in one (or more) of the other three quadrants, however, if you want to ultimately be wealthy you need to invest in the “I” quadrant.

People in the “I” quadrant focus on investments that generate income on an ongoing basis. Examples of this are:
•    Rent from a property as long as the income is greater than the expenses
•    Interest from savings (it still happens in Australia)
•    Dividends from stocks and bonds

People in this quadrant focus on having their money work for them.

Advice for B and I 

If you are in business ask yourself can your business operate without you? Can you leave your business for an extended time without detrimental effects on the bottom line? Is your business totally run by systems?

If you are not an experienced Investor it is critical to educate yourself before commencing. There are many advisors, courses and books available on every type of investing. Seek advice but never hand over responsibility.

I look forward to reading your comments on  The Cashflow Quadrant™ .  Which quadrant are you currently working in?

If you liked this content please share it with your friends.






Sue Price
Skype: sueprice

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33 thoughts on “Understanding The Cashflow Quadrant™

  1. Gen

    I always love your post Sue and you know that I adore Robert’s teachings. I really love how the cash flow quadrant breaks it all down. And I am big believer in having a business that will pay you whether you are there or not. But the best part of this whole article is the advice that you give at the end. You should always be informed and be active in how your money is invested and in how your business is operated.
    Gen recently posted..Free Advertising Pt 1My Profile

    1. Sue Price Post author

      Hi Gen

      I have read this book many times and each time get further distinctions.

      I learned the lesson of how our business was being operated the hard way. Some years back we were owners in a business that employed people but there were not enough checks in there and things happened we would not have let happen if we had been running some areas. Delegation is great but you need to know what is happening.

      Glad you enjoyed the post Gen and thanks for dropping by here again.


    1. Sue Price Post author

      Hi Elaine

      My goal is not to achieve that again – a business that can run without me. I know it is possible as we have done it once. 🙂

      Thanks for your comment


  2. Donna Merrill

    Hi Sue,

    I am familiar with the cashflow quadrant. You have explained it so well. I have been and still am a follower of Robert and have learned that principal a while ago. When I did, I became more aware of a business model.

    I not only have an online business, but am invested in real estate and of course my psychic business as you know. I used to have the mindset whereby I just let money roll in and didn’t give it a second thought.

    Now that I’m more of a savvy marketer, I have learned to enjoy where my money is and how money can make more money and so forth. I never head the head of an accountant, rather the opposite.

    But because this is so important, It did pull in my interest and I owe it to Robert’s philosophy.

    Many thanks for bringing up this topic.

    Donna Merrill recently posted..Is Your Home Office Like A 19th Century Factory?My Profile

    1. Sue Price Post author

      Hi Donna

      It does not surprise me you Robert’s teaching as he is very psychic too. Sometimes when he is really in the flow he gets off stage and hardly knows what he has said.

      I love that you being a psychic are also a savvy business person. I know a few who are so bad around business and money.

      You know given I am a trained CPA I know when I did my business degree and studies I really did not learn much about business. It is sort of scary to think many people turn to their accountant for business advice. Most have no clue about marketing. They are great at protecting you and making sure you comply with the law etc.

      I felt drawn to revisit this topic after our hangout last week.

      See you tomorrow and thanks for your comment.


  3. Jenny Leather

    Thanks Sue
    I always enjoyed this book especially when I looked at emotionally how each of these different quadrant thought about money. A lot of the time to move to different quadrant smoothly requires us to emotionally heal limiting beliefs about ourselves and money.
    Great reminder Sue

    1. Sue Price Post author

      Hi Jenny

      It is my favorite of Robert’s books as it has had the most impact on me as a person.

      Great point Jenny about needing to change our limiting beliefs about ourselves and money. The vast majority of us were brought up to have jobs not be business people or investors. I went from E to S without too much trouble but I personally think S is the hardest. At least you get paid holidays as an E.

      I enjoyed revisiting this.

      Thanks for your comment Jenny.


    1. Sue Price Post author

      Hi Barbara

      I have read the book many times and each time I get more distinctions from it. If you can fit in the time read it again as you are in a different phase of your life now.

      I just want to get past being an S again 🙂

      See you tomorrow and thanks for your comment.


  4. Michael A. Buccilli

    Hello Sue, I have read a couple of books by Robert but had forgotten the term “Cashflow Quadrant”. Your breakdown is excellent – I thank you for the good explanation; I have used the concepts in conversations with people in my circle but now I can quote Robert and his teachings – better credence to the conversation. I should go back and re-read the books as well.
    Michael A. Buccilli recently posted..Are Your Backlinks Not Helping You Get Better Rankings? Here is How to Boost Them…My Profile

    1. Sue Price Post author

      Hi Michael

      I first read the book when he first published it and have since read it several times and always got some more “ahhas”. So I am sure if you do go back and read it again you will get some more out of it.

      Thanks for your comment and see you tomorrow.


  5. Carol Minarcik

    Good Morning Sue, I think I have been in every single one of the quadrants in my lifetime. Having a business of your own is tough as it takes allot of dedication. Most people are satisfied with the weekly paycheck deal, and if your in the right company its not all bad especially if its a company with benefits. We have been self-employed for over 30 years experiencing good times and bad times. We have also tried numerous investments, some bad , some good. I guess its just a matter of deciding your ending goals and planning from that. Thanks for the post.
    Carol Minarcik recently posted..Hidden Secrets of Email MarketingMy Profile

    1. Sue Price Post author

      Hi Carol

      Sounds like we have gone down similar paths. I too have been in all quadrants. The one I have not been in for a very long time is the E one. Sometimes I wish I had stayed there with benefits etc. I know I would not have been happy though really.

      We have had small businesses, medium size businesses with varied success. We have been multi- millionaires back to square zero a couple of times. We have also had good and bad investments.

      I do not think any business owner has been without their trials and ups and downs.

      Thanks for sharing Carol and here is our success!


  6. Carol Lynn

    Well that was kind of depressing, lol…. although I run a business, I couldn’t leave it. So I have the S type, I suppose. I would like to say it could run itself and I could just oversee but not yet! I definitely have to keep the wheels turning. Plus I can only imagine what my inbox would look like after even just a few days.

    Sounds like an interesting book with a different perspective on business. Thanks for sharing!
    Carol Lynn recently posted..Build A Better Website: Take Your Home Page From Trampoline To Magnetic Selling ToolMy Profile

    1. Sue Price Post author

      Hi Carol

      Most all businesses start out as S as we need to grow them. You could work towards outsourcing some of your writing. Someone else can manage your inbox. True it can work. I had a personal assistant in my last business who could talk in my voice pretty much. It is just scary when you first start to let go. Of course there is also that balance of bringing in enough work to keep other people busy.

      It is an awesome book.

      Thanks for your comment Carol.


  7. Adrienne

    Hey there Sue,

    Okay, I’ve never read this book but I remember watching a few of Robert’s videos a number of years ago where he explained exactly what you shared here. I totally got it and I was just venturing into my own business.

    I think his teachings are spot on and I admire those people who have made some predictions about what will happen and they have come true. I think it’s kind of cool actually and really makes you take more notice of what they are saying.

    I don’t see myself as a savvy businesswomen but I am continuing to learn with each new passing day.

    I appreciate you explaining this so well. You always make things so easy to understand. This is another one of those post.

    Thanks Sue!

    Adrienne recently posted..Taking Responsibility For Your Lack Of Success And Where You Need To StartMy Profile

    1. Sue Price Post author

      Hi Adrienne

      Thank you for your very kind feedback on me making this easy to understand. I am never sure if I do or not. Having worked around Robert for so many years I know his concepts so well. I also know many people do not understand them.

      The last time I heard Robert speak live was in 2008 when I came to Dallas to do a convention for the MLM I was in at the time. He shocked the audience by predicting the crash. He was not a popular keynote – but he was right. One of those times I hoped he would not be I must confess.

      Adrienne you worked as an employee for much of your life so even thinking like a businesswoman takes time. I see you as a very savvy blogger and internet marketer. Hey and so does the entire blogging community I think.

      Nice to see you again today and have a great rest of your week.


  8. Sylviane Nuccio

    Wow, excellent post Sue!

    I was already a bit familiar with Robert’s Quadrant from his “Rich Dad, Poor Dad” book, but here you are explaining everything so well.

    I am definitely belonging to the S Quadrant going more and more towards the B as much as I can for the moment. I am very aware that wealth really comes from the I Quadrant and that is my more long term goal. Working on it.

    I know that even by investing a small amount of money over a long term you can build a small fortune. To me it’s amazing that so few people are actually doing it at all.

    Thank you for this great post and I will be sure to share it!
    Sylviane Nuccio recently posted..Why Do You Need To Use The Law Of Detachment To Attract What You WantMy Profile

    1. Sue Price Post author

      Hi Sylviane

      I think most of us that are working from home are in the S but yes we can move towards B so glad you are doing that.

      Something I did not say in the post that I should have is Robert often recommends that people make their money in the B quadrant and then hold in in I. That makes sense. Great you are moving into I and clearly understand the need to do that.

      Thanks for your feedback on the post I appreciate it Sylviane.


  9. Raena Lynn

    Hi Sue,

    This is and excellent overview of Robert Kiyosaki’s teachings. I’ve read several of his books and I have encouraged my daughters to read them to understand that there is more than one way to generate cashflow. I started with “Rich Dad Poor Dad” and continued from there. I was very happy to hear when my oldest daughter read it helped her reach a completely different understanding about how we perceive money.

    I think Mr. Kiyosaki’s concepts make sense and he has a gift of explaining everything so it is easy to understand. Everyone is different and have the choice of how they want to live their lives and generate an income. Some people are content with being an employee, others cannot survive in an “employee environment.” Some people are leaders, and some people are followers. His cashflow quadrant enlightens us to the possibilities when making decisions about how we want to approach either working for a business, or being our own boss.

    My choice? I prefer money working for me. I pick the I.

    Raena Lynn
    Raena Lynn recently posted..Skype Traffic NinjaMy Profile

    1. Sue Price Post author

      Hi Raena

      Thanks for the great comment.

      I think you know I worked with Robert. I cannot start to tell you the emails and testimonials I have read of lives changed just by reading Rich Dad Poor Dad. Great to hear your daughter read it. Even if people choose to stay where they are after this education they get to have looked at a different perspective.

      The funny thing for me is because I am an accountant when I first heard him say your home is not an asset I argued with him. I was taught it was of course. But slowly I got what he meant.

      As you say we are all different. There has to be some people that work in the businesses. If we were all business owners the system could not work. But I think even if people choose to be employees they need to be investing as well or doing a part time business of their own. There is very little security left in a job and everyone needs to think about that.

      I am pleased to hear you pick I Raena.

      Thanks for your contribution here and comment. Enjoy your weekend of learning 🙂


  10. Viola Tam

    Hi Sue,

    Congratulations for doing such an excellent overview on the Cashflow Quadrants!

    I love your questions at the end of the post! In fact, these questions needed to be asked by those in the ‘S’ Quadrant as well. I could not agree with you that perhaps the most difficult quadrant is the self employed group! I know many solo entrepreneurs who have to take care of ALL ASPECTS of their business. Without outsourcing and using systems, not only their business will suffer. Family life can be much compromised too.

    Thanks for your sharing, Sue!

    Viola Tam
    Viola Tam recently posted..Prospecting Your Way to MLM SuccessMy Profile

    1. Sue Price Post author

      Hi Viola

      Thanks for your comment. Given I worked with Robert for some many years I have heard the subject so much I feel like I know it very well 🙂

      The thing with the S quadrant is that many people in that quadrant try to do it all without any outsourcing. There are only so many hours in a day and that can become very difficult.

      I see Network Marketing as a B quadrant once the business gets to a decent size. While you do not “employee” your team you still have a team of people and as we know there are many benefits of this model over traditional business.

      Have a great week Viola.


  11. Louise

    Hi Sue

    When I first read the Cashflow Quadrant is was a real eye opener for me. Although I was of course familiar with each of the quadrants, I had never realised that we all fit so neatly into one of these quadrants. He made it all so simple and his book certainly helped me understand where I am at now, where I want to be and what I need to to to get there. Now I just have to do it 🙂

    As you know, I’m still very much in the S quadrant, but I have a plan and hope to take my business to the next level soon.

    Thanks for this post Sue and the reminder from Robert’s teachings.

    Louise recently posted..Entice Visitors Back To Your Blog With A Google Custom Search EngineMy Profile

    1. Sue Price Post author

      Hi Louise

      I think having a plan and knowing where you are is a great start. I think many people leave the E quadrant thinking that being self employed is going to give them freedom. Anything but really!

      I think most business people start in the S quadrant. It is a bit of a balancing act moving on as we usually do not have the money to employ or outsource so we are sort of stuck doing many things. But Jonathan Budd started like us too and look where he is (and many others) so it is possible.

      Thanks for dropping by Louise. I enjoyed revisiting Robert too. 🙂

      Have a successful week.


  12. Property Management Minnesotannesota

    This is a great cash flow quadrant for an ideal business. Business owner and Investors is important for me, that’s what I pondered first in the business. As the other parts of the quadrants will follow. This made me realize a lot of things that should be considered and be learned through the process. Thanks Sue!

    1. Sue Price Post author

      Hi Elaine

      The Cashflow Quadrant is such a good book. I have learned much from it.

      Thanks for your comment.


  13. Lee

    Hi Sue
    A very insightful post and very interesting to read. I have been self employed since I left education. People don’t realise you end up doing a lot more hours being self employed. They just think you can go to work when you want and work the hours you want. How wrong they are. I wouldn’t have it any other way though.

    Great post lee
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