It also doesn’t take a good formal education. I have a college degree, and I can honestly say that achieving financial freedom had nothing to do with what I learned in college. I didn’t find much demand for my years of studying calculus, spherical trigonometry, chemistry, physics, French, and English literature.
Many successful people have left school without receiving a college degree—people such as Thomas Edison, founder of General Electric; Henry Ford, founder of Ford Motor Co.; Bill Gates, founder of Microsoft; Ted Turner, founder of CNN; Michael Dell, founder of Dell Computers; Steve Jobs, founder of Apple Computer; and Ralph Lauren, founder of Polo. A college education is important for traditional professions, but not for how these people found great wealth. They developed their own successful businesses, and that was what Kim and I were striving for.
So What Does It Take?
I am often asked, “If it doesn’t take money to make money, and schools don’t teach you how to become financially free, then what does it take?”
My answer: It takes a dream, a lot of determination, a willingness to learn quickly, and the ability to use your God-given assets properly and to know which quadrant in the CASHFLOW Quadrant is the right one for you to generate your income.
What Is the CASHFLOW Quadrant?
The diagram below is the CASHFLOW Quadrant. The letters in each quadrant represent:
From Which Quadrant Do You Generate Your Income?
The CASHFLOW Quadrant represents the different methods by which income or money is generated. For example, an employee earns money by holding a job and working for a person or a company. Self-employed people earn money working for themselves. A business owner owns a business that generates money, and investors earn money from their various investments—in other words, money generating more money.
Different methods of income generation require different frames of mind, different technical skills, and different educational paths. Different people are attracted to different quadrants.
While money is all the same, the way it’s earned can be vastly different. If you begin to look at the four different labels for each quadrant, you might want to ask yourself, “Which quadrant do I generate the majority of my income from?”
Each quadrant is different. To generate income from different quadrants requires different skills and a different personality, even if the person found in each quadrant is the same. Changing from quadrant to quadrant is like playing golf in the morning and then attending the ballet at night.
You Can Earn Income in All Four Quadrants
Most of us have the potential to generate income from all four quadrants. Which quadrant you or I choose to earn our primary income from is not so much dependent upon what we learned in school. It’s more about who we are at the core—our values, strengths, weaknesses, and interests. These core differences attract us to, or repel us from, each quadrant.
Yet, regardless of what type of work we perform, we can still work in all four quadrants. For example, a medical doctor could choose to earn income as an E and join the staff of a large hospital or an insurance company, work for the government in the public-health field, or become a military doctor.
This same doctor could also decide to earn income as an S and start a private practice, setting up an office, hiring staff, and building a private list of patients.
Or the doctor could decide to become a B and own a clinic or laboratory and have other doctors on staff. This doctor probably would hire a business manager to run the organization. In this case, the doctor would own the business but not have to work in it. The doctor also could decide to own a business that has nothing to do with the medical field while still practicing medicine somewhere else. In this case, the doctor would be earning income as both an E and as a B.
As an I, the doctor could generate income from being an investor in someone else’s business or in vehicles like the stock market, bond market, and real estate.
The important words are “generate income from.” It’s not so much what we do, but more how we generate income.
Different Methods of Income Generation
More than anything, it’s the internal differences of our core values, strengths, weaknesses, and interests that affect which quadrant we decide to generate our income from. Some people love being employees, while others hate it. Some people love owning companies but don’t want to run them. Others love owning companies and also love running them. Some people love investing, while others can’t get past the risk of losing money. Most of us are a little of each of these characters. Being successful in the four quadrants often means redirecting some internal core values.
You Can Be Rich or Poor in All Four Quadrants
It is important to note that you can be rich or poor in all four quadrants. There are people who earn millions and people who go bankrupt in each of the quadrants. Being in one quadrant or another does not necessarily guarantee financial success.
Not All Quadrants Are Equal
By knowing the different features of each quadrant, you’ll have a better idea as to which quadrant, or quadrants, might be best for you.
For example, one of the many reasons I chose to work predominantly in the B and I quadrants is because of tax advantages. For most people working on the left side of the quadrant, there are few legal tax breaks available. Yet legal tax breaks abound on the right side of the quadrant. By working to generate income in the B and I quadrants, I could acquire money faster and keep that money working for me longer without losing large chunks of it to the government in the form of taxes.
Different Ways of Earning Money
When people ask why Kim and I were homeless, I tell them it was because of what my rich dad taught me about money. For me, money is important, yet I didn’t want to spend my life working for it. That is why I didn’t want a job. If we were going to be responsible citizens, Kim and I wanted to have our money work for us, rather than spend our lives physically working for money.
That is why the CASHFLOW Quadrant is important. It depicts the different ways money is generated. There are ways of being responsible and creating money other than physically working for it.
Different Fathers—Different Ideas about Money
My highly educated dad had a strong belief that the love of money was evil and that excessive profit meant you were greedy. He felt embarrassed when the newspapers published how much he made because he felt he was overcompensated in comparison to the teachers who worked for him. He was a good, honest, hardworking man who did his best to defend his point of view that money wasn’t important to his life.
My highly educated, yet poor, dad constantly said,
• “I’m not that interested in money.”
• “I’ll never be rich.”
• “I can’t afford it.”
• “Investing is risky.”
• “Money isn’t everything.”
Money Supports Life
My rich dad had a different point of view. He thought it foolish to spend your life working for money and to pretend that money wasn’t important. Rich dad believed that life was more important than money, but that money was important for supporting life. He often said, “You only have so many hours in a day, and you can only work so hard. So why work hard for money? Learn to have money and people work hard for you, and you can be free to do the things that are important.” To my rich dad, what was important was:
• Having