Cashflow Quadrant is a book by Robert Kiyosaki, his sequel to his first book, Rich Dad, Poor Dad.

This book explains how there are four ways in generating income in the entire world: The Employee and Self-employed on the left side of the quadrant, and the Business Owner and the Investor on the right side of the quadrant. The book generally refers to the quadrants as ESBI.

The book is extremely well-written for the layman, being able to put financial intelligence in perspective for all of those in the 95-percentile world and in creating a logical arguement for people to become entrepreneurs and take advantage of the tax system. Becoming an entrepreneur is a good way to get out of the rat race.

Many people do not understand the advantages of having their own business, always thinking that there needs to be a substantial amount of capital needed to start a business venture. The book educates the reader in how 95% of the money is made by 5% of the people. The 5% are the people on the right side of the quadrant - business owners and investors. The income being generated in this quadrant is called passive income.

The book explains the dynamics of each quadrant:

Employee - Works for a system, gets paid what the job is worth, not what the person is worth. The wages are usually just below the inflation rate to keep the employee loyal to their job.

Self-Employed - The owner is the system and the income is up to the person's own efforts. Some businesses that are seasonal are sometimes one of the worst in terms of income stability. There are peaks and valleys when it comes to generating income to keep the business afloat.

Business Owner - The system works for you and income is generated even if you're not there. The income potential here is exponential after the the small investment has been recovered.

Investor - The money works for you and passive income can be generated. The price of having financial intelligence in this quadrant requires that there be knowledge as well as money in which to succeed at this. This can be the most uncomfortable as most people are uneducated by how this part of economics work.

Unfortunately for most people, getting a good education and getting a good job doesn't get where people want to be. This book gives a great explanation why that is.

In addition
The E and the S quadrants are noted as "People at work". The B and the I quadrants are noted as "systems and money at work" respectively.
If you have to give time for a dollar, you are living the poorest way. The wealthy and the rich live by having their systems and money do the work for them. This is called Passive residual income.

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