Cashflow Quadrant is the sequel to Rich Dad Poor Dad, and it expands on the idea of achieving financial freedom by understanding how people earn money. Kiyosaki introduces a model called the Cashflow Quadrant, which categorises income earners into four types:
E – Employee: Works for someone else and earns a salary.
S – Self-employed: Works for themselves and earns by selling their services.
B – Business owner: Owns a system or business that generates income.
I – Investor: Invests money to earn passive income.
The cashflow quadrant means E/S/B/I, in which E means employee, S represents the self-employed or small business owner, B means business owner, and I means investor. So whichever quadrant our income comes from, we are part of that quadrant.
Different quadrants, different values -
Each quadrant has a different value of its own. For example, the core value of the E quadrant is “security.” You will always hear people in this quadrant say – “I need a right and secure job,” “how much do we get for overtime,” and “how much do we get paid for vacations.”
The core value of the S quadrant is “freedom.” These people want freedom, and they want to do what they like. Most of the people in this quadrant are small business owners etc.
People of the S quadrant wish to be the best in their field. If the people of this quadrant stop working, their income also stops.
The people of the B quadrant look for people who are the best in their field and can work in their team. When it comes to money, the people of the B quadrant keep earning even if they leave their businesses.
And finally, the logs of the I quadrant are financially free. Money works for them, they don’t work for money. So the people of these four quadrants are different, they have different mindsets, and their values are also different.
Network marketing businesses fall into the “B” quadrant. This business is for those who want to be a part of the B quadrant. Due to the unlimited income potential, it is placed in the B quadrant while the income of the E or S quadrant is limited.
If your business becomes very big, you can move from the “B” quadrant to the “I” quadrant.
The book’s central message is that financial freedom is best achieved by moving from the E and S quadrants to the B and I quadrants, where income is generated through systems and investments rather than direct labour.
Kiyosaki argues that traditional education prepares people to be employees, not entrepreneurs or investors. He encourages readers to seek financial education, take calculated risks, and build or invest in assets that generate passive income.
Chapter Breakdown:
Here’s a high-level overview of the chapters and their key themes:
Part 1: The Cashflow Quadrant
Chapter 1: Why Don’t You Get a Job?
Introduces the quadrant and Kiyosaki’s personal journey from homelessness to financial freedom. Emphasises the importance of choosing freedom over job security.
Chapter 2–6: Understanding the Quadrants
Explores each quadrant in detail, including the mindset and financial behaviours typical of each. Discusses how people can transition from E/S to B/I.
This covers the three type of business system namely:
1. Traditional corporations
2. Franchises
3. Network Marketing
Your goal is to own a system and have people work that system for you. System is a bridge to freedom.
There are five different level of investors namely:
Level 1: Buys depreciating assets (e.g., consumer goods); lacks financial literacy.
Level 2: Savers who avoid risk and prefer low-return vehicles like savings accounts.
Level 3: “Too busy” to learn about investing; may delegate decisions without understanding.
Level 4: Do-it-yourself investors who actively learn and manage their investments.
Level 5: Business owners who invest in the I quadrant, leveraging systems and people
Part 2: Bringing the Quadrant to Life/Bringing out the best in you:
It tells us to be the bank and not the banker.
Chapter 6–9: Real-Life Examples
Shares stories of individuals who moved across quadrants and the challenges they faced. Highlights the importance of mentors and support systems.
Seek advise from right kind of people, depending on where you want to be. There are different kind of advisors for different type of people - Rich, Poor and Middleclass.
Part 3: Becoming Who You Are
It starts with telling us to take baby steps. Use power of compounding, have long term plan, break it down and work towards it and believe in delayed gratificaiton.
Chapter 11–18: Mindset and Transformation - Provides 7 steps to finding your financial fast track.
Focuses on the psychological and emotional aspects of financial change. Encourages readers to overcome fear, develop financial intelligence, and take action.
- It's time to mind your own business
- We have to take control of our Cash flows
- Know the difference between risk and risky
- Decide what kind of investor you want to be - One who seek problem, one who seek answers or one who seek an expert? Be all three.
- Seek Mentors
- Make disappointment your strength
- The power of faith
The book reinforces the idea that financial freedom is a journey that requires education, courage, and persistence. Begin building pipeline of cashflow to support you and your family.
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