As I mentioned earlier, quadrant “E” is the cash flow quadrant of people who are employed.
These are people who are looking for security, regularity in their income. They do not like risk. They have this attitude because they have been programmed that way by their home and school: “Study hard, get good grades, and get a good job with a good salary… What is commonly referred to as the “rat race.
Most of the population still follows this advice, so they focus on job security rather than financial security, especially if they go through life without a financial education that develops our financial intelligence.
From this quadrant, we flee like the plague from unstable investments and, of course, from “great investments”. At most, they invest in “safe” products offered to them by “financial experts” such as bankers, stockbrokers, etc.
The lack of financial education makes these people think that these financial experts are real investment gurus. What they do not realize is that they are not going to get out of the rat race by investing in fixed maturities or mutual funds that do not have a great return (not even taking into account that the CPI will eat up their savings or the taxes that they will suffer and that we will discuss in later posts) or pension plans that do not assure them of having a retirement that they deserve.
For all these reasons and others that we will analyze later, this is the least advisable quadrant if you want to achieve financial freedom.
Who makes up the “S” in the Cash Flow Quadrant?
The “S” quadrant (Self Employed) is made up of freelancers, self-employed, small businesses that charge by the hour, commission or project.
This is the “do-it-yourself” group. They are their own bosses and consider themselves to be completely independent.
The main problem for people in this quadrant is that they understand that their income depends on their hard work and that if they want to earn more income, they have to work harder and longer hours. The bad thing is that there are only 24 hours in a day, and if their income depends on the time they spend, they have a limited income, which is their price/hour multiplied by 24 (in case they don’t sleep).
In most cases, people in this quadrant find it difficult to delegate because they think they are doing it in the best way possible, so they end up in the same routine day after day and become slaves to their own business.
The business has absorbed them instead of working for them. They become indispensable to their business so that if they are not there, they do not receive income, so in many cases taking a vacation means giving up income for that period of time.
Who makes up “B” in the Cash Flow Quadrant?
Quadrant “B” (Business Owner) is made up of large business owners who choose freedom over security.
It’s the “why do it yourself when you can hire someone who can do it better” group.
Big business owners love to delegate. They’re usually not experts in any aspect of the business, so they hire the best they can get, and usually the best people they hire are in the “S” quadrant.
Those in the “B” quadrant have a proven system that works. That system works for them, and when they stop working, the system continues to work for them. So they can be away from their business whenever they want because the income keeps coming in.
One of the great things about people in this quadrant is that they are great leaders. This allows them to bring out the best in everyone on their team. When they also manage to make their team members feel important and happy, they achieve maximum effectiveness in their business.
When a person’s business in Cash Flow Quadrant “B” is successful, the business expands and hires more people. The owner of such a business simply works less, earns more income and enjoys more free time.
Another great benefit is the tax advantages available to those in this quadrant.
Who makes up the “I” in the Cash Flow Quadrant?
The “I” (Investor) quadrant is made up of large investors who invest money in other people’s ideas and projects.
Great investors are characterized by investing their own money or the money of others in systems that offer high returns and provide a continuous stream of income.
Great investors make money with money. Their money works for them, so they don’t have to work. They can run their businesses from anywhere in the world and spend just enough time controlling them.
In addition, like those in quadrant “B,” they have tax advantages that mean they pay much less tax relative to their income than those on the left side of the quadrant.
For all these reasons, this is the cash flow quadrant of great wealth. People in this quadrant use their high incomes to be financially free, in addition to reinvesting some of their income to create new investments that generate more income for them.
If at any time you think you want to be rich, you need to focus on this quadrant, regardless of which quadrant your income is currently coming from.