CASHFLOW Quadrant Robert Kiyosaki Financial Security

The Cashflow Quadrant Explained – How You Earn Income Matters

The CASHFLOW Quadrant represents the different methods by which income or money is generated … Different methods of income generation require different technical skills, different educational paths, and different types of people.”

Robert Kiyosaki, Cashflow Quadrant

The Cashflow Quadrant. It’s the main idea of Robert Kiyosaki’s book by the same name. And it’s a powerful one that has guided much of my own entrepreneurial path to seek financial freedom.

CASHFLOW Quadrant Robert Kiyosaki Financial Security


As you can see, each quadrant represents a different way to generate income. Some people earn money in only one quadrant, while some people earn money in all four.  There are advantages and disadvantages to each.

But the two quadrants on the right side (B & I) are the primary paths to financial freedom. The majority of Kiyosaki’s book teaches the unique skills and mindsets required to succeed on this path.

Let me explain a little more about each of the four quadrants:

E – Employee

An employee has a job.  This is where most people earn their income. The job itself is owned by a business, which could be a single person or a large corporation. The employee gives his or her time, energy, and skills to an employer in exchange for a pay check and benefits.

Employees can make a little or lot of money. But when an employee stops working (or when the business stops), their income stops, too.

This long-term lack of control over income is the primary problem of the E quadrant.  An employee’s financial destiny, security, and freedom is dependent upon the whim and the success of their employer.

S – Self-Employed

Many employees get tired of their lack of control and choose to work for themselves. The self-employed still work, but they own their job.

The S quadrant includes dentists, insurance agents, restaurant owners, realtors, handymen, and many other trade workers. Many self-employed people earn very large incomes, but like the employee, when they stop working so does their income.

Self-employed people do have a lot more control than an employee, but that also means they have more responsibility.  As a result, success usually means working harder and working longer. Over the long run this can lead to burn out and fatigue.

B – Business Owner

Those in the B quadrant own a system and lead people.  The systems and people who work for the business can run successfully without the business owner’s constant involvement.

The same types of businesses could be run by S owners and B owners.  For example, a plumber could own and work in his own plumbing business,  or a business owner could create a plumbing business and hire quality plumbers, administrators, and a manager to run the systems of the plumbing business.

The wealthiest individuals in the world typically own businesses.  These include Bill Gates of Microsoft, Jeff Bezos of Amazon, and Mark Zuckerberg of Facebook.

I – Investors

Investors own assets that produce income.  This is the quadrant for truly passive income.

Investors in this quadrant have usually accumulated money earned in one or more of the other three quadrants, and they let the money go to work and produce even more money for themselves.

Investors often purchase shares of companies owned by those in the B quadrant.  The capital from the investors helps to fuel the systems created by the business owner, and this fuel can lead to even greater growth (and more income) for everyone involved.

There are multiple paths to financial independence, but most of them ultimately lead to the right side of the quadrant – B and I.  So, if you want to achieve greater financial independence and freedom, it will pay to start learning the skills and mindset required to make this move to the right side.

Which quadrant represents you? Where do you earn most of your income? What about your spouse? Your friends?  Which part of the cash flow quadrant would you like to move to first? I’d love to hear from you in the comments section below.

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    1. Thanks for sharing, Emmanuel. I agree that just being self-employed doesn’t necessarily give you freedom. It’s like a job only you’re the boss (which can be worse sometimes!).

      What I love about the Cashflow Quadrant idea is that it reminds us to slowly work our way to the right side (B or I). Is it possible to turn a self-employed business into a business you own by creating systems and hiring people to do it for you? Or if not, can you save a portion of what you earn in self-employment to purchase investment assets (real estate, stocks, etc)? Eventually, that can allow you to be in the I quadrant where you earn some or all of your income from investments.

    2. Consider selling life insurance, with commissions and renewal income, you can enjoy the freedom of being a business owner and not worry about taking a vacation as your passive income is on auto pilot.

  1. Thank you for this information it’s the way to go if you want to be wealthy and happy. Am an employee and have been and still strugglong no savings at all. By end of month i am paying debts. I choose and working towards owning a business and finally be an investor. That is my humble prayer every day. I encourage us to do so.

    1. I agree! I earn money just to have to give it away and have nothing to show for. Which is why I decided to make a change and go into ecommerce. My mentor who will have financial freedom next year(at the age of 33) will be showing me how too also become FREE. I wish you the best of luck! If you want to have a business and be free you will do it!

  2. I am a small business owner for the main time working towards building a big business and finally becoming an investor.

    1. You should definitely try to be a business owner with a system.
      follow the link below and let me know how can I help:

  3. Thanks Chad. I also have enjoyed the ‘Cashflow Quadrant’ and understand it – Thanks RDPD group. One thing also to think about, as Tom Wheelwright of the RDPD group shows is the taxes associated with each quadrant.
    The ‘E’mployee averages paying 40% taxes.
    The ‘S’elf employed person pays about 60% taxes, because the employer was paying taxes for the employee.
    The ‘Business’ pays about 20% taxes (although I believe it is much more).
    The ‘I’nvestor can get to a 0% tax bracket by using the tax code to his advantage.

    Check out Tom’s book – Tax Free Wealth and also another good book to help you with tax strategy is by David McKnight – The power of Zero.

    1. good point on taxes, Michael. It really does change from one quadrant to another. I think there is more variability possible – like in S you could have some tax write-offs and other ways to reduce the tax rate. But the system definitely incentivizes investing income more from a tax standpoint.

  4. Can’t begin to say how grateful I am that I found your content, I’ve learned a ton and I feel like I’ve barely scratched the surface. At the end of the Cash Flow Quadrant episode you mentioned investing with PeerStreet. Can you please discuss that further in a future episode? Thanks for all of the hard work.

    1. Thank you Dan! Really glad you found your way here to the site and podcast. Yes, I’ve only dabbled in Peer Street but I’ll be happy to share more in the future as I have a little more track record. It’s a crowdfunding platform where you can invest smaller amounts (ex: $1,000) in a piece of smaller real estate loans.

      1. Actually this was helpful, and l released that it’s more important for anyone to find him/herself in the I quadrant.

  5. Hey Chad,

    Thanks for this info!

    Would you be willing to share some of your check lists? Specifically when purchasing a house for a LTH do you have a checklist from finding property to placing the tenant ?

  6. Very good and helpful information. i have already start working in B Quadrant. I have read the Life Changing Book Cash Flow Quadrant. Its amazing. I want to share this information as much i can. This is my Aim.

  7. In my point of view, if you want financial freedom, you need to go through these 4 quadrants, you must have skills and personal development for starting a buiness. Because market is like a web and you need to know it deeply.

    1. Agreed! You should definitely try to be a business owner with a system.
      follow the link below and let me know how can I help:

  8. Hey Chad,

    I have a question that was brought up to me about the investors part. The question is “is it fair for us to receive our investment back knowing that there are people who are doing all the hard labor to give us our profit?”

    1. Great to hear, Franklin! It’s certainly a different set of skills to learn. I’ve found the B quadrant to be more about systems, business, and managing other people than it is the technical part itself. Some people like that and some people don’t. But it can be beneficial to learn. Good luck!

  9. Freedom for financial is long struggling journey but is possible.only key is taking decision and be committed t walk through it.

  10. Hey carson! Thanks for the brief explanation of the cash flow quadrant.
    No doubt we can only have true financial independence and freedom on the B and I quadrant, buh what are the requirement to play the game there, or can an employee suddenly come to be the B and I quadrant?

    1. Good question, Martins. For an I – you need to save and grow wealth. A large amount of money invested in solid investments (like properties) is the key.

      For a B – you first need a business that earns money, and then you can systematize and outsource to good people. That final part is not always easy. A book called the Emyth is a great guide to doing that.

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