Understanding The Cash Flow Quadrant
Understanding The Cash Flow Quadrant : You may have seen Robert Kiyosaki’s cash flow quadrant.
It describes the four types of people in business: employees who work for someone else, the self-employed who work for themselves, business owners who create a system and investors who have enough money to create a fully passive income.
The wealthier people in society are either business owners or investors, but a lot of people think they are business owners and investors when they’re really not.
We understand that only too well having operated our own accountancy and management consultancy business for 20 plus years before becoming online entrepreneurs. It wasn’t long before we realised that we were being paid for our TIME which effectively made us slaves to our business!
In this video, filmed at a private mastermind n Fiji, Vince Reed explains the truth about the cash flow quadrant.
Understanding The Cash Flow Quadrant Video
YOU MAY THINK YOU’RE A BUSINESS OWNER…
The cash flow quadrant is actually four quadrants. The two quadrants on the left are for employees and self-employed professionals, and the two quadrants on the right are for business owners and investors.
A lot of self-described business owners or entrepreneurs might think they are in the business owner quadrant, but they are really self-employed.
When Vince Reed was in real estate, he thought he was a business owner.
When we were in our management consultancy we thought we were business owners.
The reality is, he may have owned his business, but it was a business that was dependent on his own time. It was exactly the same for us. People who are in the self-employed quadrant can’t stop working for a month without their business collapsing.
We even said in a video we recorded some years ago describing why we changed our business model “if you don’t work you don’t get paid!”
This is why Robert Kiyosaki describes true business owners as those who have 500 employees or more …but of course you have to start somewhere and there are many ways in which you can be a true business owner without and entourage of employees!
THE DIFFERENCE IN TAXES
The real difference between the left and right cash flow quadrants is taxes.
We’re sharing an example from the USA but it applies in much the same way in Europe
In 1943, the United States government passed the law that employees had to pay tax before they received their pay. Since then, as soon as employees get their paycheck, the government has already taken a chunk of it.
Plus, the harder you work and the more money you make, the more money they take.
Self-employed doctors and lawyers laughed at this. Until 1986, when another law was passed that took away many of the benefits of being self-employed. In America today, the self-employed pay the highest percentage in taxes.
The big tax breaks are given to those in the right-hand cash flow quadrants. In those quadrants, the tax laws are grey and blurred, while they are tight on the left-hand side.
Full-time investors can make millions and pay zero taxes legally. They can then continue investing with that excess cash, while the employed and self-employed continue to get their wealth slashed by taxes. That’s the reason the rich are getting richer and the poor are getting poorer.
Thanks for reading – we always aim in our articles to answer burning questions or provide information of interest to our visitors – we really loved this simple to understand training from Vince Reed and hope you did too ??
Who Are We
We’re former accountants of a certain age (60+) with 5 great kids and 4 grandchildren. We love skiing and traveling the world and have achieved a fabulous life helping others to start and build a successful business online and now speak on international stages following that passion and helping transform lives. We started an online education and training business helping entrepreneurs in their 40’s, 50’s and 60’s create their ultimate retirement breakthrough and find a way to fund their retirement and fulfil their passion and purpose as midlife entrepreneurs. Our worldwide educational business is centered on online marketing business education, financial literacy and wealth creation and a desire to help you create financial freedom through online entrepreneurship whatever your age or experience.
Authors : The Mindset Shift
Contact Us : Click Here For Details
If you enjoyed this post if you enjoyed this post “Understanding The Cash Flow Quadrant” please Comment, Like and Share