One of my favorite business minds is Robert Kiyosaki. Robert Toru Kiyosaki is an American businessman and author. Kiyosaki is the founder of the Rich Dad Company, a private financial education company that provides personal finance and business education to people through books and videos. He coined the “Money Quadrant”, which breaks down an individuals career in 4 easy steps. Below I will discuss each quadrant in more detail.
Active Vs. Passive
Active Income: Income for which services have been performed. This includes wages, tips, salaries, commissions, and income from businesses in which there is material participation.
Passive Income: Earnings an individual derives from a rental property, limited partnership or other enterprises in which he or she is not actively involved.
The Money Quadrant
You work for a company, big or small, and your income is mainly based on the success of the business you work for. Your job likely comes with benefits, promotion ladder, 401k, stable paycheck, etc. People like the “comfort” of an employees lifestyle and believe it is a secure path for their financial future. Some people were meant for this career path but many people are yearning for more. Which leads to the next step.
2. Self Employed
95% of working Americans fall between these first two quadrants, employee and self-employed. Self-employed people have a yearning for more income and want to be paid what they are worth. Common career paths for the self-employed include insurance agents, MLM distributors, lawn services, contractors, etc. This is a great way to create additional income on a part or full-time basis. Working your way into this quadrant is also very beneficial for tax write off purposes, which I encourage everyone to take full advantage of. People who fall in this section also typically earn income on a “commission” basis compared to the more traditional salaried position. For those of you who worry about this aspect of creating income, watch this video. Rich Florence does a great job explaining and how to overcome your hesitation.
3. Business Owner
When it comes to becoming a successful business owner, there are three ways you can thrive in the B quadrant.
A. Find a Mentor: Information below is from
“A mentor is someone who has already done what you want to do and is successful at doing it. My rich dad taught me about systems and how to be a leader of people, not a manager of people. Managers often see their subordinates as inferiors. Leaders must direct people who are often smarter than they are.
A traditional way to do this is to get your MBA from a prestigious school and then get a fast-track job that takes you up the corporate ladder. An MBA will teach you about the basics of accounting and how the financial numbers relate to your systems, but having an MBA doesn’t mean you’re competent to run a business. You’ll need to spend 10 to 15 years in a company to learn all the different aspects of business. Then, you should plan on leaving to start your own company. Working for a successful major corporation is like being paid by your mentor.
Even with a mentor and years of experience, building a business from scratch is labor-intensive. Creating your own system requires a lot of trial and error, up-front legal costs, and paperwork. All of this occurs while you’re trying to develop and lead your people.
B. Buy a franchise
If you don’t want to take the time to build your own business systems, you can buy a franchise. When you buy a franchise, you’re buying into a proven operating system. The advantage of buying a franchise is that you can take the time you’d spend building your systems to focus on developing your team. And because banks like to make loans to businesses with good, proven systems, they’ll often give a loan to a franchise but not to a start-up.
A word of caution: Don’t buy a franchise if you want to do things your own way. You must be ready to do everything the way the franchisors tell you. You don’t call the shots, but you do own the system. If you want to do your own thing, do it after you’ve mastered both building your own system and leading people.
C. Get involved in network marketing
Network marketing often gets a bad rap. Because it’s a newer form of business system, many people look at it suspiciously and think of it as a scam. Initially, I felt this way too. But after dropping my prejudices and doing some research, I found many people who were sincerely and diligently building successful network-marketing businesses that made a positive impact on their financial futures and others’.
For a reasonable entry fee (often around a few hundred bucks), you can buy into an existing system and immediately begin building a business. And because of technology, this can be done almost entirely online and automated. Paperwork, order processing, distribution, accounting, and follow-up are almost entirely managed by the network-marketing software. This allows you to focus on building your business instead of worrying about the normal start-up headaches of a small business.
Today, primarily due to changes in technology, the risk in becoming a successful business owner is greatly reduced, and the opportunity to build your own or leverage an existing business system is available to virtually everyone. If you want to start your own business, there’s really no excuse not to start today.
Franchises and network marketing solutions took away the hard part of developing your own systems. You acquire the rights to a proven system, and then your only job is to develop your people.
One practical thing you can do today is start learning about business and systems from a mentor and a coach. I had a great mentor and coach when I was building my business, and you need one too. Rich Dad provides both mentoring and coaching for those who want to succeed in business.
The income you bring in does not require your presence. This is the best form of passive and residual income. You can invest in virtually anything you want as long as you do the proper research and educate yourself properly. Robert touches more on these topics in the video below.”
The money quadrant is important for all hopeful entrepreneurs to learn from. I encourage all of you to start your path down entering each of the 4 sections.