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Cash Flow Quadrant: How to get passive income? [Part 1.]

Cash Flow QuadrantThe article discusses the Cash Flow Quadrant – tools which divides actively employed population into four categories according to how people earning money, plus a summary in which quadrant you can get active and where so-called passive income.

I also mentioned this Cash Flow Quadrant topic in the article named “Financial Freedom: How to make money on investments, gain passive income and financial freedom?” Where you can read about:

Today we will continue in this topic …

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Would You rather watched a video instead of reading? Here it is…

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FIRST: What is the Cash Flow Quadrant?

Cashflow Quadrant is a representation which was popularized by Robert T. Kiyosaki – American businessman and author of the book series “Rich Dad Poor Dad” by which the term “Cash Flow Quadrant” led to wider recognition.

Although Kiyosaki’s books are not the ultimate solution for the financial problems of all people, I definitely recommend to read them.

Think of his books as a simple way to learn how to think differently than most population, as well as how to learn the basics for your own financial and time independence – thus to learn to think differently than 95% of ordinary people who rely only on their current income from employment but they don´t create any income for their pension…

On the examples and stories in Kiyosaki’s books you will understand the difference in the thinking of people who are financially independent, as well as you will get inspiration from a man who has built a successful business from scratch, then went bankrupt and subsequently rebuilt his business, and in his 47 years, he retired…

Cash Flow Quadrant shows a difference in people’s thinking…

And thanks to this the difference between financial and time capacity of the people who earn their money:

Because the sequence is still valid: The idea – word – action, you need to gain knowledge and then you can create your passive income.

If you change your way of thinking and looking at yourself and how you can actually make money, you will get the option to move to other quadrants and emerge from general beliefs and habitual patterns – such as going to work for long 45 years without the possibility to retire earlier than in 65 years and have time and money to travel or pursue hobbies…

Why you should understand Cash Flow Quadrant?

If you understand the principle which Cash Flow Quadrant represents, then you get a key to understanding how money actually work and how to customize your earning so:

  • You could earn as much money as you envision, without limitation,
  • to be able create not only active but also passive income
  • so you can gain financial independence and time and not labor yourself to death.

If you understand the Cash Flow Quadrant, you will make better decisions and you will create better systems that will allow you to multiply your income without the necessity to simply add the number of hours you work…

This is the only thing that can do most people…

Most people have linear thinking habit, that could be summarized in a simple idea:

The more I work, the more money I earn…

Which is true, but they will soon run into limitations in terms of their personal time – because none of us is able to work more than 15 hours a day and I dare say that it is impossible to do it more than a few months and then everybody loses desire to continue working…

By increasing the amount of time while you actively working, altough your income raise, but only for a short time period or by very little amount of money.

When people figure it out:

  • They go to school or enroll in a course and increase their skills, so they can charge more per hour of their work and thus earn more.
  • Which obviously works on the other hand, there’s always the limited time that they have and so along the higher income the ceiling exists as well…
  • And when they stop working or get sick, they stop making any money – here higher qualifications doesn´t help.

If you will understand Cash Flow Quadrant correctly, it will automatically leads you to creating or purchasing a system that will allow you to earn unlimited amount of money regardless of your personal time you have designed for particular activity…

How the Cash Flow Quadrant actually looks like?

Graphically it is a cross, which divides the economically active segment of the population into 4 groups according to how they earn money – as you can see in the figure…

 

Cash Flow Quadrant

Cash Flow Quadrant has left and right side…

Left side of the Cash Flow Quadrant includes:

For the left side of Cash Flow Quadrant is typical common denominator – time for money…

By which is left side characterized:

  • People are exchanging their personal time for money.
  • Thus, there people can only create active income (for earning they must be personally present) rather than passive income …
  • The higher the qualifications they have and the more hours they put to work, the more money they earn, but they can never stop, because otherwise they loose their income which is only active…

Whether the people are employed or self-employed entrepreneurs, they hit “the ceiling” in time, which is often not visible from the beginning.

  • Employes often find that have no space to grow and can not get raise their income.
  • Self-employed people find that they don´t have any time left that they could take and convert it into income.

The reality is that the majority of working population spends its entire life on the left side of the Cash Flow Quadrant – that’s 45 years of work effort without ever gain income on the right side.

Right side of the Cash Flow Quadrant includes:

For the right side of the Cash Flow Quadrant is a typical common denominator – the system…

People who are on the right side, decided to build or buy a system or asset that is capable generate income without direct dependence on their personal time, effort, energy, knowledge, skills, capital and acquaintances.

Because they found out how to remove the interdependence between their ability to generate income and their personal time, their income can grow indefinitely.

They can do it thanks to their understanding of how to create systems and assets that have the capacity to generate passive income.

How to get passive income?

Passive income is such income that goes to you repeatedly and still but only on the basis of work done once and this is the way how you can get your financial and time independence…

Traditional education doens´t teach us how to generate passive income, and most of the people don´t have  somebody around themselves from whom they could learn it – because most of the people work on the left side of the Cash Flow Quadrant – in employment or as self-employed people.

However, You will get Passive income only when you create or buy a system or asset (property) that generates the income without your participation:

  • Purchase a real property (or other assets) to obtain a lease
  • Multilevel Marketing, Network Marketing – to create consumable distribution network
  • Owning enterprise – to create or purchase a classical business with employees, which has a quality system and described processes.
  • Dividend from stocks, bonds and income from funds
  • Licensing patents for the operation of a system or program
  • Etc.

REMEMBER: Indeed, it is possible to have a passive income, and you can have it too.

You will have to move to the right side of the Cash flow quadrant and learn to think like an entrepreneur and investor. You’ll have to learn specifically how to create passive income.

Can you work in multiple quadrants of the Cash Flow?

Yes, definitely you can, if it is advantageous for you

Each person may be in more than one quadrant, but seldom in more than three – but the question is, why are you doing this and what advantage do you see in it – there is a need for advice of your accountant whether it has any sense.

Simple examples:

  • An employee may have another income as self-employed person and also has money invested in stock and so this person is in three quadrants, but income from one quadrant is prevailing – presumably from work.
  • The owner of the company employing himself in his own firm, paying income to himself as employee and also invests in real estate and has investment income.

Unfortunately, most people do not know that and so they are often in only one quadrant for a lifetime and mostly quadrant E (Employee) or S (Self-employed), and thus they have much less possibility of choices than people on the right side of the Cash Flow Quadrant.

Following articles…

If this topic of Cash Flow Quadrant interest you more, then read another following chapters, which analyze each of the categories of Cash flow quadrant in more deep manner:

In conclusion on the topic of the Cash Flow Quadrant…

The truth is that most of the working population labor for money – it means, that they have to work and never stop otherwise they lose their income.

Only 5% of people have learned how to get money to work for them.

Learn to think differently from the 95% of the population by understanding what understands only 5%.

The answers you seek you will find when you begin to understand the power that lies behind the Cash Flow Quadrant.

Use it as a starting point for getting your own freedom and financial and time independence.

 

If I can assist you in this particular area, please contact me.

I wish you a great day and look forward to our personal meeting.

 

PS: Do you want to get to the right side of the Cash Flow Quadrant sooner than others?

I discovered a way a person can get the passive income “to live a life without borders” by building a business from home and have a system which can handle anybody who has a dream and wants to fulfill it. This does not require selling and the best part is that it does not take much time either – maybe 30 minutes of concentrated effort / day.

Wanted / and you know about it more? Contact me

 

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  • Share your thoughts below in the discussion.
  • Click on the “Thank You” below in this article…

 

 

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Robert is an entrepreneur, a writer, a coach and visionary mentor who´s life mission is to help people achieve business, financial and life goals through coaching, mentoring and network marketing. Robert has written several ebooks - the very last one is: Magic words of the Masters of life... (avalaible in czech language only). Do you want to know more? Click here...
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