There are four different types of people in the cash flow quadrant: (E) employees, (S) self-employed, small businesses or specialists like a doctor or a lawyer, (B) big businesses with 500 employees or more and (I ) investors. The distinction is that each of these is four different types of people, and they have four other tax laws for all four classes. And this is throughout the world.
My poor dad always said to go to school so you can get a job. My poor dad wanted me to be an employee like him, and there was nothing wrong with this except that the tax laws were the worst for employees. Employees are having a tough time today. Not only are there high gas prices, but there will be higher taxes.
My rich dad advised me to become an entrepreneur or a big business like Bill Gates or Steve Jobs. Those guys created Facebook and Yahoo, and he wanted me to become an investor, so he started playing the game of Monopoly. So, I learned to be an investor, and I learned to be an entrepreneur.
You can get rich in all four quadrants. It's up to you. My rich dad said if you want to be rich, you should learn to build businesses. It made more sense to him to work hard to build a business, something you owned and something you'd pass on from generation to generation to your kids, whereas my
This side over here has a crucial value: they want freedom; they don't want to work for the rest of their lives. So, the beauty of building a business and learning how to invest is effortless. This is passive income. You work hard for a few years, but possibly for the rest of your life, income keeps flowing to you.
Understanding cash flow is crucial for the wealthy. The word "cash flow" is of utmost importance. It's imperative to know where your cash is flowing. If money comes from an asset into your pocket, that's an asset. Assets are sources of income that put cash in your pocket whether you work or not. On the other hand, liabilities take money out of your pocket even when you work.
The key to a sound financial education is understanding good debt and bad. The new money rules show why savers may lose and debtors win.
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