Written by: Jorge Contreras, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
Robert Kiyosaki’s book series “Rich Dad, Poor Dad” offers many great insights into wealth building. And one of my favorites in the series is its second installment which introduces the Cashflow Quadrant. Now this quadrant categorizes the most common income streams people have like being an Employee, Self-Employed, Business-Owner, and Investor.
You can fit your current financial status into the big picture based on where you fall within these quadrants. But the main purpose of this representation isn’t just to show you where you are - it’s actually created to help you grow and reach the most financially stable quadrant as an Investor.
Now if you’re currently an employee, or you’re self-employed and you want to get out of the rat race, the Investor quadrant is where you need to be. And you may want to keep reading through this post because we’re helping you do that by showing you some of the best paths to that much-coveted I-quadrant. Let’s get started, shall we?
The four quadrants
As we’ve mentioned, the cashflow quadrant (also known as ESBI quadrant) has four smaller squares, each representing a category of income generation. These are:
1. Employee (E Quadrant)
Individuals who are employed by companies or organizations and receive regular salaries fall into the E quadrant. If you’re in this quadrant, it means that your income is tied to the number of hours you work. As an employee, you must consistently show up and dedicate your time in order to receive your monthly paycheck.
While this is great because you’ll have financial support as long as your contract stands, the downside of this arrangement is the limited career freedom it entails. Most organizations already operate on established systems and they only hire employees to follow them to achieve the best outputs for the company. So don’t feel too bad if some of your ideas are rejected in your workplace. That’s just how it’s built.
2. Self-employed (S Quadrant)
On the other side of the employment quadrant lies the S-quadrant. In contrast to employees who operate within hierarchical structures, individuals in this quadrant work for themselves. They enjoy a bit more freedom and autonomy than those working for other companies. But they also still need to sacrifice their time to get paid.
If you don't work, you won't earn. And you have the same high tax burden as those in the E-quadrant. Plus, if you’re self-employed, you need to realize that you’re in the most vulnerable quadrant, as studies indicate that 90% of self-employed ventures fail within the first five years.
3. Business owner (B Quadrant)
Business owners in the B quadrant share a similarity with those in the S quadrant when it comes to financial independence. But business owners still have it better than most self-employed folks. For one, they have more time freedom in their hands. Rather than doing the work themselves, they can outsource, delegate and assign tasks to other people.
They can then step away from their operations and take a vacation without having to worry if it’s still running during their leave. This enables them to avoid working as extensively as those in the E and S quadrants, granting them better time and location freedom. They also pay lesser taxes, so there’s that too.
4. Investor (I Quadrant)
The I quadrant is where you’ll find investors engaging in activities such as investing in stocks, company shares, or real estate. Many people in this quadrant began their journey in any of the other three quadrants. But what differentiates them from the rest is that now their money is working for them.
They wisely invested in assets that appreciated over time, and now they reap the benefits of their investments, enjoying a fulfilling lifestyle supported by passive income. Now this is the most ideal quadrant.
Tips on moving quadrants
So according to Kiyosaki, the left E & S quadrants are the riskiest categories. And if we look at the descriptions for each of the quadrants, we can see that it’s not far from the truth. Being self-employed or working as an employee means that you’re constantly reliant on either someone else or yourself, which also implies that if you fail in your efforts, you’ll have nowhere else to go.
On the other hand, the right quadrants, B & I, are considered the safest. As a business owner, you have a system that can generate income even when you're not actively involved. And as an investor, your assets can provide for you without requiring any direct effort on your part.
Now these quadrants are just guides in showing you your present financial state but it doesn’t dictate your future. What does this mean? It means that if you’re on the riskiest side of the quadrant - you’re employed or self-employed - you have the chance to change your course. Yes, you can still go from E to I. In fact, here are some tips to help you do so:
If you’re an employee…
1. Target the B quadrant first.
Although it’s good to experience the independence that self-employed folks do, you don’t have to deal with the uncertainties of starting a self-employed career if you don’t want to. In fact, we recommend you target being a business owner first.
One of the reasons for this is that having a business will give you the guts to face the challenges of being an investor in the future. Investors know when to keep or let go of their investments. And unless you already have that ability while you’re still working for other people, it’s good to try operating a business first.
2. Start a side hustle or a small business.
Now there are a lot of ways you can get into the B quadrant. One approach is starting a side hustle or a small business. Small businesses can give you passive income with minimal initial investment. And it can get your feet wet in the industry, too. Plus, if you don’t want to quit your job yet, you can also continue working your 9-5 and scale your small business without being burnt out. This will help you transition to the B quadrant better.
If you’re self-employed…
1. Build a business you can create a system for.
As someone who’s a bit more independent, you probably already have some business skills in your arsenal. However, you still need to hone that in a way that will require you to create a system that you can have other people do for you.
For example, you can build a rental property business where you automate recurring tasks such as cleaning and maintenance to other people other than yourself. This will help you engage your business skill and give you the time freedom you’re missing out on.
2. Invest in leadership training.
This is an important tip if you’re planning to go big in the future. As a self-employed individual, you might already be used to working alone. But that’s still living with an employee mindset and it’s not helpful when you want to go into business. That’s why you need to invest in learning how to work with others, finding the right people to add to your team, and managing them skillfully.
So you see, the common denominator between the people who are employed and self-employed folks who want to become investors is that they need to stay in the B-quadrant for a while and learn the ropes there first. Got your next business idea? Don’t worry if you don’t. We actually have a good one you can start right away, and it’s called Airbnb Subleasing.
Launching an Airbnb through Subleasing
Short-term rentals through Airbnb are a great way to start a business and break into the real estate world. And you don’t even have to buy properties if you can’t yet. You can just launch one by Subleasing.
Airbnb Subleasing is when you rent properties belonging to other landlords and use them to start your own business. Is this legal? Yes, because you’ll be getting permission and signing a contract with them before launching. Click here to get a detailed view of this intriguing strategy.
Now if you’re an employee, getting launched on Airbnb can easily get you in the S quadrant where you’re independent enough to have a say on your income. However, you’ll still have time constraints that most people in that quadrant do. But you can follow the tip for self-employed folks and delegate your tasks from there.
Learning how to automate your operations will alleviate most of your work burdens and move you to the B quadrant. Assign your tasks, earn more, and reinvest your money on bigger assets and you’re on your way to being an Investor.
Does this sound like a plan? If yes, then it’s time to make a move and start Subleasing today. The I quadrant is waiting for you. Download and check out our free training guide today.
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Jorge Contreras, Executive Contributor Brainz Magazine
From poverty to a million-dollar business, Jorge Contreras is a real estate investor and coach. He started his real estate journey over 10 years ago, and he launched his Airbnb business 5 years ago. Before that, Jorge was overworked and underpaid. He barely had time to spend with his family, and his business wasn't exactly thriving. Once he got into real estate, he realized the potential, especially with Airbnb and short-term rentals. When he became a millionaire before the age of 30, he decided to share his knowledge with all the people who have the need to spend more time with their families and less time working. Jorge has already helped over 3000+ people reach their goals with Airbnb.
