What is Cashflow Quadrant? Why is it so necessary to understand it?

A Cashflow Quadrant is basically a quick solution coined by Robert T kiyosaki. Robert T kiyosaki is the author of the RICHDAD POORDAD franchise. Cashflow Quadrant is nothing but the classification of people based on the way they earn money. 

In this article, we will understand the Cashflow Quadrant and learn more about each quadrant so that we will understand more about it. 

A Cashflow Quadrant is basically the classification of how people earn money. It consists of four types. They are

  1. Employees
  2. Self Employed/ Small Business
  3. Large Businesses
  4. Investors

We will analyse these one by one and highlight the most important lessons from each step. Always remember that no system is 100% Efficient. Each and every system that we plan will have a certain number of advantages and disadvantages. The real task is to take consideration of both of these advantages and disadvantages and make the system more efficient by reducing disadvantages. 

The Employee

Around 80 percent of people come under this category. Imagine if a person has all the capability to run a company but cannot afford to take a risk, he will end up as a hard working employee in another company. A job can’t promise anything to you. All that it gives is a salary that’s not even help you in meeting your expenses. 

A job holder is merely a person who trades his talent and time for money. It’s a form of staying in a comfort zone. If a person knows everything but is not ready to take any kind of risk, then it’s not gonna be a peaceful life for him. Remember, your incapability is the strength of your boss. So we suggest you to learn things and start your legacy to do better in your life. Be strong enough to fight with the circumstances that you face in your journey and learn to take calculated Risks. Because that’s how you grow.

Self Employed/ Small Business Owners

This category is filled with people who have started their journey as an entrepreneur but lost in their own ways. See, you cannot attain supreme wisdom on anything by a night. All the knowledge that you have accumulated for years since your birth is the helping hand given by you to yourself. 

If you already have a business but the margin is very small, then you must work on creating value to your brand. This is one of the most important steps you need to focus on. As you have already gained the courage to start something new by yourself, you are really strong in the way you deal with things. But the problem arrives in further steps. If you are not interested in learning more on what you are currently working on, you will surely fail in your further steps.

Large Business Owners

These are the major game changers that can turn the economy upside down. To grow a small business to a big business, you must be ready to learn a lot of things. Generally people will not give much priority to the knowledge and experience they gain in their previous works. And also, They mostly focus on the problems that are disrupting their industry and try to attack with a new upgrade to it. To be Frank, starting and running a business is not as easy as it sounds or looks. There are certain tasks that involve risks and these risks can only be managed by People who are wiser than the rest. 


Here comes the legendary person. If you have an idea and are interested in working on it, then you may be familiar with the product or a service that you are going to publish for people.

It’s not necessary to think more if we succeed or not because, after all, we need to stay strong and go with the gut feeling. 

But the real problem is how to invest in others’ ideas. Investing is a way of believing in something that others may reject and hoping that these small stones will turn into huge cash reserves in future. Investing is not as easy as it seems.

It’s a combined work of experience and risk on what you are believing in and investing in. One must have a knowledge on what he or she is investing in. Only then, he will take worst cases under consideration and work on them to minimise losses. 

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