Cashflow Quadrant Explained

Restored from the Empower Network archive (2011–2017), lightly edited to meet our current advertising standards. Views are the original author’s.

The cashflow quadrant is a simple concept to understand. And when you fully understand it, you will never look at the way you make money the same way every again.

Its actually not too much of a difficult concept to comprehend. As the name testifies, it is basically the four different ways that one can potentially make money.

The Cashflow Quadrant Diagram

Above are the four main ways that a person can earn an income.

Earn Income As An Employee

This is the place where most people are in. Here is the kicker about this. Your whole life you’ve been told to go to college so you can get a good education so you can get a good job and be an employee.

But after being an employee for years you start to notice that its not the kind of life you want to live. But usually you don’t notice this until you find that there is a better way to earn money.

Earn Income Self Employed

Being self employed is by no means being in business for yourself. It just means that you own your own job. Comparing it with been an employee, its a lot better because you get to dictate how, when, where, and for how long you want to work.

Earn Income As A Business Owner

This is where most people would love to be but can never truly get there. This is being in business for yourself. It consists of a lot more advantages than being an employee or self employed. But it takes a lot of hard work to be able to build a successful one.

Earn Income As An Investor

Every person in the world would just love to be able to become a successful investor. Why? Out of the three prior mentioned ways to make money, this is the one that can actually give you true freedom in your life.

When you become an investor, you no longer work to obtain money. Your money works to maintain you. That is why its the place where everyone wants to be. But as rewarding as this sounds, at this level, it will take some money to make some money. This is not always the case. But for the most people who can’t afford it, there is always the option to start investing small dollars. It just will take a very long time to build up a significant amount of money will little money.

Conclusion

What can you take away from all of this? That you can basically choose which side of that triangle you want to be. Each have their benefits and their downfalls. But the ones that have the greatest downfalls are the ones on the left side of the quadrant. Believe it or not, its more difficult to be an employee than to be an employer.

So, whether you want to be on the left of the quadrant or on the right, you can truly make it happen if you really desire it and begin taking action today.

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