Summary of Rich Dad's Cashflow Quadrant

Table of Contents

Key Concepts

Set Life Goals, Find My Own Path
- My own path is not profession, income, job title, successes and failures in my life
- To find my own path means to know the reason why I was born in the earth
Trust my intuition, heart, feeling, emotion, spirit, and decisiveness
- It’s easy to find what we don’t want to do, if we don’t know what we want to do

Cashflow (CF) Quadrant classifies people according to where they earn money from.


E	B
S	I

Where,

Difference between quadrants:

Important points:

Ask myself “which is what I’m planning to do, to bring a water bucket or to build a pipeline of water?”
Two questions that “Can you make a better hamburger than McDonald’s?” and “Can you build a better business system than McDonald’s?”.
The important thing to move from left to right is “what should I become”, not “what should I do”.

What they will do when they need money:

Perfectionist
DIY (do it yourself)
Don’t ask someone to do something
Thinking I’m the best person to do it
Money is not the first priority. The most important things are independency, to do something in my way, to be respected as a professional expert.
Demerit is the bigger success leads to the longer work.
If they take a rest for a year, they will lose all works.
Own a work.
They are like a pilot of their business like. They are a part of their business system.
If they get sick or injured, income will stop.

Hire experts who are better than me to do something
Reduce my tasks to ask someone to do them
To think deeper about something is the hardest work. That’s the reason why such a few people do it.
Both leadership and business skill are necessary. Leadership is to maximize someone’s potential.
If they take a rest for a year, their business will become bigger, and its revenue will become higher than before taking the rest.
Own a system and hire people to maintain it.
Use OPT (other people’s time) and OPM (other people’s money) time from resource of E and I.

Focus on making money from money.
Earn money when the market conditions are bad than when they are good.
Average wealthy person earns 70% from right side and 30% from left side.
Changes mean moving of wealth.
When I take on debt and risk, I have to get income after taking into account debt repayment and other expenses.
The profit is made when investors buy, not when they sell.
The important points are
Someone owes to me.
Think more deeply and carefully about who I rent money from.
Build a system that someone pays off my debt when I make a big debt.

Book said:

Companies pay interests to the people who take monetary risks.
Insurance companies take risks of customers’ health and customers pay to the companies.
However, that left side E and S pay to right side B and I and take risks of sicks and accidents.

Don’t be “analysis paralysis”, which means the state nothing can be done while examining every detail. Do it.
Products and business systems are different.
Someone’s liabilities are someone’s assets. (One hand, mortgage is a liability on someone’s balance sheet. Other hand, it appears as an asset on bank’s balance sheet. And house value on the asset list of someone’s balance sheet is just an opinion which can change according to market condition. Additionally, this house is not a true asset because it doesn’t make money).
Bank deposits are liabilities for banks because they need to pay interests to users.
The basic rule of capitalism is who lends money to whom?
The more people I owe money to, the poorer I become. The more people I lend to, the richer I will be.
Be aware the difference between income gains and capital gains.
The absolute condition of investments is to ensure profits without regarding to tax incentives.
Become an employee of the company that I own.
Establish a company, then purchase real estate.
Use compound interests.
Good liabilities are ones that someone will pay for. Bad liabilities are ones that I have to pay for.