Cashflow Quadrant

Wrote by: hoangnguyen     Create date: 08/05/2016     1366 views

 


The CASHFLOW Quadrant defines how different people generate their income or money. On the left side, the E (Employee) and S (Self-employed or specialist) focus on earning income and greatly value safe, secure job or career. On the right side, the B (Business Owner) and I (Investor) focus on creating assets to provide their income source using other people's time and money. Above all, they value financial freedom.

 

Active Income

On the left side of the table is active income. You are trading time for money. In order to make money you must perform something. Every day you start from zero.

 

Passive Income

On the other side, it is passive income. You do not have to be present to generate income. Things like real estate, stocks, bonds are sources of passive income. You are literally making money while sleeping.

 

Cashflow Quadrants

 

E – Employee

Most individuals only live in this area. You work for a company and trade your time for money. If you want to earn more money, you must work more hours. Another option is work for another company that pays better. With this position in the quadrant there is no passive income. If you don’t work, you don’t make any money.

 

S – Self Employed

This is one step better than an employee, but in reality you still are trading time for money. You own your own business, but in reality the business owns you. The positive benefit you have more personal and financial freedom than an employee.

 

B – Business Owner

A business implies you have a system in place. You have others working for you as employees. You aren’t selling your time for money, but rather selling a product or service. In other words, you don’t have to be working for the business to generate income.

 

I – Investor

This is where you truly have passive income. Investments like stocks, bonds, and real estate generate an annual cashflow. These are the investments that will allow you to retire. It can also be things like trademarks, copyrights, and royalties. Things you build once and have a long (5-10 year+) timespan in payouts.

 

Which quadrant are you in? Which one do you want to operate out of?

 

 

Source reference:       www.richdad.com         

www.investorjunkie.com

Nguyễn Ngọc Hoàng - Software Engineer
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