If you want to achieve financial independence, it’s essential that you understand the different ways to earn money. I first learned about this concept years ago when I read Robert Kiyosaki’s book called The Cash Flow Quadrant.

That book helped me to better understand what types of income I needed to pursue if I wanted to be financially independent.

The Cashflow Quadrant


E- Employee

The top-left quadrant is exactly like it sounds and the worst position to be in. You are fully dependent on an employer for income, you are literally trading time for money. It doesn’t matter how long you’ve worked for a company, the results you’ve produced, the problems you’ve solved, the minute you quit working there (whether it’s by your choice or not) the income stops flowing.

Professions- W-2 wage earners

S- Self-Employed

Incomes in the S quadrant range dramatically– you could be a plumber making $30k a year, or a specialized doctor earning $750k per year. Despite the income differences, these two professions are connected in one key way, the minute they are not at work delivering services, their income stops. Many people are “owners” of their businesses, but their time is required in order to make money, in all reality, these people own a job.

Growing up, my dad fell into this category. Every time he wanted to take time off work he had to make the tough decision of whether or not time away from work was worth the missed income.

My wife works as a princess party entertainer at little kid’s birthday parties. It’s not her main job, she does it on the side and really enjoys it. Whenever weekend plans come up that would force her to miss parties she asks, “is this really worth missing out on $75-$150 in income?”

You can be rewarded very well monetarily in the S quadrant, but you will always have to answer the same question my wife asks every time you want to take time away from work.

Professions- 1099 employees, real estate agents, doctors, dentists, plumbers, mechanics

B- Business Owner

The B quadrant might sound a lot like the S quadrant initially, but there is a key distinction, in the B quadrant, you OWN a system, product, or company, and are no longer forced to trade time for money.

A doctor could be a business owner if they own the practice and employee other doctors. The key factor being– what happens to the business when you aren’t there?

Professions- franchise owners, entrepreneurs

I- Investor

Investors allocate their money into income producing assets that, once deployed, don’t require any further work on their part.

The most famous investor of all time is Warren Buffett, who has a current net worth of $82B. Buffett has never spent a second working for Coca-Cola, but he’s been a Coke shareholder for decades, and the business has made him millions upon millions.

If you are an investor, your earnings are unlimited because time has no bearing on your earnings. Thanks to compound interest, the more your money grows, the faster it will grow in the future.

Active vs. Passive, Security vs. Insecurity, and uncapped earnings


Hopefully, something really stuck out to you in those descriptions I offered above, you should REALLY want to be on the right half of the quadrant. The two main reasons are security and passive income.


Sorry to break it to you, but you’ve been lied to. You’ve been told that if you’re on the left side of the quadrant you’re safe. You have a steady paycheck, benefits, a 401k match, maybe even a pension. There’s a major flaw with this line of thinking, your company could part ways with you tomorrow if they so please. It doesn’t matter if you have been loyal for decades; as soon as you aren’t creating sufficient value– you’re gone.

“But I’m self-employed, I wouldn’t fire myself, I’m safe!” Sorry, wrong again. Since your time and hard-work brings in your income, what happens if you’re injured or are in some way prohibited from performing your job? Once again, your income is cut off.

As long as you rely on someone else for your income, you will never be secure. Only the right side of the quadrant can bring true security.

Passive income-

I wrote an article a little while ago about how I got Amazon to buy my next car. In that article, I discuss an investment I made to buy Amazon stock several years ago. In the time since I made my investment, I have made thousands of dollars from the efforts of Amazon employees. Whether I was sick, sleeping, or sitting on my couch watching Netflix, those employees were working FOR ME, to give me a return on my money.

Don’t get me wrong, this isn’t slave labor, they’re getting fairly compensated for their work. But the difference between them and me is, if they quit working for Amazon they stop getting paid; and when that happens, Amazon plugs another worker bee into their position and I continue to get paid.

Working on the right half of the quadrant allows you to step away from your business/investment and continue to get paid. Of course, there will be maintenance you have to do, but when you have systems set up correctly, you will have nearly unlimited freedom and opportunity.

Uncapped earning potential-

Only when you separate your earnings from hours worked can you break the cycle of trading time for money, and exponentially increase your income. The wealthy get to be wealthy by either letting their money work for them 24/7 or by owning a system in which others trade their time to earn you more money.

Move to the right side of the quadrant

Take steps today to move to the right side of the quadrant. It might seem overwhelming at first, but a simple first step is to open up a brokerage account and start investing. You don’t need to have a lot of money to start, it’s just important to start, even if you can only save $100 a month. $100 a month is better than $0 per month.

Eventually, your new and improved “right-side of the quadrant mindset” will allow you to create your own business or side-hustle, which will give you even more control of your future.

What steps have you made to move to the right side of the quadrant?

4 thoughts on “Multiply your income using the Cashflow Quadrant

  1. Love the simplicity of the the 4 quadrants. I took a break from corporate to focus on building the right side, investing in real estate and starting an online business (still in the making). Love being my own boss and building something that is mine and not corporate IP. Yanking a break was the best ‘investment’ I could have made.

    Liked by 1 person

    1. I agree, this is a simple framework to look at the income we earn. I like the focus that you’ve made on the right half and totally agree with your sentiments. I’ve really enjoyed making Mr. Fi Guy, and I love knowing that it’s 100% mine.

      Liked by 1 person

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