Dec
For the first time in my 16 years of working for a Makati-based company, I was put on forced leave for 9 working days. And not on any other days. But on the 9 working days before Christmas! The days when I greatly needed money.
What my friend Edel has been telling me everytime we meet about job security has now come true for me. He has been telling me to get out of the E quadrant and start my way to the S quadrant and ultimately to the B and I quadrant. Of course, I didn’t know those letters. And come to think of it, I didn’t really pay attention when he was discussing those things to me. Even after he wrote me a letter. After I was put on forced leave, I re-read the letter. Wow, he really writes so well and I’d like to share it with you:
Hi Nora:
For you to better understand my plan, I have attached an image of the Cashflow Quadrant as illustrated by Robert Kiyosaki.
Employee: You have a job
Business owner: You own a job
Self-employed: You own a system and people work for you
Investor: Money works for you
He explained that people operate in at least one of these quadrants, but most people operate only in the E quadrant. Why? Because it is a comfortable place to be. Everything has become routine. You wake up in the morning, get dressed, eat breakfast and then go to work. After work, you come home, view TV and then go to sleep. The next day, the pattern is the same. Every 15 days, you get your paycheck.
The problem with the E quadrant (and for that matter, with the S quadrant) is that there is very little leverage. You cannot make duplicates of yourself to increase you income capacity. And if you cannot go to work, you do not have the income. Right? On top of it, you have no tax advantage. Your tax gets withheld every payday and you have no control over it.
The S quadrant is a bit better than the E quadrant. There is a little bit more leverage here and the tax could be less. However, the leverage is still limited and the income also stops if the person stops working.
The B quadrant is where I want to be. This is where a system has been put in place so that even if I don’t get up and go to work, the income continues to pour in. On top of that, leverage is at its highest. So if your company has 500 employees, your income-generating potential is multiplied by that number. Now, that is leverage!
That is how Henry Sy, Lucio Tan, the Ayalas, the Lopezes, and other multimillionaires were able to generate their wealth and continue to do so with very little effort on their parts. The problem with this quadrant is that it takes time to build it and it takes much more work than in the E quadrant when you are starting to build it. That is why, I had less and less time to spare for Ebsco during the past few months.
Moreover, many people cannot handle the uncertainty. They believe that building a business is risky. They look at the statistics and point out that nine out of 10 businesses that start fail. The funny thing is they do not see the one business that made it. And even if your first, second, third and so forth, business failed, you would have gained vital knowledge that you would be able to utilize in your next venture. Many people shirk from going into this quadrant because we have been trained in school that failure is bad. Robert Kiyosaki himself failed in his first three business ventures. But he kept going on and the odds became better for him as he learned from his past failures. Failures are not bad if we learn from them.
The I quadrant is for investors. I am planning to get into this quadrant too. Thanks to Ebar. In this quadrant, it is the money that serves as the leverage, in contrast to the B quadrant where other people’s time is the leverage. It is in the I quadrant where you have your money work for you instead of you working for it. Makes sense? This is where my on-going training in the Cashflow game comes in. Do you know that it takes only a little money to make money? Do you know that if you keep your money in the bank, it is the bank that is becoming richer by using your money, in the same way that it is the investors in the company that you are working for who are becoming richer by using their employees’ time?
The problem is that it takes a different mindset to shift to another quadrant. Meaning, you have to change your mindset first before you can shift to the B and I quadrants. That is the importance of constant learning. Moreover, very few people know about financial IQ. That is why no matter how large the salary of a person in the E quadrant is, the end result will almost always be the same: retirement on an income level that is less than his or her salary. No wonder, many people depend on their children when they get to their golden years. Now that is such a sad story I would not like to partake in. Do you?
See ya.
Edel
Tags: business owner, Cashflow Quadrant, employee, forced leave, investor, job, job security, Kiyosaki, mindset, Robert Kiyosaki, self-employed