It’s VERY possible to power straight through to the final goal, which is the investment-supported lifestyle. It probably seems like you have to move from one quadrant to the next to reach the pot of gold, but that’s not true. The right side (which is where you want to be) shows the passive income streams – business owner and investor. Now, when you have a look at the cashflow quadrant, you’ll probably notice that the left side – (employee and self-employed) – represents active income streams.
Stocks and real estate are some of the most popular forms of passive income, I strongly believe in the latter. This is like the pot of gold at the end of the rainbow – where your money works for you and you make money even while you sleep. You’ve successfully developed a product or service and some sort of system to keep things going, now you have to make sure it runs like a well-oiled machine. By no means does this suggest that you can just lounge around and do nothing though. Unlike being self-employed, here you employ people to get the job done. If you’ve made it to this section of the cashflow quadrant, congratulations! You’re only a few steps away from the coveted investor section – if you play your cards right. I guess the downside is that if you’re off sick or can’t work, well guess what, your income takes a bit of a break too. You have to deal with the legalities of running a business and still do the work yourself too! This one can be a bit tricky because you carry double the burden – you’re both the employee and the boss. If you take it further and are looking for more control over your time, flexibility, all those good things, then being self-employed is a step in the right direction. This section of the cashflow quadrant is essentially where you sell your time and expertise for money. In fact, a lot of individuals only ever end up here – now that’s a trap I worked really hard to avoid. Employeeįor generations and generations, people only ever knew of this way to make money. Enough talking, let’s get to the good stuff. Now, my type of people either generate money in all four quadrants or at least in the investor quadrant. Risk-averse people and those who enjoy job stability will probably just stick to being an employee – but you’ll probably never achieve early retirement in that way. In a way, it’s a visual depiction of where we all start and the journey to where we should all end up – in an ideal world of course.Įach section shows the different ways of generating money, which is actually heavily dependent on your personality type. To paint a clearer picture for you, I’m going to have a look at each of the sections of the cashflow quadrant in detail. Then of course, there are some places in between these two that you’ll probably have to stop at along the way, namely self-employed and business owner.
The ultimate is when your investments work for you, and honestly speaking, only a few people can confidently say they’ve reached that stage. That probably doesn’t sound too bad for a lot of people, but if you consider the extreme end of the picture – when you’re an investor – you’ll soon realize that that’s what you should aspire to. Why? Well, because you have no way to leverage yourself, people just pay you. The cashflow quadrant basically paints a picture of how working as an employee of a large company is the worst.
I’m just going to assume that you know what a quadrant is and jump straight to the important stuff.
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