You may have seen Robert Kiyosaki’s cash flow quadrant.
It describes the four types of people in business: employees who work for someone else, the self-employed who work for themselves, business owners who create a system and investors who have enough money to create a fully passive income.
The wealthier people in society are either business owners or investors, but a lot of people think they are business owners and investors when they’re really not.
In this video, filmed at the Platinum Mastermind in Fiji, Vince Reed explains the truth about the cash flow quadrant.
YOU MAY THINK YOU’RE A BUSINESS OWNER…
The cash flow quadrant is actually four quadrants. The two quadrants on the left are for employees and self-employed professionals, and the two quadrants on the right are for business owners and investors.
A lot of self-described business owners or entrepreneurs might think they are in the business owner quadrant, but they are really self-employed.
When Vince Reed was in real estate, he thought he was a business owner. The reality is, he may have owned his business, but it was a business that was dependent on his own time. People who are in the self-employed quadrant can’t stop working for a month without their business collapsing.
This is why Robert Kiyosaki describes true business owners as those who have 500 employees or more.
THE DIFFERENCE IN TAXES
The real difference between the left and right cash flow quadrants is taxes.
In 1943, the United States government passed the law that employees had to pay tax before they received their pay. Since then, as soon as employees get their paycheck, the government has already taken a chunk of it.
Plus, the harder you work and the more money you make, the more money they take.
Self-employed doctors and lawyers laughed at this. Until 1986, when another law was passed that took away many of the benefits of being self-employed. In America today, the self-employed pay the highest percentage in taxes.
The big tax breaks are given to those in the right-hand cash flow quadrants. In those quadrants, the tax laws are grey and blurred, while they are tight on the left-hand side.
Full-time investors can make millions and pay zero taxes legally. They can then continue investing with that excess cash, while the employed and self-employed continue to get their wealth slashed by taxes. That’s the reason the rich are getting richer and the poor are getting poorer.