Rich Dad, Poor Dad 2 : Cash Flow Quadrant - Rich Dad's Guide to Financial Freedom

This book expands on the concepts presented in Rich Dad Poor Dad. Don't expect a detailed guide to getting rich; Kiyosaki explains that he doesn't write how-to books, but rather provides the mental framework that's necessary for gaining great wealth. He calls it the BE-DO-HAVE approach: "strengthen your thoughts (being) so that you can take the action (doing) that will enable you to become financially free (having)."

Kiyosaki promotes himself as living proof that you can get rich quickly; he went from homeless to millionaire in 4 years, and financially independent in another 5. Understandably, he doesn't believe in the "get rich slowly" movement, and thinks you're wasting your time if you do. He also rejects such other common wisdom as seeking job security, relying on mutual funds, and considering a house an asset.

His promise:

"If you have a secure system that produces more and more money with less and less work, then you really do not need a job, or need to worry about losing your job or need to live life below your means. Instead of living below your means, expand your means. To make more money, simply expand the system and hire more people".

The last page of the book provides a great summary:

"Your boss's job is to give you a job. It's your job to make yourself rich. Are you ready to stop hauling water buckets and begin building pipelines of cash flow to support you, your family, and your lifestyle? Minding your own business might be difficult and sometimes confusing, especially at first...the hardest part of the process is at the start. Once you make the commitment, life really does get easier and easier."

The reference to hauling water buckets relates to an analogy at the beginning of the book. Think of money as water. Most people try to increase their income by working more hours, or carrying more buckets of water. This is exhausting, and can only get you so far. Instead, it's better to run a business and invest to earn passive income 24/7, represented by building pipelines that provide a constant flow of water.

The book explores Kiyosaki's idea of the Cashflow Quadrant, which divides income generation into 4 quadrants.


Cashflow Quadrant
E: Employee
has a job
works for the system
values security, certainty, benefits over money

S: Self-employed
owns a job
is the system
values independence over money

B: Business owner
runs a system in which people work for them
creates, owns, or controls the system
delegates to hired experts

I: Investor
invests money into the system
money works for them

Differences between the left and ride sides
The E and S are on the left, the B and I on the right.
The left side values security, while the right side values freedom.
The right side has more tax advantages.
The right side must be good with financial numbers.
The left side is riskier because you need to live within your means and keep your job.

Differences between an "S" and "B" business
"B" can leave their business for a year or more, and the business will be more profitable when they return. "S" business would collapse if the owner left.
"S" owns a job, "B" owns a system and hires competent people to operate it.

Additional notes
Become a B before an I because I's invest in B's. Having a business will give you business sense, plus the free time and money to invest.

Become a higher level investor
Levels 0-3 are poor or middle class, and invest unintelligently, if at all.
Level 4 - Long-Term Investor: starts early, uses stocks and mutual funds to get rich in the long term.
Level 5 - Sophisticated Investor: uses riskier vehicles like real estate, businesses, new stock issues.
Level 6 - Capitalist: creates investments that create jobs and make others rich.

A house is a liability, not an asset, because it doesn't generate cash, and it costs you in maintenance and taxes.
Formula for wealth: "build a business and buy real estate"; make money with C corporations, and shelter the income in real estate.

7 Steps to the Financial Fast Track
1. Mind your own business
Fill out your personal financial statement
Set 1- and 5-year financial goals

2. Control your cash flow
Pay yourself first - save to invest
Eliminate personal debt

3. Know the difference between risk and risky
Ignorance is risky; business and investing aren't
Relying on job security is risky; minding your own business isn't
Buying liabilities is risky; buying assets isn't

4. Become educated in investing and business
For financial areas outside your expertise, 1) get educated or 2) find experts
Learn from seminars, classes, trade expos, and media

5. Seek mentors
Find investing and business role models
The 6 people you spend the most time with determine your future

6. Make disappointment your strength
Try new things and expect disappointment, but have a mentor to coach you through the experience

7. Have faith
Believe in yourself
Start today!

"Somos un país libre. Hay gente que trabaja más duro, que son más inteligentes, que están más motivados por el éxito, que tienen más talento o que están más deseosos de tener una buena vida que otros. Somos libres para tratar de satisfacer esas ambiciones si tenemos la determinación. Sin embargo, cada vez que a alguien le va mejor, algunas personas dicen que es injusto. Esas mismas personas piensan que sería justo si los ricos compartieran con los pobres."

Financial freedom is a vastly different from financial security.


For those of you who have read Rich Dad Poor Dad this book is basically an extension of the lessons taught in that book. Robert Kiyosaki gives a brief description of his journey as an adult going from a short stint living in his car to financial freedom by taking advantage of tax laws and creating assets that create passive income. (My personal gushings about this book can be found here.)
The title of the book, The Cashflow Quadrant, describes an image that separates people into 4 categories: employee, self employed, business owner and investor. (below)


Many distinctions are drawn in regards to the "left side" and the "right side" of the quadrant and what it takes to be on each side.

Kiyosaki believes strongly in the fact that if you are an E or an S you play an old game that makes sense for governments and business owners because you pay the highest amount of taxes and build large amounts of debt thinking that by doing that you are avoiding taxes through credits or refunds.The left side of the quadrant works the hardest, and is obsessed with going to school to find a job and maintain their "security." Those who would be considered an S are people who are self employed and lose their income when they are not at work. (doctors, lawyers, dentists, etc.) People on the left side of the quadrant can, and some do, make a lot of money and are very successful. The problem with this success is that the more success you encounter the less personal time you have and the harder you have to work. Again, many people choose this route because they feel secure in the fact that they know where their next paycheck is coming from.

People on the "right side" of the quadrant are not concerned with security and are interested in creating income both as a business owner and investor. Business owners and investors enjoy tax breaks, are seen as visionaries and risk takers and when success comes they are the people who enjoy more free time.

This book is a learning tool for those of us interested in moving from the left side to the right side of the quadrant. Kiyosaki is methodical and slow in his approach and encourages people to keep their jobs while they take "baby steps" towards the B and I quadrants.

This is a very simple break down of a book that I would HIGHLY recommend to anybody interested in owning their own company through the creation of a system and investing. Kiyosaki speaks of creating a system that will continuously grow and can run in your absence. If you are not interested and what I just wrote seems like a conspiracy or the rantings of a person jaded by unemployment you wouldn't make it through and this book may anger you.

Hope this finds you well.

~jc

2.5* Đọc cũng ok. Phù hợp với những người quan tâm chủ đề "tự do tài chính". Mình cũng có tìm hiểu về vấn đề này rồi nên đọc hơi chán, nhưng cũng học được một số điều.
Sách chủ yếu kiểu self-help, tập trung phát triển mindset chứ không tập trung lắm khía cạnh thực hành (dù cũng có nói về khía cạnh đó một vài chỗ). Cũng chung khuyết điểm với những cuốn self-help khác: chỉ nói về mindset thôi nên có cần kéo nó ra thành nguyên một cuốn dài trên 400 trang không trời (-.-)
Nhiều review (thậm chí cả tác giả) đều nói quyển này giống như một phụ lục cho tập 1, triển khai cụ thể tập 1 thôi. Nói chung nếu muốn đọc serie này thì vẫn nên đọc tập 1 trước. Lý do mình chỉ đọc tập 2 vì kệ sách công ty mình chỉ có mỗi tập 2 thôi nên mình đọc tập 2 thoi :)))

An amazing book. You learn how to deal with your money, you learn in what you should invest and how to get to more financial freedom. You will get a richer mind after this book.

After reading Robert's acclaimed novel, Rich Dad Poor Dad, I knew I had to jump to get this book! While its predecessor mainly explains what differentiates the poor and middle class from the wealthy, Cashflow Quadrant outlines how the wealthy ascend to financial freedom, and the levels that are required to equip oneself with financial literacy. There are four main types of people: E for Employees, S for Self-Employed, B for Businessman, and I for Investors. Kiyosaki reiterates time and time again how important it is that the poor and middle class---who usually operate as Es and S's---gain the financial education and mindset they need to be Bs and Is like the rich. In what were the best 300 ebook pages of my 17 year old life (Yup, I'm a millenial babe!), Kiyosaki lists out the ways the rich operate financially, how they accrue assets unlike liabilities, and how the design of our fiat monetary system is designed so that Bs and Is are more affluent and advantaged than Es and Ss.

I came into this book with a somewhat matured mindset about money, having just read Rich Dad Poor Dad. But some main points/tips of advice that caught my eye in Kiyosaki's book were the following:

'In the game of money, strive to be the bank, not the banker'
'If you taking the risk (when buying property or making any investment for that matter), make sure you're getting paid for it. In other words, make sure you are not paying to take a loss.'
'Unless you're getting passive income from your house, it is a liability and not an asset'
'Money=debt. Remember that. Try to have as few debts as possible. If it's a personal debt, make sure it's small. If it's large debt, make sure someone else is paying for it.'
'The rich protect their money by creating corporate bodies for them while Es and Ss act as human ones.'
'Es and Ss strive for safety and job security. Bs and Is strive for financial freedom'
'Kennedy was the last president to challenge the Federal Reserve System' (more of a fun fact than a financial OMG moment)
'Pay yourself first. Always'
'Investing involves risk (something that's inevitable and can only be controlled not extinguished). Being financially uneducated is risky.'
'We are in the Information Age, where the Industrial-Age mindset that the government should give us entitlements like Social Security and Medicare are long outdated. In the Industrial Age, the cookie cutter formula of 'go to school, get good grades, and get a secure, high-paying job' is an obsolete way of thinking, and yet we continue to base our economy off of that.'


I also made sure to jot down the list of books that Kiyosaki recommended in Cashflow Quadrant (but since this is Feb. 2017, and a certain Cheeto in Chief is in office, I won't be reading Art of the Deal anytime soon). I recommend reading any of these books to expound your insight in economic history, theory, and application, like Kiyosaki said:

The Worldly Philosophers
The Creature of Jekyll Island
Unlimited Wealth
The Sovereign Individual
The Crest of The Wave
The Great Depression Ahead
The Wealth of Nations

I hated myself for it, but I found myself nodding in awe at the points he was making about our failed government-backed social welfare system. Although I'm a big proponent of some of the welfare he renounced, I know that what lies for me in terms of Social Security will most likely, if not definitely be long gone by the time I'm retired. And throughout this book, I was all too familiar with the highlighter icon on my OneNote because all this man spoke was truth! I may come from an ignorant place, since my only financial experience has been with my allowance, I think in principle, this book gets it. I was so thrilled the author actually recommended more books for me to quench my appetite for more finance books. I'm currently on The Creature of Jekyll Island, and hope to put his advice to good practice during college with my $100k in debt as my net worth!

A decent follow up to Rich Dad Poor Dad. Kiyosaki creatively breaks down the four income types of the cashflow quadrant (Employee, Self-Employed, Business Owner and Investor) overall the book proved to be a great reference tool that not only helps identify your current financial stance but is a valuable guide on what it takes to enter wealthiest quadrants if you're willing to make that change. I was disappointed in how little this contrasted from his previous book, while the cashflow quadrant was insightful and I learned a few new things, Kiyosaki started to sound like a broken record midway through, repeating the same advice and stories from earlier in the book and Rich Dad Poor Dad and the frequency of advertising his CASHFLOW board game became exhausting. Nonetheless it was nice to be reassured that risk can be managed and isn't scary if you can learn manage it and financial education is less daunting after reading this.

For those of you who want to take control of your financial future, I recommend the Rich Dad, Poor Dad books. This is the second book in his series. It will not give you specific details of how to make those changes. It changes the way you think about money and opens your eyes to possibilites. Hopefully, it gives you the courage to make changes in your life to be financially successful. I know that Robert Kiyosaki's books have made drastic changes to our lives and it was only 1 year ago that my dh read his first book.