• Alyssa Barton

Cash Flow Quadrant: a Book Review

Updated: Apr 23, 2019

"Emotional and spiritual development…[are] what it takes to make a permanent change in life." - Robert T. Kiyosaki

Notes and thoughts on: Robert Kiyosaki's Rich Dad’s Cashflow Quadrant: Guide to Financial Freedom. (1998)

After reading Rich Dad, Poor Dad several years back, I decided to check out Cash Flow Quadrant – a book by the same author - at the recommendation of my boyfriend. Kiyosaki is pretty prolific and well respected; he has made millions and teaches classes and workshops about how to make money. I wasn’t let down by the concepts and strategies he presents in a clear and repetitive fashion to help readers learn strategies and think about which wealth model works best for them!

At least one critic has said that this book is full of fluff. Perhaps it is, from an experienced investor’s perspective. But from the beginner's perspective, I view the fluff as useful storytelling that paints an easy-to-understand picture, repeatedly hitting on the main concepts so that they’re easier to remember.

What's the "Cash Flow Quadrant"?

This book teaches readers about 4 types of working people that fall into a “Cash Flow Quadrant.” The types are categorized by how you make money. The 4 types of working people Kiyosaki describes on the quadrant are: Employees (“E”), the Self-Employed (“S”), Business Owners (“B), and Investors (“I”).

The author shares the experiences he’s had and knowledge he’s learned that lead him to conclude that being a B or an I are the most lucrative categories on the quadrant. He points to evidence, examples and reasoning that if you work as an E or S, you will most likely work a lot harder and struggle a lot more to make money than if you’re a B or an I. Living in the E or S quadrant makes it more likely that you’ll be financially insecure – meaning, dependent on a paycheck coming from someone else.

The really interesting thing I learned as I read through the book is that how we make money is really based on how we view the world. How we work and build wealth (or do not) are processes deeply rooted in our beliefs about the world, and those beliefs are based on what we were taught as children, and how our brains have been conditioned to think, feel and view the world.

Kiyosaki has some great insight at the beginning of the book about the success mentality. He drops a few hard truth bombs before quickly jumping into the meat of his book. However these beginning gems are worth a read. He says:

“Emotional and spiritual development…[are] what it takes to make a permanent change in life…. Saying to yourself, “I’m going to become an entrepreneur in the B quadrant,” is as futile as a chain smoker saying, “Tomorrow I’m going to quit smoking.” Smoking is a physical addiction caused by emotional and spiritual challenges. Without emotional and spiritual support, the smoker will always be a smoker. The same is true for an alcoholic, a sex addict, or a chronic shopper. Most addictions are attempts to find happiness in people’s souls.” P. xxiv.

As I’ve continued to learn more skills about building wealth and managing my finances, I notice that lots of writers and resources echo the same lesson: our emotional, physical, and mental well-being are critical to success. All change starts with our attitudes and beliefs. To my surprise, building wealth seems to be at least 70% about psychology!

How we end up in any one quadrant is all based on our mindset and our financial education – which comes from our parents, adults we learn from as children, our culture, TV, and the people we spend time with in our early years. Most people don’t learn about finances during their primary and secondary education, and many also don’t choose to study business or finance in school. As such we can become trapped in the lifestyles that were modeled by our parents.

Our Money MIndset and American Culture

Kiyosaki describes the average American lifestyle: go to school, get a job, get married, sink all your savings into a house, continue to scrape by with a 9-5 job and hope one day you can retire. Kiyosaki lays out a great case for why we should think outside the box, step outside of these antiquated systems and reconstruct a new strategy for our lives built on financial knowledge. He recommends becoming a business owner and then later, transitioning into the “I” quadrant.

B's know that if you take on debt and risk you should be paid for it. Kiyosaki talks about how buying a house for your personal home is a liability, not an asset – the bank owns it, you don’t. The “America Dream” usually includes homeownership. Sometimes it includes starting with a “starter house” and then upsizing once your paycheck increases. But if you write out your assets, liabilities, income, and expenses on a piece of paper, the house you live in will usually be a liability. I don't think this is how most people thing about homeownership, but it makes sense.

You have to keep paying for a house and maintaining it perpetually. The home you live in likely does not make you any income, unless you’re renting rooms out. And even if your house is appreciating in value, you’re not able to benefit from that value until you actually sell and accept the proceeds. If you fail to make payments on your mortgage, the bank will take it away. Even if you own the house, you don’t really own it: the government does! See what happens if you stop paying your property taxes. If you’re still paying a mortgage, that piece of property is the BANK’S asset on the BANK’S cash flow statement, because it’s a source of income for the bank.

Fear is a major roadblock to success, and the ability to overcome fear requires emotional and spiritual training. This is why, the author says, so many “A” students fail in life. “The reason so many people fail to achieve success is because they fail to fail enough times.” P. xxiv. You must try, and fail, to learn. The best learning moments come from our mistakes and failures!

To work past fear and to rewire your attitudes and beliefs – your very brain – for success, you have to change your habits and routines – aka your path.

I think that the key that spurred me to change my course in life was … A DIET! I’ll talk more about this in another blog, but for a few years, from about 2015-2017, I struggled with some health problems that couldn’t be cured by modern western medicine. I kept returning to the doctor over and over again for more and more treatment, the same old drugs, and they were almost completely ineffective. It was very frustrating, and mentally and emotionally draining!

When doing the same thing repeatedly failed, I turned to the internet and my past experience with others who faced the same problem I was facing, and decided to change my diet. Research shows that fixing your diet can remedy many illnesses and ailments. The diet totally resolved my health issues, and changed my life!

For me, dieting required a complete overhaul of my schedule. It required weekly planning, time management skills, and discipline to incorporate new healthy cooking and eating routines into my life. It also then forced me to re-evaluate the way I was handling my grocery budget, as well as to entirely cut out alcohol - which resulted in changes to how I was spending my free time! At the end of the day, living my life in a healthy, happy way was the goal – not my weight, my appearance, or a trip that I had to save money for. And by rebuilding my entire routine, including habits and activities, I set myself off onto a new path for success!

Kiyosaki says that it’s hard to know if we’re on our right path, but that if you can relate to any of the following statements, you’re probably not on it:

  • “I’m working with dead people.”

  • “I love what I do, but I wish I could make more money.”

  • “I can’t wait for the weekend.”

  • “I want to do my own thing.”

  • “Is it quitting time yet?”

These are the words and thoughts of people on the left side of the quadrant – Employees and the Self-Employed, or E's and S's. They are typically overworked or don't take a lot of joy and pride in their work.

Kiyosaki tells a great story to differentiate between people on the left side of the quadrant vs. the right side (Business owners and Investors, or B's and I's). The story goes: a small town needs water. An Employee, Ed, starts a business hauling water back and forth with buckets he carries. A Business owner, Bill, creates a business plan, incorporates, finds some investors, hires a president to do all the work, and returns in 6 months with a business crew. Bill builds a pipeline from the nearest lake to the town, then rewrote the business plan and went off into other towns to replicate the system he created. The comparison highlights how much more effective and efficient it can be to start a business, how much more money you can make, and how a little strategic planning is much more likely to lead you to financial freedom. It also highlights that the difference springs from different mindsets and ways of thinking.

Kiyosaki divides the bulk of his book into three sections about the differences between the quadrants, personal change, and about how to find success on the right side of the quadrant – as a Business owner or Investor. The concepts overlap and sometimes pop up in multiple places.


The author characterizes people in each quadrant and explains their way of thinking, along with pros and cons. Here are some notes about this:

1. Employees:

  • May say or think “I am looking for a safe, secure job with good pay and excellent benefits.”

  • Employees can be fearful, they desire security and stability.

  • “Diversification” is a strategy for “not losing” that is born out of fear. (P. 51).

  • Most Employees earn something like 80% or more of their money from their job, and only 20% or less from investments.

2. Self-Employed:

  • May say or think “My rate is $75 per hour,” or “I’ve got more than 20 hours into this project.” The focus is on how much money their time is worth – not their business systems. They expect to be paid well for hard work – but a self-employed person may find themselves working harder and harder to make more and more – and burning themselves out.

  • The Self-employed want to be their own boss, and tend to be “Do-it-yourselfers,” or DIY-ers.

  • S’s are fiercely independent, can be hard core perfectionists, and can be distrustful of others. This can be problematic. It can prevent them from appropriately delegating. It springs from the fear that training others may lead to them one day leaving and becoming their competition

3. Business Owners:

  • Prefer to surround themselves with smart people and delegate. Their motto is: “Why do something yourself when you can hire someone to do it for you, and they can do it better?”

  • “In designing a B type of business, success simply means increasing the system and hiring more people. In other words, you work less, earn more and enjoy free time.” (P. 37)

  • “Most rich people receive 70 percent of their income from investments…and less than 30 percent from wages.” (P. 38). This is almost exactly the opposite of the distribution of income sources that E’s have – 80% from wages and 20% or less from investments.

4. Investors:

  • Might say or think “Is my cash flow based on an internal rate of return or net rate of return?”

  • “Investors make money with money. They don’t have to work because their money is working for them.” (P. 36).

  • Your retirement account is not an investment. This tidbit is a super useful concept and you should give this one some thought, ladies!!! It’s a challenging idea to process, since so many of us think that yes, my 401(K) is an investment! But your retirement account, likely a 401(K) – or if you’re like me working for a non-profit, I have a 403(B) – consists of mutual funds managed by a funds manager. Mutual funds contain a portfolio of stocks. The value is based on the market, so if the market tanks, so might your retirement account! I think the author would agree that if you don’t have a knowledge of the market and the funds you’re invested in, and the control to move them, then your retirement account isn’t a true investment – it’s more like a gamble.

  • “The 401(K) is for people who are planning to be poor when they retire.” This is another super challenging concept! Kiyosaki says this is because the 401(K) assumes “your income will go down in retirement into a lower tax bracket. If, on the other hand, you are rich when you retire and you have a 401(K), you could pay even higher taxes at retirement. Smart investors understand taxes before investing.” So you see that it’s critical to understand our tax structure when doing your financial and investment planning.

Getting to the Right Side of the Quadrant, becoming a Business Owner or Investor

“Long term financial success is not measured by how big your stride is, but by the number of steps, the number of years, and the direction in which your moving.” (P. 217)

You should take action by filling out your own personal financial statement and setting financial goals for yourself (1 year, 5 year, and 10 years out or more). The best type of planning actually envisions what your ultimate goal is: how do you want to live your life when you’re 60, 70, 80 or older?

Regardless of the future you wish to build for yourself, you must get in control of your cashflow now to if you want to get to a better place. You can do so by creating a cash-flow management plan. This should include:

  1. Pay yourself first. Select a percentage of your income (i.e. 5-10% per paycheck or more) to set aside in an account for investments. Don’t ever take it out until you’re ready to invest!

  2. Focus on reducing and eliminating consumer debt, and

  3. Educate yourself. “Commit five hours of your time each week” to self education about business, finance, and investing. (P. 250).

  4. Seek mentors to help show you the way. “Be careful from whom you take advice. If you want to go somewhere, it is best to find someone who has already taken the journey.” (P. 263). Who you spend your time with is your future. ​

Words of advice

In closing, here are some final tidbits about changing course to pursue wealth on the right side of the cash flow quadrant:

  • Expect to be disappointed

  • Have a mentor standing by

  • Be kind to yourself- self compassion is SO IMPORTANT, LADIES! I’ll have much more to say about this in a later blog, but essentially, you must try, and fail, and laugh about it! You cannot beat yourself up because mistakes and failures pave the pathway to every success and victory!

  • Tell the truth. Being authentic and living with integrity means everything, because your reputation can make or break you. Remember that reputation takes years to build, but only takes one incident to destroy.

  • Make mistakes – be afraid but do it anyway!

  • Start small. You have to start somewhere!

  • Have faith.

Phew! So many truth-bombs, and much more in the way of strategies and tools can be found if you read the book. I’ve left the author’s best advice for you to find out yourself.

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©2019 by Alyssa Barton