John Carver - The Cash Flow Quadrant

Robert Kiyosaki is the author of "Rich Dad/Poor Dad."  It's an eye opening book about the four different ways to earn income in the American system.  He says, "On the left side of the quadrant are Es and Ss. They pay the most in taxes and trade their time for money.

On the right side of the quadrant are Bs and Is. They pay the least in taxes and create or invest in assets that produce cash flow for them even when they’re sleeping.

It’s my belief that the dividing line between those who are struggling in today’s economy and those who are prospering is the line between the two sides of the CASHFLOW Quadrant.

In this downturn, it is employees and self-employed people who are struggling as jobs are scarce and the cost of living is rising. Because they have only their time to trade, and that is not in high demand, they are at a disadvantage. Additionally, the products they need in order to live like food, gas, and more are becoming more expensive.

On the other hand, those who own big businesses and who invest are becoming richer and richer. Corporations are sitting on piles of cash and investors are cherry picking the best assets at rock bottom pricing.

Many in the E and S quadrants are holding on for the economy to pick up, and if it does, they will do well as the demand for people’s time—employment—goes up. That being said, the will still pay the highest in taxes and still be under the mercy of their employers and the economy. Until then, they will struggle because they have nothing else to offer and no other way to make money. Employees and self-employed always do badly in a down economy.