The cost of choosing security over freedom

Remember, true entrepreneurs aren’t comfortable.

Robert Kiyosaki

Robert Kiyosaki

Contributor, Freedom Financial News
Posted May 06, 2024

The truth is, comfort can be fleeting. Problems, changes, and unforeseen incidents are common and can come at the most inconvenient of times. True entrepreneurs would absolutely never consider taking a well-paid and “secure” job for comfort over chasing their own dreams to build something. In fact, the goal of a true entrepreneur is to build a company that will eventually produce revenue without them.

The dividing line between many who struggle financially and those who are prospering is the line between the two sides of the CASHFLOW Quadrant.

As you may have noticed, the wages of the poor and the middle class have either held steady or shrunk over the last couple decades. Yet, those on the left side of the quadrant continue to think they are living in security while looking at those who own businesses and invest as risk takers.

The sad reality is that those who operate on the left side of the quadrant pay more in taxes and pay more in interest on debt for liabilities the more they make. It is a vicious cycle that keeps them feeling poor—what we at Rich Dad call the Rat Race.

To understand why Es and Ss don’t get rich, you have to understand the difference in financial intelligence between the two.

What really makes you rich

How much money you make does not make you rich. Rather, how much money you keep is what makes you rich.

Those on the right side of the CASHFLOW Quadrant pay the least in taxes, know how to use debt to make money, and hedge against inflation through their assets. They not only make more money than employees and self-employed, but they also definitely keep more money.

Those on the left side of the quadrant work for what is called earned income. It is the highest taxed income. They have little-to-no tax shelters. Those on the right side work for passive income, the least taxed income. They have many tax breaks in the tax code they can use to their advantage.

The mindset we are taught vs. the mindset we create

In Robert’s book, Why “A” Students Work for “C” Students, he writes about how every child has a genius in them—the one thing that lights up their life, motivates them, feeds their dreams, and challenges them. Unfortunately, school often does not recognize the genius in our children. And even more, school may even crush a child’s genius.

This is because our educational system teaches one way of doing things—one mindset—that of the left side of the CASHFLOW Quadrant.

Our kids are told to go to school and get a good job. The problem, of course, is that they don’t know what they really want to do and are called to do yet when they hear this, so our kids chase down paths that are prescribed for them, like doctor, lawyer, teacher, and more—jobs in the E or S quadrant of the CASHFLOW quadrant.

As they grow older, they are trapped in the rat race. Because they go to college and take on debt, they have to get a high paying job. Soon they buy a house, and because of that debt, they must keep working. Then other expenses like kids, health care, and more paint them into a corner. Before you know it, the dreams of youth are gone, replaced with what for some is a miserable reality of work that is not soul-giving.

The school system does not help us discover our genius. And in the process of chasing other peoples’ dreams for our lives, we often lose our genius.

In another book Robert wrote, The CASHFLOW Quadrant, he talks about the importance of finding our own path—of changing your mindset about life and money. It’s not easy. We can often get lost in the process, and it’s not always simple to find our way back. But finding our path—releasing our inner genius, and the genius of our children—is essential to a happy life.

How about you? How is your path going? Do you find yourself making these types of statements?

  • “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?”

If so, it may be time to change your mindset and find a new path. To discover your life’s purpose, why you were given this gift called life, and what the gift is that you should give back to the world.

Moving from the left quadrant to the right quadrant

If you want to move from to the right side of Rich Dad’s CASHFLOW Quadrant, here’s some help on changing your mindset.

A while back, a study was conducted that showed the mindset of those who moved from poverty into wealth. Three things were seen to be a determining factor:

  1. They maintained a long-term vision and plan
  2. They believed in delayed gratification
  3. They used the power of compounding in their favor

The study also analyzed those who were once wealthy and became poor. These were the three factors that came into play:

  1. They had short-term vision
  2. They had a desire for instant gratification
  3. They abused the power of compounding

Very simply, the path to the right side of the quadrant starts with thinking in terms of acquiring assets that produce passive income rather than living in a pattern of paycheck to paycheck. Start small, have patience, and watch as your wealth grows over time.

If you’re going to invest the time and money to learn something new, then focus on learning how to operate on the B and I side of the CASHFLOW Quadrant. No degree program will teach you how to be a successful investor. But you can teach yourself by reading Rich Dad’s CASHFLOW Quadran t and attending some of our workshops. Sure, an investment of time and money is required, but you’ll experience a much better return on your investment than you would with a traditional education.

Robert Kiyosaki
Contributor, Freedom Financial News