How Cash Flows

The Concept of ESBI by Mr Kiyosaki

In his book Rich Dad, Poor Dad, Kiyosaki explained a key concept of ESBI.

As we can see in the above picture, the various characteristics of people in each quadrant. Let’s discuss about the people in each quadrant, and figure out in which quadrant we find ourselves and how can we move to the most desired quadrants.

First Quadrant: Employed

In this quadrant we find people who are employees. They always work for others and depend other instruments which take the money from them.

Cars and their life is a struggle for survival. They often compare themselves with others who made what and in the process lose the complete picture. They cannot accumulate enough wealth in the process of working for others. Sadly we find many in society including ourselves in this category. Work hard, earn money, give 30% to Govt as tax, another 30% to banks in terms of interest and live a hand to mouth life. Buy more and more liabilities as houses,fear they are driven by insecurity,process upon their salary or payment they receive from their employer. They basically work for others. The moment they stop working, their income stops and they find themselves in financial troubles. They are driven by fear of losing their job or source of income which is very much needed for their survival. so they keep on working hard, change from one company to another which pays them slightly better. Take loans to buy cars, houses and to meet big expenditures as marriages and all. To repay that loan they work more hard.

Second Quadrant: Self Employed:

People of this quadrant, do not work for others. they work for themselves. small business owners, entrepreneurs fall in this category. They are independent. They have to work hard to make their business run. If they take and off from their business, their income stops. So they also depend except the fact that, One works for others and the other works for self. The moment both stop working , their income stops. They also give tax to Govt and borrow money from banks to stand their business. They also like the employees run a little chance of creating great wealth and remain struggling.

Third Quadrant: Big Business owners

People in this quadrant create enterprises. They employ smart people who work for them and grow their business. who make money for the owner. And the Business owner generating more money from the business employs more people who further works more to enlarge the business. People in this quadrant are generating passive income as deferred to Employees and Self employed. Because their income doesn’t stop when they stop working. People are already working for them. They are secure and generate wealth in the process and go on becoming investors in the long run. But their Business still require their presence and involvement.

Fourth Quadrant: Investors

People in this quadrant don’t work for money. Their money works for them. They have invested in successful business and their businesses generate a continuous flow of income. They achieve their financial goals easily. They have achieved financial freedom. Their business or enterprise doesn’t require their presence to generate money. That is the beauty of being an investor.

So from the above quadrants which quadrant you find yourself in. The basic purpose of this writing is to find ourselves in the Right quadrants rather than the left quadrants. How can we move towards Financial Freedom. It’s not that only few have the opportunity to achieve it. We all can achieve it if we change our mindset towards Life, Job, Money and everything we do on a day to day basis.

The important thing is how we use the single single penny we get. Are we using for further wealth creation or we are buying more and more liabilities. How we see 10 years from now..

Still working for others or having a passive income out of our money.

The Way Out

Q. So what can I do ? I am an employee, i just can’t leave my job and be an Investor tomorrow.

A- No one is asking you to leave your job right away. It’s about changing one’s mindset towards money. It’s not about changing job or finding something else to earn more. It’s about being financially disciplined. How to save out of your income and put that money in a business that ll work for you. Be an employee but be a business owner also. Look for opportunities to grow your money and have a passive income. Save every unnecessary expenditure and invest them in right instruments. There are ample opportunities to invest now a days. Just think from an Investor’s point of view. Don’t remain an employee for your entire life working for others. Achieve financial freedom.

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