the_cashflow_quadrant

right

~side of the Quadrant, you must know the difference between facts and opinions.

Few lessons are more important than this one."

~ I sat there listening quietly doing my best to understand what he was saying.

was obviously a simple concept yet it was larger than my brain could accept at

moment.

"Do you know what 'due diligence' means?" rich dad asked. I shook my head.

"Due diligence simply means finding out what are opinions and what are

facts.

When it comes to money, most people are either lazy or searching for shortcuts, so

~ey do not do enough due diligence, And there are still others who are so afraid

t~at aff they c(o is due difigence and then do nothing. Too 1~ algence is also called 'analysis paralysis'. The point is you must know ?ift through the facts and opinions, and then make your decision. As I said, *mk are in financial trouble today simply because they've taken too many 2nd are making their life's financial decisions based upon opinions, often 7,be cAsHnow Quadrant

the opinions of an "r' or an "S", and not theiam. it -Youwant to be a "B" or

"I", you must be keenly aware of this difference."

I did not fully appreciate rich dad's lesson that day, yet few lessons have served me better than to know the difference between facts and opinions,

especially when it comes to handling my money.

Years later, in the early 1990's, my rich dad watched the stock market

clilnb

out of sight. His only comment was,

"That is what happens when highly paid employees or self-employed peopi

big ay checks paying excessive amounts in taxes, greatly in debt, and vvith only paper assets in their portfolio begin handing out investment advice.

Millions

are about to get hurt following the opinions of people who think they know the

facts. "

Warren Buffet, Americas greatest investor, once sai

"If you are in a poker game and after 20 minutes you do not know who the

W17ff PEOPLE STRUGGLE FINANCLILLY

I heard recently that most people will be in debt from the day they leave school until the day they die.

This is the average middle class American's financial

picture:

job

Income Statement

Income

Expense

SalesTaxes

C Pa t

Entertainment

Recreation

Doodads

Etc.

Balance Sheet

Assets Ilabilifies

Mort9w

Car Loan Debt

Consumer Debt credit Cam Debt School Loan Debt

The CASHFLOW Quadrant

SOMEONE ELSE'S BALANCE SHEET

if you now understand the game, then you may realize that those liabilities ed must show up on someone else's balance sheet like this.

Income Statement

Income

Expense

Assets

Mortgage

Car Loan Debt

Consunter Debt

Credit Card Debt

School Loan Debt

Balance Sheet

Liabilities

i I Anytime you hear these words, "Low down, easy monthly payments,

)t or

~ I)on't worry, the government will give you a tax break for those losses," then you

~iow someone is luring you into the game. If you want to be financially free,

'Ve got to be a little smarter than that.

For most people, no one is indebted to them. They have no real assets (things

put money in their pocket)... and they are often indebted to everyone else. t is why they cling to job security and struggle financially. if it were

not for

job, they'd be broke in a flash. it has been said that the average American is

than three paychecks away from bankruptcy, just because they sought a better d got run over by the game. The deck is stacked against them. They still

their house, car, golf clubs, clothes, vacation home, and other doodads are assets, They believed what someone else told them. They have to believe it ~uuse they cannot read financial numbers. They cannot tell facts from opinions.

sr-hool and learn to be players in the game, but no one

I

The CAS1JFLC)W Quadrant

explained the game to them. No one told them that the name of the game is is indebted to whom?" And because no one told them that, they're the ones w ht

become indebted to everyone else.

i

MONEY IS AN IDEA

One of my favorite songs is Ybe Gambler, by Kenny Rogers. One line

sums

this whole chapter: "If you're going to play the game, boy, you've got to learn to

play it right."

I hope you now understand the basics of the CASHHOW Quadrant and

~0-~

that money really is an idea that is more clearly seen with your mind than your

eyes. Learning the game of money and how it is played is an important part of

your journey to financial freedom, More important, though, is who you need to

become to move to the right side of the CASHHOW Quadrant. Part 11 of this ba~k

ill focus on "Bringing Out The Best In You" and in analyzing the formula:

BE-DO-HAVE

The C4SHFLOWQuadrant

PARTH

0 0 Bringing Out The Best In You

7he CASHFLOW Quadrant

I

122

The CASHFLOW Quadrant

CHAPTER 7

Becomi*ng Wbo You Are

~,'Ifs not being homeless that matters," my rich dad said. "It's about who you

Keep striving and you become somebody. Quit and you also become somebody... but not the same person."

THE CHANGES YOU GO THROUGH

For those of you contemplating going from job security to financial

security,

can offer you are words of encouragement. For Kim and me, it took being

eless and desperate before I found the courage to move forward. That was

o

path, but it definitely does not have to be your path. As I described earlier, there

am ready-made systems that can help you cross the bridge to the right side of th(

issue is the changes you go through internally and who you becorn( s. For some people, the process is easy. For others, the joumey is hom

Thereat

in the proces

f IDNEY IS A DRUG

Rich daci ~kouki always say to Mike and me, "Money is a drug,"

At main reason he refused to pay us while we worked for him was because a wanted us to become addicted to working for money. "If you become The C4S1LFLQWQuarant

addicted to money," he said, "it's hard to break that addiction."

When I was calling him from California as a grown man to ask him for mo he was not about to break a pattern he had started with Mike and me when we

were 9. He did not give us money as kids, and he was not about to start now, Instead he continued to be tough and guide me away from the addiction of working for money.

He called money a drug because he had observed people who were ha'PP' when they had money, and upset or moody when they did not. just as heroine

addicts get high when they inject the drug, they also get moody and violent wh

they don't have it.

"Once you get used

receiving it, that addiction keeps you attached to the way you got it."

Put another way, if you receive money as an employee, then you tend to

go,

accustomed to that way of acquiring it. If you get used to generating money by

being self-employed, it is often difficult to break the attachment to earning

in that way. And if you get used to government handouts, that, too, is a hard

pattern to break. elm

"The hardest part about moving from the left side to the right side is the attachment you have to the way you have been earning money," said rich dad,

more than breaking a habit; it's breaking an addiction."

That is why he stressed to Mike and me to never work for money. He ins we learn to create our own systems as a way of acquiring money.

"Be careful of money's addictive power," he often said.

THE PAMRNS

For Kim and me, the hardest part in trying to become people who genera income in the "B" quadrant was that all of our past conditioning was still

hold

us back. It was tough when friends said, "Why are you doing this? Why don't ~,oq

just get a job?"

It was even more difficult because there was a part of us that also go back to the security of a paycheck.

Rich dad explained to Mike and me that the world of money was one large system. And we as individuals learn how to operate in certain patterns

within that

system. For example:

An "E" works for the system. An "S" is the system.

A "B" creates, owns or controls the system. An "I" invests money into the system.

en to t ey

"It's ted

ed ou to

t

The CASHFLO W Quadrant

The pattern rich dad was talking about was the pattern in our body, mind

and

soul of how we naturally gravitate to the subject of money.

"When a person feels the need for money," rich dad explained, "an'E'will automatically look for a job, an 'S' often will do something alone, a 'B'

will create

or buy a system that produces money, and an 'I' will look for an opportunity to

invest in an asset that produces more money."

IrS HARD TO CHANGE A PAIYERN

"The reason it's hard to change a pattern," said rich clad, "is because

money

today is essential for life. In the Agrarian Age, money was not that important

because the land could provide food, shelter, warmth and water without money.

Once we moved into the cities during the Industrial Age, money signified life itself.

Today, even water costs money."

Rich dad went on to explain that when you begin to move from, let's say, the 'E'quadrant to the "B" quadrant, the part of you that is addicted to being

an "E,"

or afraid that life will end, begins to kick and fight back. it's like a drowning

person beginning to fight for air, or a starving man who will eat anything to

survive.

'to "It's this battle that goes on inside of you that makes it so hard. It's the battle

in W a y

t

rbu vest ir

Th,

.tween who you no longer are and who you want to become that is the problem," rich dad explained to me over the phone. "The part of you that still

seeks security is in a war with that part of you that wants freedom. Only you can

decide which one will win. You'll either build that business or you'll go

back to

hding a job-forever."

FIVD YOUR PASSION

"Do you really want to move forward?" asked rich dad. 'Yes!" I said hurriedly.

"Have you forgotten what you set out to do? Have you forgotten about

your

passion and what caused you to get into this predicament in the first place?" asked

dad.

'Oh," I replied, a little startled. I had forgotten. So I stood there at the ay

p

phone, clearing my head so I could remember what got me into this mess in the

flist place.

"I knew it," said rich dad, his voice booming over the phone. "You're more worried about your own personal survival than keeping your dream alive. Your

fw has pushed aside your passion. The best way to keep going is to keep the ~n ~our heart going. Always remember what you set out to do, and the trip The CASHFLOW Quadrant

will be easy. Start worrying more about yourself, and your fear begins to eat

at your soul. Passion builds businesses. Not fear. You've gone this far. You're

so don't turn back now. Remember what you set out to do, keep that memor~ your heart and keep the flame going. You can always quit... so why quit now: With that, rich dad wished me luck and hung up the phone.

f le was correct. I had forgotten why I set out on this journey. I h about my dream and allowed my fears to fill my head as well as my

just a few years earlier, there had been a movie entitled "Flash theme song said something about, "Take your passion and make it

Well, I had forgotten my passion. It was now time to make it happen or back home and forget about it. I stood there for a while, and again I heard

ri

dad's last words: "You can always quit. So why quit now?" I decided to delay quitting until I had made things happen.

BECOMING A TEACHER WHO OWWED THE SYS

I stood at the phone booth after rich dad and I had hung up. My fears and lack of success were beating me, and my dream had been pushed aside. My dre

of creating a different kind of school system. An educational program for pe

who wanted to be entrepreneurs and investors. As I stood there, my mind dr back to my days in high school.

When I was 15 years old, my high school guidance counselor asked me, are you going to do when you grow up? Are you going to become a teacher I

your dad?"

Looking straight at my counselor, my answer was straightforward, strong filled with conviction. "I'll never be a teacher. Becoming a teacher is the

I t

would ever do."

I did not dislike school. I hated it. I absolutely hated being forced to 1

an,

listen to someone I did not particularly like or respect speak for months on a

subject I had no interest in. I fidgeted, squirmed, caused problems in the back

the room, unless I just left instead of going to class.

So when my guidance counselor asked me if I was planning to seek a ca following in my father's footsteps as a teacher, I nearly jumped out of my

skin.

Little did I know at the time that passion is a combination of love and

haj. I

loved learning, but I hated school. I absolutely detested sitting there andbe

programmed into becoming something I did not want to be. I was notalone

NOTABLE QUOTES ON EDUC1TION

Winston Churchill once said: "I am always ready to learn, but I do not alwa The CASHFLOW Quadrant

d dream ple ed

\-O a t

like

and

thing I

and

a

Ck of

areer,

kin.

.iate. ing e.

always

Ae being taught."

loln Updike said: "The founding fathers in their wisdom decided that

children

were an unnatural strain on their parents. So they provided jails called school,

equipped with tortures called education."

Norman Douglas said: "Education is the state-controlled manufactory of

echoes."

H.L. Mencken said: "School days, I believe, are the unhappiest in the

whole

span of human existence. They are full of dull, unintelligible tasks, new and

unpleasant ordinances, and brutal violations of common sense and common decency."

'm Galileo said: "You cannot teach a person anything; you can only help him find

Mark Twain said: I never let schooling interfere with my education."

Albert Einstein said: "There is too much education altogether, especially

in

Amedcan schools."

A GIFT FROM MY EDUCATED DAD

The person who shared these quotes with me was my highly educated but poor dad. He also despised the school system... although he did well in it.

He

hecame a teacher because he had dreams of changing the 300 year old system, but

instead, the system crushed him. He took his passion, tried to change the system,

and ran into a brick wall. it was a system that too many people were making nioney in, and no one wanted it changed... although there was a lot of talk about

ie need for change.

Maybe my guidance counselor was psychic because years later I did

indeed

How in my father's footsteps. I just didn't follow him into the same system. I was