{"id":56287,"date":"2021-12-18T07:48:00","date_gmt":"2021-12-18T11:48:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=56287"},"modified":"2021-12-20T12:50:37","modified_gmt":"2021-12-20T16:50:37","slug":"wealth-quadrant","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/wealth-quadrant\/","title":{"rendered":"The Wealth Quadrant: Why the Rich Get Richer"},"content":{"rendered":"\n

Which cashflow quadrant are you in? Do you generate income from the work you do (E and S quadrants) or from the assets you own (B and I quadrants)? Which quadrant is the most conducive to building wealth<\/a>? <\/p>\n\n\n\n

Robert Kiyosaki uses the concept of the ESBI quadrant<\/a> to categorize different ways of generating income. The first two quadrants, employees (E) and the self-employed and small business owners (S) are usually dead-ends on the road to wealth. The other two quadrants, big business owners (B) and investors (I), are the most conducive to accumulating wealth because those are the categories in which you can develop passive income in the form of assets.<\/p>\n\n\n\n

Here, we\u2019ll go over four major changes you have to make to your thinking to succeed in the wealth quadrants. <\/p>\n\n\n\n\n\n\n\n

B\u2019s and I\u2019s Fundamentally Understand Money<\/h2>\n\n\n\n

According to Kiyosaki, there are two groups of people: people who understand how money flows and grows, and people who don\u2019t. Those who don\u2019t are usually in the E and S categories. People who are fluent in money 1) realize how important it is to be wealthy and 2) know that the best way to wealth is to be in the B and I categories. If you\u2019re fluent in money, you\u2019re at a big advantage.<\/p>\n\n\n\n

(Shortform note: It\u2019s harder, and more important, to be financially literate today<\/a> than it was in the past. While your grandparents may have made most of their day-to-day purchases in cash and may have had pensions that required very little decision-making<\/a>, financialization of the U.S. economy has meant saving, investment, and retirement options are now more complicated than they\u2019ve ever been.<\/a> Between 1950 and 2019, the financial sector\u2019s share of the U.S. GDP rose from about 3% to over 20%.)<\/p>\n\n\n\n

B\u2019s and I\u2019s Utilize \u201cOther People\u2019s Money\u201d and \u201cOther People\u2019s Time\u201d<\/h2>\n\n\n\n

In the E and S categories, you earn money from your<\/em> work and time. Earners in the B category generate wealth by using other people\u2019s time <\/strong>and people in the I category can make money using other people\u2019s money<\/strong>. <\/p>\n\n\n\n

Remember that in the B category, you own a system that can run without you. A B category business owner makes money from the time and labor of the people who work for their business. <\/p>\n\n\n\n

In the I category, you can use your own money to invest, but you can also invest with other people\u2019s, or a bank\u2019s, money. (Shortform note: That money will probably come in the form of a loan, which you pay interest on. You\u2019re betting that the profit you can make from the borrowed money will be more than the interest you owe.) <\/p>\n\n\n\n

Three Ways to Use \u201cOther People\u2019s Money\u201d to Start a Business<\/a><\/strong>

Other people\u2019s money isn\u2019t just for investing. It\u2019s a common way to start a business, too, since most people don\u2019t have enough capital on their own<\/a>. 

1. Borrow from the bank.<\/strong> A line of credit in the form of a credit card can be a good choice because many cards don\u2019t charge interest for the first year, allowing you some time to generate a profit. 

2. Apply for grants and awards.<\/strong> Be on the lookout for opportunities to acquire capital you don\u2019t have to pay back. 

3. Find an investor.<\/strong> Investors are always looking for great new business ideas\u2014yours could be the one they\u2019ve been waiting for. <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

B\u2019s and I\u2019s Ask \u201cWho Am I Making Rich?\u201d<\/h2>\n\n\n\n

The fundamental question to ask yourself<\/a> in the B and I categories is: Who are you<\/a> making rich? In a capitalist economy, Kiyosaki says, either you\u2019re getting rich, or you\u2019re making someone else rich. <\/p>\n\n\n\n

In the E and S categories: <\/p>\n\n\n\n