Robert Kiyosaki is an American businessman, investor, and author known for his book “Rich Dad Poor Dad” and his teachings on financial education. In his book and subsequent works, Kiyosaki emphasizes the importance of understanding the concept of cash flow and building systems to generate passive income.
Kiyosaki’s cash flow system revolves around the idea of generating income from assets that produce cash flow, rather than relying solely on earned income from a job or business. He encourages individuals to focus on acquiring assets that generate income and reduce liabilities that drain money from their pockets.
Here are some key elements of Kiyosaki’s cash flow system: makesense narative <Your thought -> Intention -> attraction>
Assets vs. Liabilities: Kiyosaki distinguishes between assets and liabilities. According to him, an asset is something that puts money in your pocket, while a liability takes money out of your pocket. For example, real estate properties that generate rental income, stocks that pay dividends, or a business that generates profits can be considered assets. On the other hand, personal expenses such as luxury items or a large mortgage on a home are liabilities.
Cash Flow Quadrant: Kiyosaki introduces the concept of the Cash Flow Quadrant, which categorizes individuals into four quadrants based on their primary source of income: Employee (E), Self-Employed (S), Business Owner (B), and Investor (I). He encourages people to transition from being employees or self-employed (trading time for money) to becoming business owners or investors (generating passive income).
Building Passive Income: Kiyosaki emphasizes the importance of generating passive income, which is income that continues to flow even when you are not actively working. This can be achieved through various means such as investing in stocks, real estate, or starting a business that can be automated or run by others.
Leveraging OPM: Kiyosaki promotes the use of “OPM” or Other People’s Money as a means to finance investments and build wealth. By leveraging OPM through loans, partnerships, or other forms of financing, individuals can amplify their investment returns and accelerate wealth creation.
Financial Education: Kiyosaki stresses the significance of financial education and developing a strong financial IQ. He believes that a lack of financial literacy is a major obstacle for many people in achieving financial independence. Understanding concepts such as accounting, investing, and tax strategies enables individuals to make informed decisions and navigate the complex world of money effectively.