The Cashflow Quadrant: Rich Dad's Guide To Financial Freedom

In this presentation, I will consider the book entitled
Cashflow Quadrant: Rich Dad's Guide to Financial Freedom

Also, please go to “The Word Is…” on my website for an audio presentation on “Suze’s Christmas message.”

In the book, the important concept of cashflow is discussed. There is also a graphic entitled the Cashflow Quadrant where individuals are categorized into four groups depending on their cashflow or how money comes in and how money goes out.

Cashflow is the flow of money on a periodic basis. Cashflow can be tracked by a family via a monthly household budget. The importance of having a budget is in bringing awareness to how money is handled. This is especially important for people who at the end of the month wonder where all their money has gone to. Having a budget will help to develop control over one’s finances. Observing how much money comes in and how much money goes out will show where changes may need to be made.

Of note is Robert’s discussion of the common assumption that having a home is an asset. He contends that a home is actually many times a liability because having that home takes money out of your pocket. Specifically, there is money paid out for the mortgage, repairs, and maintenance. However, if the house is rented and the rent is enough to pay all these expenses and bring some money into your pocket, then it would be considered an asset. According to Robert, “So a house could be an asset or a liability depending on the direction of the cash flow. If the cash flows into your pocket, it is an asset, and if it flows out of your pocket, it is a liability.” He goes on to explain with graphics that, in most situations, the house is actually an asset for the bank (mortgage holder). It then becomes apparent that having a mortgage may indeed be a liability.

Robert believes in helping people understand the basics about money. In this book, he explains the concept of cashflow as a way to help people improve their financial literacy. His hope is for everyone to eventually be financially free.

Thank you. May this book be influential in your life on your own road to success.

*Note this review is based on the 1999 edition of the book.