Book: "The Cash Flow Quadrant

The cash flow quadrant represents the four ways in which people earn their income:

1) Employee

These are those people who work for a company, for a monthly salary and economic benefits such as vacations, they work "X" amount of hours per day and are paid depending on the work they perform an hourly wage; and they are compensated on a monthly basis.

In this quadrant is where the majority of the population is: an employee of a company, an analyst, a builder, a doctor, a manager, a chef, in short, anyone who is under someone's command and receives a monthly salary.Employees are looking for: comfort, guarantees, the feeling of financial security that a job gives them.They trade their time for money.

Already in school we are prepared to be employees.

2) Self-employed

They are those who do not work for someone else's company but for their own company. They may be entrepreneurs who work alone, have no boss, and claim to be masters of their own time. Nowadays there are many freelancers, for example: a computer scientist who creates web pages, a content writer, a graphic designer, a lawyer, a doctor who works in his office, a bricklayer who works on a project basis, in short, they are people or independent professionals who work for themselves and not for a company. What characterizes them is that they must do the work, that is, the generation of income depends on their physical presence, i.e., they cannot get sick because then who generates the income?

Their favorite phrase is: "if you want something done right, do it yourself".

3) Business owner

They are the ones who direct the action, who are in charge of creating systems, that is to say, they are the ones who have the idea, the business plan, raise the money from investors or from their own funds, create companies, hire personnel, intelligent and trained human resources, automate the company's system, have processes with rules that must be followed, know how to delegate responsibilities, ... The owner is only in charge of directing and controlling that everything goes as planned. The generation of income of the company does not depend on him, the company can function without his physical presence.

4) Investors

They are the ones who put money on the table and make their money stay or grow in value without having to work for it. They invest in something, recover their investment and reinvest, although this is not always the case, since sometimes they can lose it. For example: a person who buys an apartment and rents it; it costs 100 thousand dollars and has a profitability for example of 15% per year, which means that he generates 15 thousand dollars in profits and at that rate he would recover his investment in approximately 7 years. When with a time or term deposit the profitability can be 5%, which means that you would recover your investment in 14 years. That is the difference of a professional investor versus one with little knowledge, the professionals know how to generate high returns with low risks; they are characterized by having the experience and the capital; an investor is interested in knowing what the profitability is and how long it will take to recover his investment.

Differences we can observe: while the left side focuses on a linear income in which you exchange your time for money and if you stop working your income stops; the right side generates passive or residual money, that is, it is an income that you receive by doing a job once or many times and does not depend on your physical presence to continue generating it. It requires a lot of sacrifice, time and energy, but once it is set up, the only thing left to do is to control it.

People can be in different quadrants, we can see it with the following example: a doctor who works for a government health institution is an employee of that place, he receives a fixed monthly salary no matter how many operations he does. After leaving that job he attends in his private practice where he charges a consultation fee, he also performs surgeries and charges depending on the procedure and if he does not attend patients or does not perform surgeries because he is sick or on vacation he does not generate income; here he is a Self-Employed. But he also had an idea and partnered with other investors to create a laboratory and installed a system to run it himself and has a computer system to see and analyze the numbers, has a security team to see live what is happening, has qualified personnel for the services they offer for accounting and marketing, he can be operating on a patient, in consultation, in his job, he can be sleeping that his company is still generating money; here he is a Business Owner. But the doctor also owns three houses: one in which he lives and two that he rents through a company that manages those rents; he bought those houses to rent after having paid for his main house, that is, he invested the money and after several years he recovered his investment and continues to generate income; here he is an Investor.

Robert Kiyosaki defines wealth as the amount of time you can go without working and still be able to cover your lifestyle expenses, so if you have 5 thousand euros saved and your expenses are one thousand euros per month and you have no income of any kind your wealth would last five months; on the other hand, if you have 1200 euros in passive income for which you do not physically work your wealth is infinite until that passive income ceases or your expenses increase beyond 1200 euros. The objective of this cash flow quadrant is to show the formula to have freedom of time and money, that is, to move from the left side to the right side of the quadrant and no longer exchange your time for money but to have money and your mind working for you, creating businesses and investing so that you generate income, whether you work or not.

The path to the right side would be from: Employee ->Self-employed ->Business owner ->Investor.

The author gives us some tips to move to the right side: first evaluate your current situation, which quadrant are you in, and think about which one you would like to be in: If you are an employee, try to have a variable salary component in addition to a fixed salary, either commissions or based on results. It is very important that you manage your monthly income, that you get out of consumer debt, credit cards and loans.

f you want to know more about our training proposal in aesthetic medicine, we encourage you to contact us. We will solve your doubts and advise you on what you need.

Dr. Manuel Rubio Sanchez

aesthetic doctor