Robert Kiyosaki, the author of Rich Dad Poor Dad, uses a model he calls the Cash Flow Quadrant to explain different ways income is generated. When you are an employee you know you will get a paycheck as long as you continue to work for the business, even if the business is not profitable.
Earning a consistent wage each month is important when it comes to paying off debt, like home or car loans. However, full-time employees get their income from this single source, their job, and if they lose their job they lose 100% of their income. They have to rely on unemployment to bridge any employment gaps.
Moreover, in terms of Income taxes, employees pay the highest percentage of their income. The more you earn as an employee the higher your tax bracket, and you have no options to reduce your income through deductions or tax credits. Most Americans get their income from this quadrant.
How much of your income comes from wages earned as an employee?
- Cash Flow Quadrant
- Employee – Cash Flow Quadrant
- Self-Employed – Cash Flow Quadrant
- Business Owner – Cash Flow Quadrant
- Investor – Cash Flow Quadrant
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