by James Webster

Created on: October 24, 2008

The mindset and income patterns of the rich are totally different to those of the poor and middle class.

Given the huge difference it makes to our lives, it is astounding that we are given little or no education on money matters at school. The result: millions of financially illiterate people, living from pay check to pay check, at the mercy of others who are financially intelligent.

The lack of actual knowledge is compounded by psychological issues to do with money: We find it difficult to be logical about something that goes to the very core of our survival. In the place of logic is fear, including not wanting to know the true state of our spending and income patterns.
Robert Kiyosaki grew up in Hawaii, where his father was an educator. Disliking the idea of becoming a wage-earning teacher himself, he instead pursued a business career. The irony, not lost on him, is that he later became a passionate teacher through his writings and financial seminars.

His argument in Cashflow Quadrant is that everyone lives out of one of four financial quadrants, which describe both a mindset and a way of making money.
The quadrants
The four quadrants are represented by the letters E, S, B, and I.
Kiyosaki explains the quadrants this way: When an E needs money, they automatically look for a job. Their key word is security' and they believe a waged position provides this. An S person, on the other hand, will do something to make money on their own. Their key words are perfectionism' and control'; they have to make sure things are done right, which means doing it their way. Thanks to this, their operations remain small.

In contrast, a B person will start or buy a system that generates money, and an I will put money into a system that will produce more money without them having to be directly involved.

Kiyosaki identifies the basic cashflow patterns of the poor, the middle class, and the rich. For both the poor and the middle class, most of what they earn comes from a job, and as soon as they receive it the money goes out again for expenses and debts. All that varies is the amount they earn. This is the cash-flow pattern of the E person. Most of the income of the rich, in contrast, comes from assets. All liabilities are paid for as they arise through the cash generated by the assets.

The middle-class cashflow pattern is considered normal in our society. Outwardly it makes you look like you are doing well (you have cars and a house and go on holidays), but in fact you live from month to

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