Lets take a look at some information that I learned from a book called Cash Flow Quadrant by a man named Robert Kiyosaki. I highly recommend the reading of this book (you can find it in the book Store) and for our purpose we will extract some information from it.
There are four basic ways in which to earn money? none are really superior to the other; we just tend to earn money based on how we were taught to earn it. Each way is broke into four Quadrants and each Quadrant has a distinct characteristic associated with it.
I. Employee? familiar to most of us? we agree to spend our time working for a particular company in exchange for a specified amount of money.
II. Self Employed?. A person no longer working for a company but goes into business for themselves but they are still spending there time in exchange for money.
III. Investors? a person who uses their wealth to create an income, for most of us we just don?t have the resources to utilize this method?. Lets just leave it at that this is not your 401k or IRA plan.
IV. 'B' type business?. A person who owns a system that plugs people into a training program that creates a cash flow for its owner. It is important to note that it?s the creation of a system, or implementation of a system that has already been created.
Many people actually believe that they are buisness owners, when in fact they are Self-Employed. Check out my page Self Employed VS. Business owner for an explaination of the difference.
There are basically two sides a Right and a Left. In general the two means of Income on each side share the same characteristics, although there are some minor differences between each Quadrant.
The Right side is made up of people who generate their Income through passive means, which in turn leave them with pleanty of Time and Money. We will spend more on this subject latter
The Left side has the Employee and Self Employed type. In each instance the income is dependant on a person actively working for an income trading their time for money. Granted Self Employed people are generally better paid than Employee's however they usually have less time to spend that money. It is also interesting to note that Self Employed people also have a higher divorce rate than Employees do?
The draw back is that on the left side of the Equation there is an inherent Cap on the amount of money that a person can make, there is only 24 hrs in a day, and this method of income is dependant on that individual doing the work. The US Dept of Labor puts out a chart based on Income vs. Age?. This chart represents the average person in America over the course of there life.
The average person gets their first job at around 18 to 21; from that point through the movement between new jobs, Education, and promotions gains between 10 to 15% raise each yr. Then at some point it becomes more economical for companies to hire new employees then to give liberal raises so unless a person changes careers they will relatively see no more money. In fact on the most part the average raise is around 3% per year, while inflation continues to rise at around 7% per year. Which actually causes a person to be able to buy less each year.
This cap usually occurs between the age of 30 and 35. Unfortunately, this usually happens to be right after a couple has acquired Car Loans, Mortgages and the birth of an average of slightly more than two children. A person may then look forward to this Capped off income until they reach the age of 65. At which point they may now retire on about ½ to 1/3 of the income that they are have a wonderful time making a living on already. If you want some verification to this look around at the people that you know that are at each stage of life.
Because reality is that 95% of all Americans are living this life, yet this group only controls about 5% of all the wealth. Yep that's right the other 5% of Americans control 95% of the wealth in this country. The trick is that they have learned some techniques that make money attracted to them.
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