The Wealthy Mindset by Robert Kiyosaki

Robert Kiyosaki has been one of the greatest influences in my life when it comes to the mindset behind wealth-building and more generally, financial literacy. Even more, the way I personally define wealth has been greatly impacted by his content ranging from books, podcasts, seminars and videos. In my eyes, he is simply one of the greatest and most experienced business owners and investors out there who is willing to help others reach their financial freedom as well. In this article, I will talk about the core aspect of his writings and his ideology. The mindset. More specifically, I will look into the concept he came up with, called the Cashflow Quadrant, and how that explains the way you can identify where your mindset puts you in terms of the societal structure and wealth building. Understanding this will help you gain a thorough understanding of how you can shift and build a greater amount of wealth for yourself and for the generations to come, which will allow you do all the things you want to do in your life.

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The Cashflow Quadrant

As you can see in the figure above, there are 4 legal ways of generating income in society.  You can be an employee, a self-employed person (a small business owner), a (big) business owner and an investor. You can look at these 4 parts as separate quadrants, or you can look at the figure from a more broader perspective as two halves. These two halves represent two kinds of income, active income (where you actively participate in creating the income – trading time for money) and passive income (where you leverage either an entity – asset or people that you have built, or where you simply multiply your capital through investing it). In the second half, you first put a lot of time in to create the asset and then you can sit back ant the entity works on its own. This is the half where we should all be striving to live in, according to Robert Kiyosaki. Why? Because the way he defines wealth assumes that time is the most valuable commodity we have in our lives. I completely agree with this assumption and that’s why I strongly value this concept. Try comparing time with money. Can you invest it? Can you save it? Can you multiply it? Answer these questions and see whether you feel like time is more valuable or not.

The E Quadrant

As an employee, you simply have a job where you trade your time for money. Depending on your own values, you will either feel like this makes sense or like this is an unfair exchange. If you feel like this makes sense, this is probably where you fit in the most (with your current mindset). As an employee, you work on someone else’s asset in which you have very little interest. For employees, security and stability is the whole deal. But are jobs in the present really secure??

The S Quadrant

As a small business owner, you create a job for yourself and maybe for a couple of other people who work in that small business with you. Don’t misunderstand though, if you have a small business, you probably need to invest even more time than as an employee. Why? Because the business is directly dependent on your activity in it. If you own a dental clinique and you’re the only dentist there, what happens if you don’t come to work? Nothing, nothing happens and that is the problem. Since nothing happens, no money comes in. There are two major reasons why you might want to be a self-employed person. Either you really value independence or you want to scale your business later so that you can shift to the B quadrant. Examples of small businesses include a corner shop, a small dental clinique or a small local restaurant (not a chain restaurant).

The B Quadrant

As a big business owner, you own an asset. An entity that is capable of running on its own, thus generating passive income for you. This means that if you don’t actively participate in its daily running, the money will still be coming in. What you did is you started depending on your leadership skills less than your professionalism in a specific area. You brought more skilful people together and you were able to give them vision and purpose to stay together and build the business. As you moved from the left side to the right side, you have started accumulating residual (passive) income, which is the goal if you want to have more time to do whatever you want in your life.

The I Quadrant

As an investor, you keep the mindset of a business owner. You value leadership and freedom. Now, since you have generated some capital through your business, you can use other businesses and financial tools to multiply it. Real estate, IPO investment, stocks, funds and other tools are included in here.

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The Shift

As you can see in the second figure, the only (proper) way for you to safely move to the I quadrant is to go through the whole journey. The mistake most people make is that they try to jump from E to I and most often fail terribly. Understand that it is not only about the money, it is also the mindset that limits you from making such a huge jump effectively.


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Set Yourself Up For Success

Most of us know what kind of movies they like, some of us know what subject in school they enjoy, few of us know what they want to do as a job and most of us don’t know how they want to live. This is a major flaw in modern society. It is clearly a fault of the tradition. We are led to think about the “what” rather than about the “why“. This is something that cripples us in the long run and makes most people regret not having done what they’ve dreamed of doing in their lives. This flaw has a further crippling consequence. We are unaware of where we are and what we should do next with our time. Why do you think many teenagers end up drunk every weekend? Do you think they would still do that if they understood their direction and the reason why they’re taking that path? In this article, I will be talking about a few steps you can take to set yourself up for success in the long run.

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Step #1 Find Your Direction

As I have mentioned many, many times before, it is not important what you do, but why you do it. Why do you go to school? Why do you go to uni? Why do you workout? Why do you wake up early? Why do you procrastinate? Why do you read books? Why do you not read books? Begin with the end in mind. Become outcome-focused, not process focused. Why? Because processed focus people never actually achieve what they want. Even more, they don’t understand what they want, they don’t understand the outcome. They only understand the process. If you know that you have to go to university, but you don’t know why, how are you going to feel? Will you study just to “get it done” or to actually learn and grow, so that you can utilise that knowledge in the long run?

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Step #2 Identify Where You Are

The second step is slightly easier than the first one, but its biggest challenge is your subjectivity. To understand how far we are from the desired outcome, we need to set up some framework that will make it easier for us to clear up some confusions created by the subjectivity of this matter. What I would suggest is setting up a scale from 1 to 10. 10 would be that goal of yours, maybe the life that you want to live. It is “the why” you came up with. Now it is important to take some time and think about how far you are from where you want to be. The scale helps you to specify it for your reference. You can set up some points where you’ll be stepping up one number. If your dream is to live the life of a judge, not for the sake of being one, but for the sake of imposing justice, one of your steps could be graduating from a law school. Which leads me to the third step…

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Step #3 The How

After you have figured out how far you are from your goal, from the final point, you should start planning out the “how” in terms of how you are planning to get there. What are the steps you have to undergo to achieve that goal? What are the experiences and learnings you have to go through to live that life? How will you grow to your success? This is the time for you to find the right platform that will deliver the results for you. In order to do this, a very helpful aspect of your focus should be a person. A someone who is closer to that 10 than you are or a someone who is already past it. Pursue them and learn from them. That will cut your path much shorter than it would be otherwise.

Finally, understand that your 10 is not a static point. It is very likely that as you grow and as you start approaching it, it will expand. It will shift and you will find yourself sitting on a 5 even though you were on a 7 before. Why? Because you have grown, you have expanded your dream and your 10 became an 8. This should not disappoint you, it should excite you. It is a sign of you developing a growth mindset – understanding that there is always some space for growth and improvement.

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Be An Ambassador For Positivity

In our daily lives, we encounter situations where we have a choice to make. It’s a choice of response. In your workplace, what do you do when your team screws up? In your household, what do you do when your kids don’t do their homework? What do you do if they finish it well? All these situations might seem boringly common, but the reality is that the majority of people makes the less correct choices in such situations. How many times have you been yelled at in work? How many times have you been yelled at when you were a young rebellious kid? All of these experiences have framed your way of thinking. The truth is, most people have got a very bad understanding of how they should behave in such situations exactly because of the way they have been brought up. In this article, I want to utilise one of the concepts that is developed in a book called Whale Done, where the author tells a story of a manager who learns about how he should “motivate and treat” the people around him (including his team and his family) and how he should build healthier and more positive relationships.


Your Response

According to Ken Blanchard, there are 4 ways we can respond to any situation. No response, negative response, redirection and positive response. The two very well known responses would be the positive and the negative one. However, Blanchard argues that these are too simplistic and that there are 2 more responses that are less easily observable.

The first one is no response. The reason behind the complexity of this response is that it is the most frequent one we use without realising that we do. In most cases, when people do something well, they tend to be ignored, but they should be praised. This is a very common issue because the only way you can motivate someone to grow and perform better and better is through a very careful choice of your responses. We need to understand that no response is also a response. It creates a very passive behaviour of the subject because he or she did something well but is not seeing any appreciation – the subject does not treat the consequence of his/her behaviour with any special care and thus might not utilise it for the future. This is not how we should treat people when they behave well. They need to be praised and rewarded – they need to see our positive response.

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The second less understood response is the redirection. Redirection is a method of handling a negative situation by redirecting the energy or the attention of a person or an animal in a positive direction. What you can imagine behind that is trying to teach a og how to stay by your side. He sees another dog and there he goes. He has not stayed by your side. What you should not do is you should not scold him, you need to redirect his attention to something positive. You utilise other things you have practised before, you get to him and you show him a treat. You make him stick to you and you make him come a few steps with you. Then you give him a treat or you praise him. You have ignored his bad behaviour and you’ve turned the situation around. This is a very simple example. In the human case, you might have someone messing up in your work. What you should not do is you should not scold the person. You speak to him, you calmly explain that there has been a mistake and you take responsibility. After that, he will feel more comfortable and you can start focusing on how he can improve his performance. Scolding people does not work most of the times. Redirecting their attention is a different kind of story.

For a more detailed explanation, I highly recommend that you take a further look into the book Whale Good. In a very short summary, make sure that you understand that any reaction that you have will affect the person’s state of mind and your relationship. Focus on building a good relationship through positive responses and redirections and watch your relationships improve.

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Shifting Your Orientation

Most of us grow up in an environment where we are taught to focus on the process. What do you want to do when you grow up? What do you want to study at uni? What internship are you planning to look into? This kind of questions inevitably places our mindsets at one side of the scale I will be talking about today. It makes us process-oriented. If you look around yourself, most people are focused on the process, they care about the “what” rather than the “why.” In this article, I want to touch upon the reason why you might be caught up in the confusion of the process with no significant outcomes.


Process Orientation Vs Outcome Orientation

You might have heard the saying that you should focus on the process and the outcome will come naturally. But will it? If you have no idea what the outcome you’re looking to reach is, can you really reach it? Does that even make sense? The truth is, you should enjoy the process, you should be grateful for the lessons, the mistakes and the little successes, but you should always know the reason why you are doing something. In other words, you should always bear the outcome in the back of your mind and you should be looking into ways that can get you there. However, the looking part comes after understanding where you want to end up. You can’t arrive at a destination if you don’t know what the destination is. Simply put and as I always say, find your strong why and you’ll figure out the rest.

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A Little Story To Make It Clear

Once upon a time, Jack had to make a 5mm hole into a wall so he could hang up his favourite picture. However, he found out that he needed to buy a new drill. So he packed up, changed and went out to get one. When he arrived, he walked past the cashier and headed straight to the section with drills. But when he got there, he froze. There were so many of them, different brands for different prices. He looked at them and he decided to go to another shop because he thought that the brands weren’t really good as he saw some bad news about the companies in terms of financial crises and their weaker position in the market. So he got in the car and drove to another shop. When he got to the section with the drills, he froze again. He found out that good brands with a better image were too expensive. So he got to his car and drove back to the first shop to buy one of the cheaper ones. When he got back home, he unpacked the drill, plugged it in and made a 5mm hole. Then he packed the drill and hid it in the garage. The outcome of making the hole took him about 3 seconds. However, the process of buying the drill took about 3 hours.

Can you see my point? Jack got hung up on the process not realising that all he needed was to make a 5mm hole in the wall. All he needed was the first drill he got his hands on that would be able to make the 5mm hole. If he focused on the outcome, he would’ve gone to the shop, got the first drill, went back home and made a hole. That’s everything he had to do. Why would he complicate things so much for 5mms?


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Learning Point

What should you take from the story? People do this in their daily lives! Apply this analogy to your work life. Why do you work where you work? What do you do what you do? What is going to happen if you do what you do for the next 10 years? Are you going to achieve something you wanted to achieve or are you going to “survive” on the monthly income with no specific outcome in your mind? We often fail to realise how much time we waste being all hung up on the process not realising that there is no ending point in what we’re doing. Focus on the outcome, find your why and make it happen. As Friedrich Nietzsche said: “He who has a why to live for can bear almost any how.”

3 More Ways To Improve Your Relationship

When you’re 80, thinking back about your life, you won’t think about how much money you’ve made, how many companies you’ve grown or how much you’ve travelled. You will think about the relationships you’ve created throughout your life. You will think about the people you’ve spent your time with. Relationships are arguably the most important aspect of our lives as human beings. This is due to the fact that we are social beings, we love to be around other people. This also means that your number one regret will be connected to the relationships that have not worked out, what you will regret the most is that you have not spent more time with the people you love. Because of that, I decided to minimize that regret in your life and write our second article on this topic. If you want to take a look at the first one, here is the link. Listen to the next audio (start at 1:40) before we begin.


Learn To Communicate

Communication is the most important aspect of your relationships. In fact, your relationships are built on your communication with the other person. If you can’t communicate how you feel, your relationship will be full of misunderstandings and misinterpretations that will drive you nuts and eventually lead to an end of the relationship. Learning to communicate is a long process that requires lots of practice. We have already posted an article on how you can connect with anyone. You can read about that here. In communication, being sincere and straight-forward is a must. You don’t want to allow any kind of misunderstandings step between you and the other person. Another important factor in communication is timing. You might have the best intention to talk to the other person, but there are times when it is simply better to give them more space. This is especially the case if the other person is of the opposite gender. Men and women find it very hard to understand when they should give each other more space and when they should be more intimate. It is a skill that requires practice. If you’d like to read more about this specific issue and many more regarding the relationships between a man and a woman, I suggest you take a look the book Men Are From Mars, Women Are From Venus. It is probably the best piece out there that talks about issues of such kind.

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Build A 100/100 Relationship

This is quite straight-forward, yet many fail to understand it. According to my research on Instagram, most people think that relationships should be 50/50. That is a huge mistake. The only way your relationship will grow and prosper is through a constant effort of both parties. You both need to go all in. What does it mean from your perspective? It means that you should give it your all without expecting much in return. There will be times when you will feel like you’re giving more than the other person, but that will be only temporary. If not, that relationship was not meant to stay. It is as simple as that, but you should not hold back just because you’re afraid that the other person won’t try as much. Go all in and what’s meant to be will be.

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Create A Growth Environment

We are here to grow. Growth is something we are all looking for inherently. We might not understand it at first, but one of the major reasons why we look to create relationships is to grow personally alongside someone else. Thus, we should also strive to create a growth environment in the relationship. Help each other, support each other and strive to grow together. It is the most beautiful feeling when you learn what the other person needs and how you can help them. Each relationship is different in this sense because we’re all looking for something else. However, it is a fact that once you figure it out, lots of positivity and momentum will step into your relationship.

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