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What is Cashflow?
Cashflow is basically the idea of where the flow of money comes from and go. Understanding it, may take you sometime or for some people it's just figuring out what financial statement is.
Let me give you some idea how cashflow works.
1. What does the cashflow of an employee looks like?
Employees in general are either paid by monthly salary, daily paid or hourly. These are skilled worker who earn by lending their services and presence at work. Usually they earn through pay check. These are very common by having an 8 hours daily job. Although all quadrant takes TIME to earn money. Employees also spend their time earning it. The difference is the amount of time and physical effort you exert to produce that income. In this quadrant it is basically no work no pay unless that is if you have vacation leaves or sick leaves.
2. What does the cashflow of a self-employed looks like?
Self-employed on behalf is having a job who you owns these are professional like dentist, lawyers or engineers. They make their income through professional work without any employers who pays them. They organize their time and schedule while earning through professional fees. Basically these people are highly skilled that they do work by themselves and not letting other people do it for them. The only problem is that this also requires your presence to earn the income. If your presence is not there you'll have no clients to consult you resulting no income either. This could be categorize to no work no pay concept.
3. What does the cashflow of a business owner looks like?
Talking about businessman these people has the ideas to create system that involves number of people. Employees and self employed are also included in the system of the business. The difference is on this quadrant business owner take time to build the system and later could spend on vacation still earning that profit or income passively. When we say passive, even your presence in the business is absent the business system would still works that makes the most of your money. And later on you will have all the time you need to do other things. Sounds great isn't it. But this would also requires time and dedication to build the system. The first two I mentioned awhile ago also do requires dedication the difference is in the long run. And the freedom once you perfected the system.
4. What does the cashflow of an investor looks like?
These people let their money works for them no more no less. People who have the money does it. And for them to able to roll the money it requires learning and research. Investor should always do that for them to lessen the risk of losing the money. It requires no physical effort but do still needs time to gain and to earn the return of it. Investor could be the owner of the business but let other people run them or acquiring assets that earn for them like real estate or stocks. Earning dividend and rent checks. It is always ideal to become an investor in the end of the day. Why? because it gives you freedom to enjoy the things in life, spend time with family, friends and still helping those people and educated them to become one also.
Cashflow is basically the idea of where the flow of money comes from and go. Understanding it, may take you sometime or for some people it's just figuring out what financial statement is.
Let me give you some idea how cashflow works.
1. What does the cashflow of an employee looks like?
Employees in general are either paid by monthly salary, daily paid or hourly. These are skilled worker who earn by lending their services and presence at work. Usually they earn through pay check. These are very common by having an 8 hours daily job. Although all quadrant takes TIME to earn money. Employees also spend their time earning it. The difference is the amount of time and physical effort you exert to produce that income. In this quadrant it is basically no work no pay unless that is if you have vacation leaves or sick leaves.
2. What does the cashflow of a self-employed looks like?
Self-employed on behalf is having a job who you owns these are professional like dentist, lawyers or engineers. They make their income through professional work without any employers who pays them. They organize their time and schedule while earning through professional fees. Basically these people are highly skilled that they do work by themselves and not letting other people do it for them. The only problem is that this also requires your presence to earn the income. If your presence is not there you'll have no clients to consult you resulting no income either. This could be categorize to no work no pay concept.
3. What does the cashflow of a business owner looks like?
Talking about businessman these people has the ideas to create system that involves number of people. Employees and self employed are also included in the system of the business. The difference is on this quadrant business owner take time to build the system and later could spend on vacation still earning that profit or income passively. When we say passive, even your presence in the business is absent the business system would still works that makes the most of your money. And later on you will have all the time you need to do other things. Sounds great isn't it. But this would also requires time and dedication to build the system. The first two I mentioned awhile ago also do requires dedication the difference is in the long run. And the freedom once you perfected the system.
4. What does the cashflow of an investor looks like?
These people let their money works for them no more no less. People who have the money does it. And for them to able to roll the money it requires learning and research. Investor should always do that for them to lessen the risk of losing the money. It requires no physical effort but do still needs time to gain and to earn the return of it. Investor could be the owner of the business but let other people run them or acquiring assets that earn for them like real estate or stocks. Earning dividend and rent checks. It is always ideal to become an investor in the end of the day. Why? because it gives you freedom to enjoy the things in life, spend time with family, friends and still helping those people and educated them to become one also.
To understand your personal cashflow just download the excel file below and modify the amount specified in the columns.
cashflow.xlsx | |
File Size: | 12 kb |
File Type: | xlsx |
Hopefully by this time you understand it's concept. Cashflow Quadrant basically understanding where the money comes from. By before grasping the whole idea of the quadrant you should under stand also what financial statement looks like. When you encountered terms like active income, passive income, dividends, gains, expenses, mortgage etc. One you understand how it works the easier you can manage you finance in life and how you will generate your money to bless your family and other people.
Personal Advice
I would suggest you sign up and register and play the game Cashflow 101 of Robert Kiyosaki to understand what it looks like.
Personal Advice
I would suggest you sign up and register and play the game Cashflow 101 of Robert Kiyosaki to understand what it looks like.