I believe the entire Rich Dad concept is built around the infamous Cashflow Quadrant.  The Cashflow Quadrant is made up of 4 categories, obviously.  They are: E, S, B, I.  E means Employee; S means Self-Employed; B means Business; and I means Investment.

These 4 categories can generally cover all possible types of ways to make money.

Most of us who has a full time job working for someone would fall under the “E“mployee category.  There is nothing “wrong” about being in this category, but the fact most of us are in this category, but yet in this world most of us are not considered “rich”, probably means staying in this category has a lesser probability to become rich.

Next, there are 2 types of people who can be classified as “S“elf-Employed.  One, those who are highly skilled professionals, like doctors, accountants, and lawyers.  They may have their own clinics, firms, and chambers (a.k.a. “business”), but the entire business is structured around the individuals.  This means if the doctor/accountant/lawyer is gone, the business itself will collapse very quickly.  This is the definition of “Self-Employed.”  Also, some people who own and operate their own businesses, but if the businesses need their presence to continue the primary operation, are also considered self-employed.

“B” and “I” are the preferred categories of Rich Dad’s.  “B”usiness is classified as businesses where the owners do not need to be present for the operation to continue.  For example, if you start a shoe selling retail store and you hire a store manager and sales, you physically do not need to be present daily for your retail store to operate.  That is one example of a business.

“I” is Investment.  That is when you make money via investment vehicles.  For example, if you have a portfolio that can generate income, that means you fall under this category also.

One important thing to realize is that we are not bound to 1 category only.  A full time employee (FTE) who spends 40 hours a week in the “E” category, may follow the market closely at night and invest his savings on stocks and such, which qualifies him as an “I.”  During the weekend, he may be writing a blog about what he feels about the market, making some Google Ads money, which also qualifies him as an “S.”  This is a very typical case and anyone can simply fall into 3 categories of the 4 Cashflow Quadrant.

Take away:  Do not limit yourself to just 1 category within the Cashflow Quadrant.