That Home Loan Hub
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That Home Loan Hub
The Forgotten Wisdom of Kiyosaki: Why Your Income Source Matters More Than Its Size
A forgotten classic is making a comeback. Robert Kiyosaki's Cashflow Quadrant - the framework that revolutionized how a generation viewed wealth creation - remains as relevant today as it was 25 years ago when it first captivated eager minds seeking financial independence.
James Shears breaks down this powerful concept with crystal clarity, explaining how income sources fall into four distinct categories: Employee, Self-Employed, Business Owner, and Investor. The left-side quadrants (Employee and Self-Employed) represent the traditional path where more money requires more time and effort. The right-side quadrants (Business Owner and Investor) represent financial freedom - where systems and investments generate income without your active involvement.
For young professionals and first-home buyers in New Zealand, this episode offers practical stepping stones toward financial independence. KiwiSaver emerges as the perfect starting point, with its employer-matched contributions creating an instant "pay rise" while building investment capital. James explains how property investment provides another powerful path, with mortgage strategies that can save hundreds of thousands in interest while building equity for future investments.
Self-employed listeners receive a crucial wake-up call about business value. If you "are the business," what happens when you're gone? The episode explores how to transition from self-employment to true business ownership by creating systems that function without your daily involvement - ensuring your hard work culminates in an asset with real market value rather than disappearing when you retire.
Whether you're just starting your financial journey or looking to accelerate your path to independence, this timeless wisdom provides the roadmap. As James summarizes perfectly: "The sooner you get started, the better." Want to dive deeper? Google "Robert Kiyosaki Cashflow Quadrant" or pick up his legendary book "Rich Dad, Poor Dad" - still converting readers into investors after all these years.
Hello and welcome back to the episode with James Shears. Hello, James, hey Sabaniso. Good, thank you, James. What are we talking about today?
Speaker 2:Well, today we're going to go back in time and we're going to go a little old school and I'm going to bring out Robert Kiyosaki's Cashflow Quadrant.
Speaker 1:Cashflow Quadrant. What the actual? What is it?
Speaker 2:Well, if you're around my age, you'd probably know 20, 25 years ago, robert Kiyosaki was the man when it comes to personal finance. But the quadrant is it's an expression about how you can start earning money more from investments and from business as opposed from a job.
Speaker 1:Okay, so a quadrant. I assume it consists of four different things.
Speaker 2:Yep, okay. So the quadrant has four squares on the left-hand side, the two left-hand side One is the employee, one square is the employee, the one below that is self-employed. So in both those squares you've got somebody who's working in a job. Basically, in terms to the more money they want to make, the harder they have to work.
Speaker 1:Okay, you know the more hours they have to do Sounds like you and me at the moment. Yeah, pretty much Awesome.
Speaker 2:So what we want to be doing is working our way towards the right-hand side of the quadrant.
Speaker 1:And what's on the right-hand side.
Speaker 2:On the right-hand side is you've got the business owner who owns the business but doesn't necessarily work in the business. The goal, Because I know plenty of people who make lots of money but they're still self-employed.
Speaker 2:So, even if they wanted to, they can't enjoy their money because they have to keep working. So you've got the business owner on the right-hand side, who owns the business doesn't necessarily work in the business. Owner on the right hand side, who owns the business, doesn't necessarily work in the business. And then you've got the investor who invests in property and gets his rent, or invests in shares and gets his dividends, and so on okay, so for the young people that are listening today, they're going oh, how can I go from this to that?
Speaker 1:what would be your suggestion?
Speaker 2:well, I think the best way is there's lots of options where can.
Speaker 1:Where can they start?
Speaker 2:Well, obviously, with KiwiSaver. Building up your KiwiSaver is a great way to get that capital, because to be able to get to the right-hand side, you've actually got to have capital, you've got to have equity in your house, you've got to have a super fund or money that you're saving up. You can't just go and become an investor with $100. Because you make 10% on $100, it's only going to be $10.
Speaker 2:Yeah, you know what I mean, but if you're making 10% on a million dollars, you're making $100,000. Yeah, so it's about moving slowly over time, or?
Speaker 1:as fast as you can from the left-hand side to the right-hand side. And I'm glad you mentioned KiwiSaver because for a lot of people out there that are looking to get on the ladder for instance their first property ever often they go.
Speaker 1:oh, you know how can I come up with a deposit? And if you have a KiwiSaver, or if you're just entering the workforce and you're looking to buy a property, you know, in three years' time, joining KiwiSaver right now is an absolute ideal prime time, because you put 3% of your income and then your employer puts 3% of you know your income as well, so you're getting an instant pay rise when your employer puts in 3% on top of your salary. So that helps you to build up your deposit. And because KiwiSaver is an investment product, the money grows on money.
Speaker 2:Absolutely, and that's what we want. And it's the same if you're paying your mortgage off faster, because you're just saving yourself tens of thousands, perhaps hundreds of thousands of dollars in interest costs. If you pay your mortgage off faster, you are going to be in a much better situation to get that second property quicker. So it's the same as building up the KiwiSaver, so you can have both these things working for you.
Speaker 1:Yeah, because I think a lot of clients we're dealing with right now they're sort of sitting in that spot. They are the first home buyers and they're looking to buy in the immediate future six to 12 months. Or we've got a lot of mom and dads that already bought a property three years ago and now they're looking to upgrade or build or do something and they need to know how to get to that next step.
Speaker 2:Yeah, and the great thing is, you can still be working in a job while you're building up this side of your life. Why are you building up those investments? So at the moment, you might be getting the majority of money from your work, but pretty soon, if you work on your KiwiSaver or getting that extra property, that rental, then you're going to start generating money from other areas of your life rather than just your work.
Speaker 1:Yeah, exactly, and also investing into businesses. And again, guys, this is not a financial advice, but investing into businesses. You know, you may be friends with someone that's looking to open a business or that's running a business and they may need some capital and you may have some cash under your pillow that you've saved up, so that's also ways of investing into something that could potentially return you.
Speaker 2:I think it's something worth thinking about as well as for self-employed people, because often self-employed people, they are the business. So it's very hard. You know some businesses you build up and you can sell them and you can do quite well if you are not the business. But if you are the business, like most self-employed people are, and then when it comes time to sell or retire, your business isn't worth that much because there's no. Once you leave the business, that's the value gone. Does that kind of make sense?
Speaker 2:Oh, absolutely so, I think that's quite important for people to think about.
Speaker 1:Yeah, so think ahead, right, Like if you're in your 30s and you're starting up a business. Think ahead. You know what does retirement look like for you? Or what's your continuation plan? Are you going to be selling off that business? Are you going to be putting someone else in place in that business? Absolutely, et cetera. No, that's awesome. Anything else from your quadrant that you wanted to cover today, james? Before we wrap up?
Speaker 2:No, the sooner you get started, the better is what I would say.
Speaker 1:Yeah, perfect. Thank you so much, and if you do want to have a look at that cash flow quadrant, we recommend Googling Robert Kiyosaki cash flow quadrant and you might also come across Rich Dad, poor Dad book.
Speaker 2:Oh, absolutely, which is?
Speaker 1:absolutely legendary starting point, I think. For anyone that's ever been interested in property, that's like the book to read. I'm trying to get a 12 year old to read that book. Yeah, so awesome, thank you. Thank you, james, and have a lovely day.
Speaker 2:No worries, same to you Bye.