The Four Financial Quadrants

One of the financial experts and financial gurus who has been continuously educating people financially and how to grow their financial wallet or financial IQ has touched on the topic regarding the four financial quadrants. According to him, knowing about the four financial quadrants will make you realize that you would want to move up and be on the other side of the pie. The only way to be able to move to the other side of the pie is when you become educated financially. So what are the four financial quadrants? This article aims to touch and discuss on each and every quadrant so that you would know the difference between each one.

Employee (E). This quadrant is the basic quadrant that is located at the top left part of the division of the pie. People who belong to this classification or quadrant, obviously are the people who are currently working as employees in big and huge companies. People who belong in this quadrant control 5% of the money that circulates in the world. This is due to the fact that they simply depend on the salary that they receive. In return for their salary, they put in a certain amount of hours for work. However, if they get sick and fail to report to work, they don’t get paid. It is in this financial bracket where you get paid based on the number of hours that you work. A regular employee often works 8 hours a day and this is where their basic monthly salary is based. If they work more than 8 hours, they get paid overtime. However, if they work less than 8 hours, there would always be a corresponding deduction in their pay for the number of hours they missed in their given 8-hour shift.

Self-Employed (S). This is the second quadrant after being an employee. There are people who would try to get out of the state where they work for a certain company and start to use their skills and expertise in order to earn without depending on a company that dictates that they should come in 8 hours daily. People under this quadrant are working as: lawyers, doctors, and other professions that can stand alone and yet earn without necessarily being connected with a company. The only catch of being in this quadrant is that the money you earn depends on the amount of active work you put in. The lesser number of active work, then the lesser your income would be. What does this mean? Here in the Philippines, you can see lawyers who put up simple and small offices and place a signage in front of their office which reads “Notary Public.” These are lawyers who simply rely on the number of clients that would go in their office to have a certain legal document notarized. However, their income would depend on the number of legal documents they would be able to sign and record so if they have few or little clients that walk in their office, they get little of minimal income.

Business Owner (B). This quadrant is the third quadrant and is located at the top right part of the pie which is just across quadrant E. From the name of the quadrant itself, people who belong to this quadrant are those who have small businesses, whether it be a food cart franchise (the one’s we see inside shopping centers and malls), a shop or boutique that sells any basic commodity or luxury good, etc. People in this quadrant own a system and do not rely on active work in order for them to earn. They hire employees that does the work for them and so, even if they are on vacation, sleeping, etc. money would come into their pockets for as long as the employees come into work. According to all financial experts and gurus, they are the people who control 95% of the world’s wealth. Meaning, bulk of the money is being controlled by these people.

Come to think of this, in any country, regardless of the type of government that each country has, the people who control the economy of the country would always be the business owners or the businessmen. Here in the Philippines, we would also find this to be true. Bulk of the cash flow or the influx of money going in and out of our economy is always being dictated by the businessmen.

Investors (I).This is the fourth quadrant that is located at the lower left part of the division of the pie. This is when you own multiple or several investments and this is also the stage where money then starts working for you which is totally the opposite of quadrant E. According to one of the financial gurus, people who occupy or belong in this quadrant are often the people who are also in quadrant B. Why? Because people in quadrant B, when they earn, they start to invest in other goods and commodities. Their goal is always to make something more and increase the streams of their passive income.

Now that we have gone through the different financial quadrants, what we need to do is to learn how to move around it and be at quadrant B and quadrant I. Again, if we started off as an employee that does not mean that we would not do anything in order for us to become future business owners. So how does one move from quadrant E to quadrant B? The secret to moving would always be financial education. When you learn how to increase your financial I.Q., then you would find ways and means on how to move from quadrant E to quadrant S, from quadrant S to quadrant B. This is however not a fixed process or movement is. Sometimes people who start off with quadrant E would move to quadrant B after being able to establish a certain amount of capital. It can either be a small business that they would start up like your next door canteen or cafeteria or a simple store.