The investment goals and strategy of each cashflow quadrant will therefore look quite different. They still need to save and invest, though. Successful business owners, who have built a system with competent employees providing them with an income even when they step out of the business, have even less pressure on them to contribute to the traditional retirement savings pot, as their business should be able to supplement their personal retirement income. As a rule of thumb, the old school advice of saving 15% of your income from the first rand you earn and doing that throughout your working life should suffice. Exactly how much they need to save of their income every year will depend on the individual’s unique circumstances. They have more time to save and contribute towards their retirement savings pot.Īs a result, they don’t need to save as aggressively as the FIRE movement.They will spend less time in retirement and therefore need a smaller retirement savings ‘pot’.Happy workers have a few advantages above the FIRE movementīecause the happily employed, happily self-employed and successful business owners are in no hurry to retire, they have two important advantages above the FIRE movement: Other cashflow quadrants might want to retire as late as health and circumstances allow. Aiming to have enough investment income to retire early is but one recipe for financial freedom. I also have a friend aged 81 who is a self-employed Alexander Technique practitioner and who still drives from town to town to do her skilful, much needed work. He agreed but asked to still come into the office a few days a week just to read the paper, give some advice and be in his beloved work environment. Here I think of a gentleman in my office who was highly competent, but asked to retire at age 80 – 20 years after the company’s normal retirement age. In contrast, the happily employed, self-employed or business owners who are already doing what they love want to push their retirement age to as late as possible. The FIRE movement is saving aggressively so they can live off their investments from a relatively young age. That’s why they’re driven to ‘retire’ as soon as possible from the work they have to do so they can do the work they love to do. Those in the FIRE movement have not yet carved out that niche job or business that pays enough. If holding a specific job or running your own business is something that you enjoy and can see yourself doing for the rest of your life, and you’re earning enough, you’re already financially free. You still need to give your time in exchange for an income. If the business continues to run smoothly and provide you with an income, it’s truly a business if not, you’re in the self employed quadrant. But according to Kiyosaki the true definition of a business is one that can continue without you, while still providing you with an income. This is often incorrectly called ‘running your own business’. The quadrants are self explanatory, but it’s worth spending some time on the self-employed quadrant. One model that comes in handy when analysing the different ways in which people take control and provide an income for themselves is Robert Kiyosaki’s four cashflow quadrants. But because it relies on Lady Luck and other people whom you can’t control (who knows what surprises might be in that Will), these two recipes tend to flop. Winning the Lotto or inheriting are other ways to financial freedom. What other recipes are there for financial freedom? Robert Kiyosaki’s four cashflow quadrants In essence, you’re already financially free when you earn enough and you leap out of bed excited about your day. But there are also other recipes for financial freedom, like finding the work you love, work you never want to stop doing. Generally, the FIRE movement follows the recipe of living frugally and saving aggressively so that it’s possible to retire earlier than normal, leaving enough time to enjoy this freedom. There are no rules for how you choose to spend your time. Financial freedom could involve doing paid work, volunteering, or no work at all. The most common definition of ‘financial freedom’ is being able to live the life you want on your own terms. Financial freedom and the four cashflow quadrants By Lizelle Steyn
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