E
Employee
You sell your hours to one employer and receive a wage for them. The contract is security; the price is control, and the income stops when you do.
- You trade
- Time
- You own
- A job
- Ceiling
- The salary
Where does your income actually come from?
Not your job title, not your salary: the side of the quadrant that pays you. Four letters, four different relationships with time, and one test you can finish in a minute.
Which quadrant are you standing in today?
Six questions, no sign-up, no email. Your answers are counted anonymously so readers can see which quadrant most people start in; nothing else about you is kept.
The four letters
The quadrant is not a ladder of worth. It is a description of where the money comes from, and of what you are trading for it. Plenty of people hold two or three sides at once.
S
Self-employed
You own the job, and usually you are the job. Income can be excellent and it is welded to your hands: no work, no money, no holiday.
- You trade
- Skill
- You own
- A craft
- Ceiling
- Your hours
B
Business owner
You own a system, and other people run it. Your income no longer needs your body in the room, which is the whole difference from S.
- You trade
- Leadership
- You own
- A system
- Ceiling
- The team
I
Investor
Money works and you collect. This is the column the book is trying to move you towards, because it is the only one that keeps paying while you sleep.
- You trade
- Capital
- You own
- Assets
- Ceiling
- Your judgement
The left side of the quadrant earns income. The right side owns the source of income. Moving right is not a promotion; it is a different skill, learnt on purpose.
The bucket and the pipeline
Two friends were offered work carrying water from a river to a village, and paid by the bucket. Ed took the money and bought a bigger bucket. He earned more every week, and every week he had to be there.
Bill spent his evenings digging a pipeline. For months he earned less than Ed, and the villagers laughed at him. Then the pipe opened: water arrived without anyone carrying it, and Bill was paid whether he worked that day or not.
The book uses the story for the move from E and S to B and I. The bucket is a wage. The pipeline is an asset column. Digging is slow, unpaid at first, and looks foolish from the outside.
Ask of any hour of work: did I get paid, or did I get closer to the pipe?
Five levels of investor, and where most people actually are
From the book that followed: readers do not move straight from saving to owning deals. They climb, and the climb starts where they are standing.
Level 1: nothing to invest
Everything earned is spent, so there is no column at all. The only move is to make the first one: one small asset, then another.
Level 2: the borrower
Borrowing to buy things that feel like assets and pay nothing: the car on finance, the larger house, the holiday on the card. The payments become the asset column of somebody else.
Level 3: the saver
Money set aside steadily, in something safe. Patient, and usually slower than the cost of living around it. Safety is a real feature; it is just not the same as growth.
Level 4: the smart investor
Knows how to read a deal, understands the vocabulary, takes calculated risks and can explain the downside before the upside. This is where financial literacy starts paying.
Level 5: the capital investor
Creates the deal rather than joining it: raises the money, structures it, and takes the largest share of the outcome. Reached by building a record at level four.
One step at a time. The book's advice is not to leap to the top level, but to know the level you are on, and take the next one.
Three kinds of income, and only one of them is free of you
The closing chapter sorts all money into three buckets. The order matters more than the amounts.
Earned income
Wages, fees, salary. The most taxed, the most effortful, and the only kind that stops the moment you do. Almost everyone starts here.
Portfolio income
Capital gains, interest, dividends: money made by money you already own. It needs no hours, and it needs patience and literacy.
Passive income
Rent, a business that runs without you, royalties. The book's favourite, because it arrives whether you were in the office or not.