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Robert Kiyosaki Has 5 Levels of Investing. Which Level Are You? | Ep 17

James and Jessi talking about the 5 levels of investors
In this episode of the Furlo Capital Real Estate Podcast, we explore the five levels of investing outlined in Robert Kiyosaki’s book Cashflow Quadrant. We discuss how each level impacts wealth accumulation, the impact of actively managing investments, and highlight the substantial impact of financial education.

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Show Notes

  • 00:00 Kicking Off with a Light-hearted Intro
  • 01:50 Exploring Robert Kiyosaki's Five Levels of Investing
  • 04:20 Level 1 & 2: From Zero Financial Intelligence to Savers as Losers
  • 07:55 Level 3: The 'I'm Too Busy' Investor
  • 15:01 Level 4: The DIY Investor
  • 18:11 Level 5: The Capitalist Level
  • 20:16 Reflecting on Personal Financial Journeys

Key Lessons

  1. Get started today: Understand that investing is not just for the affluent; it can start with you, regardless of your current financial situation.
  2. Risk comes with potential reward: Embrace calculated investment risks to enable substantial wealth accumulation. This mindset shift is crucial for moving from passive saving to active investing​​.
  3. Never stop learning: The most successful investors continually educate themselves about financial markets, strategies, and opportunities. Regularly seek knowledge to enhance your financial intelligence.
  4. Diversify, but be informed: While it's wise to diversify your investments, ensure you have a solid understanding of where your money is going. Blindly trusting others with your investments without understanding the basics can be detrimental.
  5. Active involvement leads to better outcomes: Taking an active role in your investments, rather than just setting and forgetting, can lead to more substantial growth and learning from both successes and failures.
  6. Seek synergy in investments: Look for opportunities to add value, whether through direct involvement or strategic partnerships. This 'wedge' can significantly increase your investment's worth over time​​.
  7. Passivity has its place but comes with trade-offs: Understand that while passive investments like 401(k)s or mutual funds can offer moderate growth, they may not provide the learning or larger returns that come with more active involvement​​.
  8. Leverage experts and partnerships wisely: Collaborating with experts and leveraging partnerships can amplify your investment potential. However, choose partners who align with your investment philosophy and goals.
  9. Understand the impact of taxes on investments: Be aware of how different investments are taxed. This understanding can significantly affect the net return on your investments and influence your strategy.
  10. Investing is a commitment to your future self: Recognize that investing isn't just about making money; it's about securing your future. Make decisions that will benefit you in the long term, not just for immediate gain​​.

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Read the Transcript

James: I'm going to see if I have memorized this intro. Here we go. Welcome to the Furlo Capital Real Estate Podcast, where we dive into the intricacies of passive real estate investing. And in this show, we dive, we, what do we do? We talk about the goal. That's it. The goal of the show is to help people invest wisely in both people and properties so that together we can not only build wealth, but we could also improve housing.

I'm James. And this is my wife, Jessi.

Jessi: I'm here. I'm itchy, but I'm here. You're itchy. It was so nice. I had to garden a little bit, but I know every time. Just pull a few weeds and I'm sneezing and itchy.

James: Yes, yes, that's one of the joys of living in Oregon.

Jessi: Yeah, gotta wait for my allergy meds to kick in.

Most people have

James: to. Oh, that's good, that's alright.

Jessi: It's alright, it was fun. Worth it.

James: you know it. You know, that's like me, if we may enter into a little bit of a TMI for a moment here. Oh boy. I can only have so much cheese and, and Before your

Jessi: body disagrees.

James: Yeah. Alright.

Jessi: And I don't

James: care,

Jessi: I,

James: I just own it and go totally worth it.

Like for example, on Easter we had personalized pizzas and I just like, I extra, extra cheese on mine. And yeah I did like your comment the other day. You're like, yeah, you may not care, but the rest of us, yeah,

but you know what? Again, like, as long as you're being intentional, I'm okay with sometimes making poor choices.

Jessi: Well, you know, I take allergy meds. So I can deal with the itchy, so, you know, maybe there's some tummy meds. I could do that, but I

James: won't. Oh my gosh, yeah. Awesome. How did we get there? Dude, this is like real talk.

Speaking of

Jessi: investing in your health.

James: Yeah, no. What I actually want to talk about today is It's five levels of investing and this comes directly from Robert Kiyosaki's book. It's one of my favorite. It's a cashflow quadrant and in it, if you may draw a picture in your mind, there's four quadrants in the upper left hand quadrant, which is now your right in the upper left hand quadrant, you have E which stands for employees, people who have a job.

Lower left hand quadrant. Like I'm doing this opposite so that it all makes sense on the camera. It's S which stands for self employing people who he likes to say, own a job, but essentially it's a small business. You're working for yourself. And then upper left hand quadrant, right hand quadrant, you have B, which stands for business owner and the.

Definition or the difference between like a business owner and someone who's self employed is that with a business, it can run on its own. It doesn't require you to be present to work. As a matter of fact, one of his tests is if you left for three months, is it actually running just as well, if not better than when you were originally there.

And then the lower right hand quadrant are I investors. And this is where it's money working for money essentially. Cool. And so he dives into that. I quadrant a whole bunch more. It essentially calls out five, yeah, five different levels of investing, even though I think he starts with like level zero and goes, goes to four.

So I just want to talk about them because I think it's a really interesting concept. I think it's it's just good to kind of understand where you are and maybe you want to be there. Maybe you don't want to be there. Sure. And it just kind of, yeah, understand it. I think that's just, I think that's good.

So the first one. See if you can, let's see if you can guess what some of these are. I know it's, I did you, did you ever read the book or have I just told you about it? Yeah, no, I've read the book. I thought

Jessi: it was super interesting.

James: Okay. Alright. You read Rich Dad, poor Dad. I, I read Rich Dad, port Ed

Jessi: and I read, which I

James: think I've got No, I don't have it here.

You don't? Because I gave it away for someone to read.

Jessi: Oh yeah. I read Rich Dad, poor Dad. I've read some stuff that his wife has written.

James: Oh, yeah. If you don't have this on the shelf, because these are all my awesome books. But that's okay. Yeah,

Jessi: no, I read Cashflow Quadrant. Alright,

James: well I'm going to test how good your memory is from reading this, what, like 15 years ago?

Yeah, let's go. Alright, so the first one is called, okay Kisaki, he can sometimes be a little bit brutal in his language. I just want to put that caveat out there. I don't necessarily like, I like his concepts, I don't necessarily agree with the way that he presents them. He can be a little mean about it, but anyways, the first one is called the zero financial intelligence level.

Jessi: I mean,

James: all right, so if you're not doing anything,

Jessi: that means you're not really doing anything with your money.

James: Yeah. Yeah. A hundred percent. Yeah. He just. He says there's no significant investment and it's like virtually non existent. And he says, usually the people in that stage, they're focused on survival.

Jessi: All right. That's kind of makes sense because it's like either a, you don't know what to do or Be, you don't have anything to do investing with,

James: you know, so it's like,

Jessi: I don't even have enough to pay my bills. Like how would, or why would I invest, invest in something?

James: And my guess is anyone listening to this is not in this category.

It really is like legitimately paycheck to paycheck type of stuff. No savings going on your, maybe not food stamps level, but like maybe, maybe that kind of thing. All right. So level number two is the savers are losers level. Savers are losers. Yeah, so what do you think? I'm guessing you just like put it in a hole or a bank account, maybe Dig a dig a hole put it in a jar.

Yeah. Yeah, nice pad. Not not the Not put it in a hole, but yeah, they just save it oftentimes these are people who They say because they are risk avoidant. Mm hmm. So when you think about the Jesus's parable about the talents. That's exactly

Jessi: what I was thinking about. That's

James: He

Jessi: like, yeah, the guy who buries it, yeah, that's, that's like, well, I don't want to lose it.

James: Yeah. I'm not

Jessi: confident I could make it grow. So,

James: yeah. And I'm not going to bridge any spiritual like connections to people who save but yeah, it's kind of, it's that, it's that visual that you should have. And and essentially one of the big problems that you have with that is inflation because typically savings accounts, whatever they are, are just not going to give you a lot They're going to be less than inflation as a general rule.

And so if you're saving your money, which is like in a money market account potentially even just put it in a bond market though recently, that's less true. It's yeah. And did I say money market accounts already? Savings account, which I believe you should have some money. Yeah, that's what I was gonna say is like, you should save

Jessi: something, right?

Yeah. Because there's, there's something to be said about putting something in a, putting a certain amount of money in a savings account that's, that's liquid, you know, in the sense of like, if I need this because I had an emergency or had to go to the hospital or whatever, I have the buffer in my life that I can pull that out.

It may become less liquid, or less available, it might make more, but you can't get it right away necessarily.

James: And that's us. We've got, I'm trying to think what the number is I'm trying to do the quick math. I guess we have five months of expenses saved. Yeah. It might only be four, but but that's, and that's just, it's a savings account.

Which like

Jessi: three to six I feel like is a good

James: buffer. Yeah. And then I have. Probably the same absolute number in the business account saved up. Yeah, yeah. And yeah, and it's just, it's just there, just savings. And it's cause it's good to have something that's liquid. So yeah, so it's not to say, but that's like, that's their primary.

Jessi: Right, if that were, if that were your, where you were putting all of your cash.

James: Yeah, that could be a problem. Wouldn't

Jessi: necessarily be growing. And so

James: he calls them losers, not because, he's not attacking their character. That is

Jessi: pretty

James: brutal. He's not attacking the character. He's saying like you're losing to inflation, like you're not, yes, your absolute number might be going up, but your, your relative, your real number Yeah, that's, it comes off as harsh, but it's got some meaning behind it.

All right. Level number three, the I'm too busy level. What do you think that one is? This one's a little trickier. And this is honestly where the majority of people listening fall. Yeah. I'm guessing you're careful with your words. I'm

Jessi: guessing on some level you're giving it to someone else to either invest for you or, yeah, yeah.

Yeah. Which I would think is like the stock market or

James: yeah, no Exactly. Yeah they recognize the importance of investing but they got a lot of us of other stuff going on Yeah, maybe baseball practice or exactly whatever

Jessi: or work

James: serving at the church. They might

Jessi: be in that equadrant.

James: Yeah, the old equadrant Yeah, totally.

And so they hand off their investment decisions to financial advisors or to mutual funds. Yeah. Yeah, pretty classic and they do experience some moderate growth. So I copied off some quotes here that he had about level three, which I just thought were interesting. So for example, he says the problem with a level three investor, that's the, I'm too busy, is that they learn nothing if they lose their money because they weren't doing the investments.

They've handed it off to someone else. So they have no experience. Except for maybe a bad one. And all they can do is blame their advisor or the market or the government or whatever. And it's just hard to learn from your mistakes if you are not involved in your investing at some level. I also thought it was interesting.

What, what I also thought was interesting is he talks about some problems with 401ks, which my mom's going to love this part since that was what she spent her entire career helping people set up. But I thought this was super interesting. And again, like I've probably read the book a couple of times and I was like, oh yeah, that's right.

He says longterm capital gains are taxed at a lower rate of around 15 percent federal. He goes, but 401k gains, do you know what they're taxed at? Nope. Your ordinary income tax rate around 35%. Yikes. So he says it's the highest of all types of income. So if you want to take money out of your, and if you want to take money out of your 401k early, you have to pay an additional 10 percent penalty tax.

Jessi: So, no matter what, you pay 35 percent even after you hit retirement and you do the full adjustment. Yeah, I didn't think that was, I didn't think

that was the case. I mean, you have to wait a lot longer to access it, but once you wait. Yeah. It seemed like you could. Didn't have to pay as much.

James: Yeah, I, so what he talked about is, he says that financial planners will often say, when you retire, you'll be taxed at a lower rate.

And that's because they assume that your income will go down in retirement to a lower tax bracket.

Jessi: Ooh.

James: Which is like, so your financial advisor's telling you you're going to be poor today, then. Or poor when you retire than you are today. And, and I remember my mom explicitly talking about that kind of stuff because she's like, well, you have certain expenses now that you may not have in the future.

Like say for example, raising kids or there's certain things that you pay for because you have a job, like maybe like new clothes, driving. Yeah. Like those would generally go down. And so, but for him, he's like, why in the world would you plan for lower income when you retire with inflation? The goal is to like.

Make more. Yeah. So that was just kind of his yeah, I thought that was, yeah, no, not making me question whether or not you get taxed at the end. I don't really care because I don't have a 401k, so it's not important to me. You know, I think that, I feel like you would be, cause I remember when I left HP, it rolled over to an IRA and it wasn't, it wasn't a Roth IRA, it was just a regular IRA.

So I would imagine that means that you do pay taxes afterwards. I don't know. And so yeah, so last thing here that he talks about specifically to like the 401k things or just the I'm too busy level in general is he says the reality is that real investors do not park their money. They move their money.

It's a strategy known as the velocity, velocity of money. A true investor's money is always moving, acquiring new assets, and then moving on to acquire even more assets. Only amateurs park their money. And is there

Jessi: like a. Hybrid of sorts where you, you could invest in those sorts of investments, but be more involved.

So, you know, you're moving your money and, you know, watching the stocks and.

James: Yeah, I think so. And that's one of the things, and we'll kind of get into the next level here, that that passively investing in real estate kind of gets you there, right? You don't, it's, it's going to be in between this next level, which is like the, I'm a professional DIY level and then, and this I'm too busy level because you have to be involved.

You have to understand the investments you are going to learn from failures or successes. So there's some additional education that's required, but you're also do not to do everything yourself. You can lean on other people. So I think that's why one of the reasons why I like people investing in other deals, I think it's that good hybrid.

Cause it, If you are too busy, that's awesome, but you can also get some bigger returns than just handing it off and doing nothing. And I think what he's really trying to say is for the, I'm too busy. It's, it is like the 401k. I'm not even going to worry about it. I'm just handing it off to somebody else.

Jessi: If someone wanted to invest in your properties like that, would you be okay with that? What do you mean? Well, I mean, you said there's a level of learning, but I kind of feel like. If they, if they just trust you and they're like, yeah, I don't care. I don't want to learn. I just, I know that you're going to get me a return.

Here's the money. Invest it. Good to go.

James: Yeah. I mean, I'd still probably want to share information with them anyways. What if

Jessi: they don't care?

James: I don't know. Cause

Jessi: they're too busy.

James: Yeah. I genuinely people who are too busy to care. Like they're not even, they're not doing this. They don't, they're not taking the time to learn about other investments.

Interesting. Cause they're too busy.

Jessi: I don't know. I kind of feel like you could. Have someone invest in one of your properties and not really know or understand how the deal works.

James: The thing to talk about for like these last three levels is that there's pluses and minuses to each of them. Sure. Like if you were genuinely, you have other stuff and you love your job, like Yeah, go in on that, like, be too busy to do the investment side.

Your job is where you're investing.

Jessi: And

James: that's totally okay. I, it's not, there's just, there's trade offs. Chances are you're not going to make as big of a return as if you focused all your energy and effort into the investment, but maybe that doesn't matter because you're going to get the huge return in your job.

And that's okay. Like, so I could totally see that. Does that make sense?

Jessi: Kind of.

James: Kind of. All right. Level four. It's called I just feel

Jessi: like you could be a lot more passive. Yeah. Then you're making it sound investing in syndications or real estate deals.

James: Yeah, you could, I don't necessarily recommend that.

I guess like you should, you should know what you're putting your money into. Cause it's, you should know cause there, there is genuinely risk and there's unknowns and it's, and it's not like you're going into the total market index and like, and you're going to get the average of everything. It's not that it is very specific.

And my experience talking with people is they all have opinions. They all have things that they like or don't like. And yeah, so yeah, yeah, yeah. Level four. I'm the, I'm a professional level, otherwise known as the DIY level. What do you think that is?

Jessi: Someone who manages their own investments.

James: Yeah, sure.

Yeah, yeah. The way he says it is they take a more active role in their investments. Yeah, which is exactly what you just said. They're willing to take calculated risks. I think we definitely have fallen into that category where they go like, yeah, you know, there's some, there's some risk here, but it's okay.

Like we bounded it. And, and he also says that their financial intelligence allows them to make decisions leading to substantial wealth accumulation. Yeah. And he also adds, like, usually they use their own money. He says,

Jessi: so it doesn't really matter what type of investment you're making, whether it's real estate or stocks or.

James: Yeah, correct.

Jessi: Somebody else's business.

James: Yep. A hundred percent. But yeah,

Jessi: you're more actively managing and deciding where you're going to put it.

James: Correct. Yes. A hundred percent. Yeah. Yeah, that's the idea is you're taking that active role and there's all sorts. Yeah. Real estate's definitely one of them.

You could be a DIY or in directly investing in like stocks or commodities. The

Jessi: assumption that as you as you become more active, I is, I'm guessing the assumption that he's making in this. As you're working up the levels, you're also learning how to do it. Cause it's like, yeah, you could take a more active role and have a no idea what you're doing and just be like, Oh yeah, a frozen yogurt business.

That's always great. Or like, yeah, a movie theater. There's one for sale down the street. I'm going to do that. So

James: you'll be like this. I actually got this quote from it. He says, obviously those who also invest in their ongoing financial education, taking classes regularly and hiring a coach to enhance their performance will outpace those who just do it on their own.

Yeah. So, yes, he agrees with you.

Jessi: And I think that's part of Not just being more active, it's Yeah,

James: I think that

Jessi: Evaluating the investments. If you are more

James: active, it's understanding where you're at. And I do think people get themselves into trouble. That's why we picked up our five unit place. The guys jumped all in on that.

And he was like, he was so overwhelmed, he couldn't stand it. And so he sold it to me for what he bought it for, because he was like, I just can't anymore. And so that happens, for sure. And Yeah. But yeah, I think that's part of it, just being smart and having education and the coaches or

Jessi: Which is probably why you would like people to understand what they're investing in.

James: Yeah, I think so. And that's kind of that DIY part of it. Like when we do an investment, I put out that investment sheet and here's the offering, here's what it is. And like, you should read it. Yeah. You just try to understand it.

Jessi: Sure.

James: Now, you don't have to spend hours doing it. You don't have to do all the education, but you should, you Read and understand.

And if you have questions you should ask. And that's, that's a worthy time investment. And that's why I kind of said it feels like a hybrid between the two.

Jessi: Yeah.

James: Because it's not just set it, forget it. As a matter of fact, someone can't just give me their money and say, make magic happen, call me in 20 years.

Cause then that turns me into something different that I'm not supposed to be. They have to, they have to be the ones directly investing.

Jessi: Okay.

James: Yeah. Yeah. Yep. Yep. Yep. And it says here, the ease of raising capital is one of the biggest differences between being successful in the S quadrant versus being successful in the B quadrant, which is another way of saying.

The ease of raising capital is the biggest difference between the, I'm a professional level and the capitalist level shocker. He makes an awesome name for

Jessi: the highest, the highest

James: level, if you will. And again, there's pluses and minuses to everything. This level does not work for everybody. It shouldn't work for everybody.

And the trick is finding out, okay, where am I comfortable with? Where do I want to land? And how do I optimize and make sure I'm being intentional about that? So what do you think the capitalist level is, which is like the one that's not like a self describing name?

Jessi: Well, the next level up, I would think is someone who is taking some of those DIYer type of people's money and helping them to invest that in bigger deals or pooling pooling it together You know to be like hey, yeah, you kind of understand this and you kind of understand it So do you like let's get together and do this bigger deal because you can leverage The amount that you have a little bit more.

James: Yeah. Okay, cool Yeah, one of the things he says is they not only seek to grow their own wealth and assets But they contribute to the economy by creating jobs and opportunities for others Which I think is Similar to what you were saying. He also does say like they have substantial wealth and use it to create more wealth to kind of keep that engine going.

But yeah, the thing that I, I really view it as the, they contribute to the economy, they create jobs and they create opportunities for others. And that's how I look at what we're doing because we're bringing in other investors and our deals, creating opportunities for them and doing the repairs and fixes.

We're creating jobs. Temporary ones, but you know, jobs, nonetheless, like if the weather holds up, we're going to get a roof replete replaced on our newest acquisition, which would be cool. That's great. A job. And that's awesome. And so, yeah, those are the, those are the five different levels. Cool. And I think it's just good to know where, you know, What they are, what could be, what makes sense for you?

What doesn't make sense for you? Things like that. I'm pretty sure had we never met, I would be a saver, loser, . Oh man. A loser saver. A loser saver man. Why a, why do you think that? '

Jessi: cause that's definitely how I was as a child.

James: Mm. Yeah. Actually

Jessi: I was a spender saver.

James: Okay. I don't know. I don't know how those two things work.

Jessi: My first job was a newspaper delivery person. What do you call it? A newspaper carrier. Those don't exist anymore, I don't think.

James: I don't know.

Jessi: Maybe. Anyways, I delivered newspapers. That's

James: hard to say. I

Jessi: got money from delivering and I had to save some.

James: Huh.

Jessi: Put some to church and then I got some to spend.

And I would always like, Take a large portion of my spending and just go buy candy and come with it first thing and then be like well If I have any left over I'll put I'll put extra in savings But then yeah, I would just scroll it all away and just like yeah, it's just going into savings or something.

Gotcha. Gotcha Okay. All right. I was always a saver and then big spender. I was always saving money for big expense. You still do that. Exactly. We've talked about that where there might be a month where like you might do 10 times as many transactions as I do, but I'll have one that outspends all of yours combined, which is how I roll.

James: Yeah. Cool. So there you go. Those are the five levels. Hopefully you found that interesting and kind of helps you think about what level you're at. And okay, I can do this without looking. And so if you enjoyed this episode, we would absolutely love it if you would leave us a review and a rating wherever it is that you listen to podcasts and have a fantastic day.

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Furlo Capital Podcast

Furlo Capital
Real Estate Podcast

A conversational podcast between James and Jessi Furlo that dives into the intricacies of passive real estate investing. Our mission is to equip people to invest wisely in both property and residents so that, together, we can build wealth and improve housing.

Listen Anywhere

Let's build your wealth and improve housing, together

Passive Income

Tenants pay monthly rent, which covers expenses and generates a profit for investors. Plus, multifamilies appreciate and usually sell for a significant profit.

Consistent Above-Average Returns

Real estate is less volatile and historically outperformed the S&P 500 by routinely generating average annual returns of at least 10% after fees, inflation, and taxes.

Revitalize Local Communities

We give people a great, safe place to call home. This doesn’t hit the spreadsheet, but every property is managed and maintained with the residents as a top priority.

Extraordinary Tax Benefits

Your income is taxed much lower because of depreciation and because it’s taxed at a lower capital gains rate.

Below-Average Risk

More units mean less vacancy sensitivity. Plus, costs are distributed across a larger number of units, which also allows us to hire a professional property manager.


Unlike stocks, lenders like to finance multifamilies and the loans are tied to the property, not the person. This accelerates wealth building.