Over the weekend, I got five of my friends together to play this game that’s like Monopoly. The game Cashflow 101 was developed by Robert Kiyosaki, author of Rich Dad Poor Dad. It teaches people financial intelligence. How can anyone learn financial IQ from a board game right? I was skeptical in the beginning also. But I was a fan of his book so I wanted to see what it was about. It’s now my fourth time playing and I definitely picked up a thing or two.
What You Do In The Game
Every player starts out selecting a profession at random. These were jobs such as engineer, manager, airline pilot (what I got last game), janitor, doctor, and so on. Entrepreneur was not one of the options. Then, everyone writes down the monthly salary, expenses, and debts for that profession. The jobs with the higher paying salary typically had higher expenses. Everyone gets a rat as the game piece and go around a circle. The point of the game in the beginning is to generate more passive income than expenses. Once you done that, you’re considered to be “out of the rat race”. Then, the real fun begins. But I have never gotten to that point. I was close.
Around the circular game board are different landing spots- Opportunities, Market, Doodads, Child, Paycheck, Downsized and Charity. Opportunities are what can make you money. Market simulates events that happen which affect the opportunities. Doodads are impulse spending. Child is when you have a baby and you start tacking on child expenses. Every player is limited to a maximum of 3 children. So does that mean you can’t achieve financial freedom if you had more than that? Just a thought. Paycheck is just like Go in monopoly. Players collect their monthly cashflow (once all expenses are paid out). Downsized is the worst of all. It simulates when someone loses a job. Players have to pay 1 month income and lose their next 2 turns. And Charity is where you can roll more than 1 die for the next 3 turns if you decide to donate money.
That’s it. Sounds simple yet so complicated. Most of the time is spent evaluating opportunities to see if they are a good investment. Some are real estate properties where it tells you the downpayment, mortgage, ROI, and cashflow. Others are stocks you can buy at certain prices. Of all the landing spots, the most interesting and fewest is the Market. This can be something like… “buyer looking for 3 bedroom, 2 bath house, anyone may sell at x price”. This is where players with real estate investments can turn them into lump sums. Opportunity spots come in either small or big. Small ones are what the average person can invest in- stocks and small time real estate. The big opportunities are really really big that require a lot of cash investment. When someone does get out of the rat race, they’re moved to the “fast track”. They still go around a board, but on a different track and their payday is 100x more. The Rules say that once a person has proven their financial intelligence, they are rewarded with a higher payday. The game ends when someone on the fast track is able to buy their dream. The dream is a spot on the fast-trac board. They can be things like a trip to see the 7 wonders, starting up a charity, building a school, etc. Kiyosaki’s philosophy was that money was only a tool used to obtain someone’s dream, not the dream in itself.
What I learned
Sometimes, you NEVER land on opportunities
At my first time playing, I did not land on an opportunity square for the last hour and half of playing. I was getting shorted even though the odds of my landing on an opportunity is extremely high. It’s every other spot! But in life, that happens. But you can either decide that’s your fate or you can just keep fighting. By the fourth time playing, I realized you could BUY other people’s opportunities. This meant that whenever someone landed on one, they could either use it themselves or sell it to someone else. Sometimes, that person can’t afford it because they don’t have the necessary capital. The analogy in real life is like having a really good financial adviser who can suggest opportunities for you. All you have to do is shell out the money.
Ability to spot good deals increased
After looking at so many numbers, I started to develop a good sense of when an opportunity was REALLY an opportunity. Even when a real estate property had positive cashflow, it might not be a good deal because of the amount of downpayment required or the potential return in investment.
Confidence In Taking Risk Increased
This is kind of funny because it’s a game but people still won’t bet it all when it comes to a good deal. Ok, I get it. If you lose your money, then you will have a set back in your monthly cashflow, blah blah blah. But it’s also funny how quickly people start betting it all by the their 2nd and 3rd time playing. Hey, I was exactly like that. Yes I also know this is just a game, not real life. There’s so much more things that can happen. But I feel Kiyosaki is really teaching us to put confidence in ourselves when we spot a good deal. Because by then, we would have done our homework. And this is what my friend said. You think it’s risky but you don’t realize that paycheck is just around the corner.
More People Knowing The Market = More opportunities for you
Because the Market card came up so rarely, it helped when there were more players in the game. And the Market card was the only one that can shake things up both good and bad. So for us in real life, we need to surround ourselves with people that know the market very well. Only then we will be able to make the right decision to make a gain or to avert a lost.
Money In Bank Does Nothing
Yes, money in the bank gets you 2% interest after inflation. Likewise, just getting a paycheck every couple of turns and not taking risks in buying investments will get you nowhere in the game. It will do nothing for you to get out of the rat race. Live with the fact that some investments will make money, some will lose. But the more you do it, the better you will become in finding the ones that MAKE you money.
People With Smaller Expenses Get Out Of Rat Race Faster
At my last game, I was generating over $2500 in passive income. My expenses however were around four grand. And after doing the math on whether I could just pay down some of the expenses, I realize it was better to generate more passive income. It was taking forever. My friend however, had something like $1500 in passive income but her expenses was around a grand. Because of that, she got out of the rat race. I had 4 times as many real estate holdings but it was my expenses that was holding me down. So note to self: keep expenses low (unless I want to keep going around the board as a rat).
Buying Someone’s Opportunity Saves Time
Because I had to keep generating passive income, I snatched up every opportunity that had positive cashflow. Not only that, I brought other people’s opportunities when they couldn’t afford it. Doing this saved me a roll of the die. So instead of being able to buy just 1 opportunity on one turn, I was able to buy 2-5. And that saved me time in the game. And that saves time in real life.
The Cashflow Formula
Finally, I figured out the formula to get out of the rat race. The player first HAD to buy up small opportunities. There was just not enough capital to invest in the big ones. But these small opportunities only generated a small amount of cashflow. So second, they need to be sold for large lump sums in order to buy the bigger opportunities. These bigger opportunities are the ones that was generating significantly more cashflow, 4-5 times as much. And that’s the way Kiyosaki did it in real life. He started buying small real estate properties, 2-3 bedroom houses. He then parlayed that into duplex, 4-plexes, and apartment buildings. He did it this way because the knowledge needed to make a small deal is exactly the same as a big deal. He looked at the numbers. After having enough confidence in making small deals, that transfers over when making large deals.
Our group meets up again in a month. I plan to own it next time around. If you played Cashflow 101 before, what were some lessons you learned?