My family and I will play Robert Kiyosaki's Ca$hflow game from time to time. We don't play it too often as it can take hours, even using the mobile app to keep our income statements and balance sheets. It used to take us almost a whole day when we did the calculations by hand. One of the criticisms of the game, even during development, was that it took too long for somebody to win. Buried in the game are many lessons about money, which I would like to share.
Lesson 1 - It does not matter where you start
At the beginning of the game, you pick a card with your profession. You could be an airline pilot, a physician, a school teacher, or some other profession. Some of these can be a bit more challenging to leave the rat race. However, the important thing is that everybody can get out of the rat race eventually.
Lesson 2 - Financial Statements
This probably should have been lesson number 1. The goal of the game, according to Robert Kiyosaki, was to teach people how to read an income statement and balance sheet. After all, Kiyosaki teaches that rich people, middle class people, and poor people spend money differently. You can see it in their financial statements. The game offers a very simple view of these financials. However, the principles are the same as the real deal.
Related to this is keeping a budget. This is kind of in the background for the game. You get a budget for your starting point when you pick your profession. So, those are the numbers you have to work with. Keeping a budget isn't something that you're consciously doing as it is implied in your financial statements. However, ever since I started budgeting, we have been able to keep our credit cards under control and our savings have climbed. Having awareness of where our money is going has been a tremendous benefit to our family.
Lesson 3 - Spotting a bargain
If you're in the market long enough, you start to develop a sense of what a good price is for a stock and what is not. Again, the game simplified stock trading significantly. However, my family now has a good idea what a good price is for buying stocks, and when to sell. This could apply to any market, really, including crypto. The same applies to real estate. We look at the deal cards and don't take too long pondering the numbers. If a property cash flows and we have enough for a down payment, we buy it. If the property doesn't cash flow, yet the price is good, we may pick it up. Sometimes we'll even borrow for a down payment.
Lesson 4 - Don't be afraid to invest
I consulted Mrs. TWM on this one. The game certainly allows you to keep rolling the dice and never invest. You can play it safe, pay down your car, your mortgage, and credit cards. But, you'll also never leave the rat race. She says that you have to take that chance.
Lesson 5 - It makes sense to cash out sometimes
If you have a property that is not cash flowing, and a buyer pops up with a good offer, cash out. Even if you have a property that is cash flowing, you may be better off cashing out. The profits can pay off a debt and leave you enough cash for down payments on new properties. There is no shame in taking a profit. Sometimes it is good strategy to sell to better position yourself for further investments.
Lesson 6 - The winning strategy is in the name
Our family has a group SMS going where we keep up with each other. The other day I asked:
Ca$hflow question: to get out of the rat race, do you first pay off debt, or focus on raising your income?
I was asking the question because I was pondering whether to keep paying down my credit cards or to shift my money into investments like stocks and crypto that would raise my income. Based on our experience playing the game, I was curious what their strategies were. One of my daughters will do a combination of paying off debt and buying assets. My son, on the other hand, doesn't even bother paying off debts. He focuses on increasing his income. The thing is that he is usually one of the first to leave the rat race. It's usually him or me. Obviously, the winning strategy is in the name of the game. Focus on cash flow. I got my answer.
With the prospect of a new stimulus payment and payroll tax cut coming up, I may take advantage of the lessons learned from this financial simulation. The best strategy would be to increase my income. This would put me in a better position to both increase my wealth and pay off debts down the line. In a previous post, I calculated that at a 16% APR, I only need a little over $6000 to generate an extra $1000 of annual income. The thing is, if I can manage to save $6000, then I can manage to save $10K or $20K. In other words, I have the power to give myself pay raises without having to rely on my employer to give me one. And, if I can give myself pay raises, then it becomes easier to save and give myself bigger pay raises.
I think buying the Ca$flow game has been a great investment for my family. It helps us speak the same language when it comes to money. The kids are able to understand the strategy when we make financial decisions. If we are off on our decision they can call us on it.