Wisdom of Rich Dad

Over the weekend, I got five of my friends together to play this game that’s like Monopoly.  The game Cashflow 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.

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.

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.

Read the rest of this entry »

I don’t know one person in my sphere of influence that couldn’t use a little extra monetary help. Everyone I know would like to have more money and not have to work so hard everyday to get it. Yet so few people get any income from sources other than their jobs. It doesn’t have to be this way but they do not realize it.

It is important for me to say that I do not think everyone has to have the same goals as me. Not everyone wants to be an entrepreneur or full time investor. Not everyone wants to or is willing to devote their lives to getting out of the rat race. Some people just want a little more than they’ve got now. There is help out there for all types.

So what can these people do? They say they’ve got no extra money to spend, no time to read or the don’t like reading, they just aren’t smart enough to get the principles of money or it’s all too complicated.

Books

Let’s start with the simple – books. Money should not be an issue when it comes to books. There are cheap books from used book stores and online and then there’s the free library. Reading them should not be an issue either. I know that some books are boring and painful to get through. But if a book is enjoyable and easy to read then it should take no effort. If you really don’t like reading then try an audio book and listen to it in your car on the way to work. I would recommend “Rich Dad, Poor Dad” and “The Cashflow Quadrant” books by Robert Kiyosaki as a good place to start. They are easy to read and enjoyable books. But there are others. It doesn’t matter, just read something and start changing your perspective on your own money situation.

Read the rest of this entry »

Over the weekend, we had some friends round, who are interested in getting out of the Rat Race and sorting out their finances. They have read my book, and we have gone through their budgets and spending habits and had a good old sort out already – but they are now interested in the next step.

So – we played Cashflow. This is a board game based around the Rich Dad, Poor Dad books by Robert Kiyosaki. In it, you are given a profession, with an income after expenses, and with that – you invest in order to get out of the rat race and fulfil your dream.

The four of us picked our profession cards: I ended up as an airline pilot with a Cashflow of $2,600. One of my friends picked the Janitor Card, with a Cashflow of just $650 a month. This is the lowest earning card in the pack. I predicted that the mild mannered Janitor would win the game: and he did.

In fact – no only did he win the game, the rest of us hadn’t even got out of the Rat Race and onto the Fast Track when he did it.

So – why is that predictable? Why do you not have to have a high income to be wealthy?

Because you do not need a high passive income to live on if your expenses are low! The Janitor may have a low income, but he has low expenses: a small mortgage, not many other debts, and when he has a child, the expenses for the child are relatively low (that game seems to assume that the high income earners clothe their children in Baby Gap and send then to private prep schools).

The janitor needed to get a passive income of just $950 to get out of the Rat Race. I needed a passive income of $6,900 to cover my expenses. So basically – if you can cut your expenses; you can retire on your investments quicker.

Not only does the game show that a High Income is not necessary in order to become wealthy – it also shows you how cutting your expenses can affect your outcome. Some expenses in the game – you cannot alter, but you can choose to pay down things like car loans, credit cards and retail debt. Doing that increases your monthly Cashflow and can have quite a positive impact on your game. It also means of course, that you do not need such a high passive income.

If you are thinking of going into investing in any way seriously – I really recommend playing this game. It’s obviously a highly simplified version of real life, but it does teach you a lot about how things work. You can buy and sell shares, property and businesses; you can get downsized; you can have (expensive) children; you get to waste money on Doodads (Rich Dad’s name for anything that wastes your money – like coffee). It is a fun way to learn the basics and to get your head round what you look for in an investment.

Cashflow is a pretty expensive game, so look around for people running games nights in your area. If you can’t find one – contact me and ill see if I can put your in touch with someone running a game.

The game that Robert and Kim Kiyosaki (of Rich Dad Poor Dad) developed – Cashflow 101 and 202 can now be played online for free.

This game is a good way to test your financial literacy and see if you have what it takes to get you out of the rat race.  It is a fun way to learn about investing smart without the risk of real money.

The game is designed to teach you how to think like the rich and learn what it takes to get out of the rat race and live a financially independent life.

There’s no software download required.  You can play right from your internet browser.  And you can play by yourself or with other players online.

All you need to do is register for free.

Robert Kiyosaki’s Cashflow 101 game is a great learning tool. The following hints have been compiled so that you can get the most value you possibly can from the game. These tips apply to real life as well, so keep your heads up.

1. Don’t cheat. The purpose of the game Cashflow 101 is for you to learn so if you cheat you learn to cheat. Why make money illegally when it is so easy to do it legally?

2. Read the rules. You should especially read the three-hour millionaire piece on the back of the Cashflow 101 rulebook. See also Robert Kiyosaki’s Hot Tips page that comes with the game. Know the legal side of things and listen to the advice of professionals.

3. Find learners to play it with. Find people who want to learn more about investing and money to play with. It is wholly different to play with people with the same money and financial interests, than family and friends who play with you because no one else would. Some action is better than none, but better yet is someone motivated to the action for his/her own personal reasons.

Read the rest of this entry »

1. Simplify and get out of the rat race faster
I noticed that whenever I played the cashflow 101 game and was able to choose a “simple” profession like a truck driver for example, I was able to get out of the rat race faster. 

As a truck driver, although my salary was low, my monthly expenses were also very low. Because I had  low monthly expenses, I already had a positive cashflow and all I needed to do was just get those passive income generating deals.

After each payday, I had more money to invest, and with just a few passive income generating deals, I had enough passive income that exceeded my monthly expenses, and I was able to get out of the rat race faster.

In real life, I am applying the same strategy by reducing my monthly expenses by leading a simple life. This was also described by Bo Sanchez in his book “Simplify and Live the Good Life ” and T. Harv Eker in his book “Secrets of the Millionaire Mind”.

My family and I lead simple lives, which explains my very low target monthlypassive income which is why I know I am going to get out of the rat race in real life very soon!

2. Start with small deals first, and the big deals will follow
In the beginning of the game, I always chose small deals even if they produced little cashflow. Later on, when the market presents good opportunities, I was able to sell or “flip” these small deals and then I used the profit to buy the bigger deals that produced greater cashflow, allowing me to get out of the rat race.

In real life, I am also following the same path. I focus on single family homes or properties which may produce little cashflow at  the very least, but can actually generate significant profits if “flipped” or sold through “rent-to-own”. I can then use the profit later when they are enough to get bigger deals that can produce bigger positive cashflow.

3. Over-leverage often leads to bankruptcy
During the game, we often encounter great deals that produce a lot of positive cashflow but require a big downpayment and it is tempting to borrow money from the bank just to be able to buy those great deals. However, there is such a thing as becoming over-leveraged which can produce negative cashflow situations because of the high monthly payments for those loans.

Even if one’spassive income is enough to cover the monthly payments for those loans, imagine if something happened and the monthly income of one’s investment properties were affected, suddenly the monthly payments for the loans cause a negative cashflow and can lead to bankruptcy. The same can also happen when one is downsized. This is the reason why one should avoid deals that lead to too much exposure or over-leverage.

Applying this is real life is a no brainer. I would not dare buy those multi-unit apartments unless they were in the same price range as the single family homes I focus on. As mentioned in lesson number 2 above, I can go for those bigger deals later when profits from my small deals are enough.

4. It is better to wait for a good opportunity than settle for those not so good deals
In the game, good opportunities come in the form of deals that have big ROI potential, and can be bought with little or no downpayment, while producing positive cashflow. If any of these elements are missing, I consider a deal as “not so good” and I pass them up and just wait for the good deals.

In real life, I do the same and patiently wait for good opportunities. If a not so good deal comes my way, I can either look for ways to make it into a good deal, or I just pass it up and wait for another more worthwhile deal to pursue.

5. Learn how to spot a good deal and grab it
One of the biggest challenges one faces in the game is how to spot those good deals so that you can grab them. Sometimes a good deal is right under your nose and it slips away because you didn’t realize soon enough that it was a good deal.

I believe spotting good deals is a skill and you can only learn this skill by continuously analyzing deals. Once you get the hang of it, you will start seeing those good deals more often. Normally those deals would have normally slipped away without you knowing it. If you see good deals often, it’s just logical that you will eventually grab one of those deals right?!

6. Learn how to protect your investments
I distinctly remember games where apartment buildings getting toppled by mud and all the cashflow generated by these properties are gone, unless I am covered by insurance.

Does Ondoy and Pepeng ring a bell? Who would have thought that a game like cashflow 101 actually teaches us to protect our investments from such disasters and calamities. Better get your investments insured with “Acts of God” coverage pronto!

7. Net worth is worth less, cashflow is king
Once you play cashflow 101, you will notice its emphasis on the importance of cashflow over one’s net worth. You will see that it really is more important to have positive cashflow frompassive income. What is the use of having a big net worth if you don’t have any positive cashflow?

In real life, we should apply this by focusing on building our positive cashflow with income generating assets. Even if we have to use leverage to buy these assets, it really is okay. We call this good debt. Don’t be afraid to have good debts that buy real assets that produce the cashflow we need to get out of the rat race for real!

Get out of the rat race in the game, and in real life!

So you got out of the rat race when you played cashflow 101. So what?! That’s useless if you don’t take action and apply the lessons you have learned from the game in real life. But playing a game is one thing, doing it in real life is an entirely different thing… or is it?

I can truly say that Robert Kiyosaki’s Cashflow 101 game is a “life changing” game because my life has really changed ever since I decided to apply in real life the lessons I have learned from it. Take note that I only listed the top 7 lessons I have learned and I can assure all of you that there are more lessons one can learn from this game.

People may find it hard to believe that one can learn so much from a game and can have such a huge impact in life. I guess you just have to play the game and experience it for yourselves.

How about you, have you played Rich Dad’s cashflow 101 game? What did you learn? Are you applying them in real life?