Wisdom of Rich Dad

I am still reading Kim Kiyosaki’s Rich Woman and in the true Kiyosaki style she offers some incredible common sense objection handling to the common issues thrown up when it comes to why so few women have succeeded in obtaining financial independence either within a relationship or on their own.

1. I don’t have the time.

2. I am not smart enough.

3. I haven’t got the money.

Now as a mother myself, I can fully relate to the time factor involved with bringing up children, however I take on board Kim Kiyosaki’s viewpoint that if my life depended upon finding the time, I’d have found it somehow.

I concur with the viewpoint that men are not born smarter than women when it comes to finances, in fact biologically women are better equipped for investing than men. ( Kim goes on to show this .)

I began studying investing over 12 years ago, when on regular trips to the USA & Canada I was amazed at the extent of personal finance books, business and self help books available everywhere compared to the extremely limited selection in the UK. ( So I bought several on every trip & changed my course.)

I have been guilty of waiting to hit the big deal, then start investing, and with money to invest too much too soon without first practising, I have set myself a small challenge this week of finding an asset ( something that pays me a positive cashflow ) this week for around £100. I am a massive believer in learn by doing, I have come through all the money management levels required in order to be free to invest in passive income so I will research what is available and do my due diligence.

If you ever come across the chance to play the Cashflow 101 game by Robert Kiyosaki then jump at the chance, you play the part of a Rat, trying to get out of the Rat Race. You collect your Monthly Cashflow payment and decide which small deals provide you with a positive Cashflow, when to convert those samll deals to capital gains to clear liabilities and when to purchase a big deal.

The object of the game ( and is highlighted throughout Kim Kiyosaki’s book ) is Financial Freedom is achieved when your Passive Income pays for your Total Expenses.

Source: http://witoo.wordpress.com/2008/04/05/financial-freedom-is-achieved-through-passive-income/

If you think playing the Cashflow game is just like playing another silly round of Monoploy, then you need to seriously think again.  Cashflow boardgame is not just like a game, it is a educational tool for you to sharpen your finanical acumen and you get to learn different lessons each time you play the game.  

The author of Rat Race Escapes (ratraceescapes.com) shares his learnings from his recently cashflow game:

Sue, Bob, Terry and I played Cashflow 101.

I played the teacher. Because the monthly cash flow is lower than occupations I normally play, it was much longer before I started taking big deals. Things moved pretty slowly for me for quite some time, buying 400 shares of MYT4U at a reasonable price of $10, even though I immediately landed on charity and in my next 3 roles I had for paychecks. Shortly thereafter, I partnered with Bob and Sue on a limited partnership with a doctor’s office and then immediately I was downsized.

Things were looking great when I bought a “great deal” for $35,000, a government owned home with a tenant, for $2000 down and $220 per month cash flow. Just before my next turn, a buyer appeared and I sold the house for $135,000, putting $102,000 in my pocket. I paid my bank loan plus my credit card and retail debt and still had $90,000 in cash!

On my next turn I drew a Big Deal and it was the 60 unit apartment building. Perhaps I should have passed on it. It was initially a net neutral deal for my monthly cash flow: with a down payment of $200,000, I borrowed $110,000 to make up the difference in the cash I had on hand but the $11,000 in monthly cash flow covered the loan. I still had a decent monthly cash flow of about $1600. Had I passed and taken a different big deal on a subsequent turn, I’d have retained cash, increased my cash flow and I may or may not have exited the Rat Race sooner.

After a couple more turns, and starting a software company in my basement, received a paycheck and borrowing more money from the bank, I got laid off again. My cash flow shrank to less than $100 and on a subsequent turn to about -$300. I survived and then sold the limited partnership, double the money for myself and partners and then sold the MYT4U stock for $40 after a split. After paying debt down, I was back to good cash flow and still had cash. In the mean time, Bob exited the Rat Race getting $600,000 as his initial Cash Flow Day.

Bingo, now there was a private lender offering better rates than the bank. I had a Big Deal Opportunity for a 8-Plex but didn’t have the cash for the down payment and there were no partners in sight. But with the private money rates from Bob, borrowing the amount I didn’t have the cash flow made the property cash flow. Bingo!

Now I refinanced my remaining bank debt with Bob increasing my loan from him to $127,000 but my monthly payment was only $6350! Adding the cash flow from the 8-Plex and refinancing the remaining $104,000 bank loan dropped that payment from $10,400 to $5200 and Bob had $6350 cash flow from me in the Fast Track. Great investment for him and such better financing for me that I was immediately out of the Rat Race with passive income of $12,700!

Ultimately I won because of a little luck. I loaned money to Sue in the Rat Race so she could buy a property that now made sense where it wouldn’t have before because the cost of the money would have been too high and I bought several businesses. But I won because the Russian Oil Deal paid off with $75,000 in cash flow.

So I learned two good lessons:

(1) I jumped on a huge deal that immediately netted me no extra income, took all of my cash and gave me a lot of debt. Had I waited for a less expensive big deal, I would have had more flexibility and cash. I don’t know if I would have exited the Rat Race sooner but I do know it wouldn’t have felt like a struggle. Ultimately, despite some financial pain, it still paid off handsomely, primarily when I got to the Fast Track with monthly cash flow of $1.3 Million. Maybe sometimes being circumspect pays off. Or not. It’s a matter of risk tolerance and while I still did the deal, I had less stomach for it than usual.

(2) Debt strategy and exit is a major component of success. Sometimes, paying a seemingly high rate for debt is okay (think hard money, borrowing downpayments, or even using credit cards on a daily basis while running a balance), IF you have exit strategies for this debt. For example, paying down to reduce what you pay monthly is a valid strategy and the only one that “stock” rules allow for. But life isn’t like that. Refinancing and restructuring of debt are real world examples of debt strategies that allow you to get cash or reduce the cost of debt.

Strategies change over time and debt should be no different. Say you bought a property with hard money for the purchase and rehab. You bought well and now the property is occupied and you have an appraisal that shows your debt is 65% of it value. Maybe you paid 5 points are paying 15% on the hard money. You’d want to refinance, right, especially if you could at Fanny Mae rates. You’d cut you debt payments in 1/2!

My strategy changed for debt when Bob got out of the Rat Race since I now could get a money backer that would help me along beautifully while giving him returns he was happy with. I call that WIN-WIN! He got a 60% yield and there’s only one business with that kind of yield in the Fast Track. Does he have risk? Sure, if I were to go bankrupt in the game on unsecured debt, he’d have a problem and lose his money. Would it kill him? Hardly but no one would like it. The bank takes the same risk on bank loans.

I went from struggling to being free because my strategy evolved and I had a new exit. So look for your options and act when conditions change.

Cashflow 202 e-game takes you to the next step of financial skills. It teaches you the advanced skills of technical investing – make money even when the market is going down with stock and real estate options and short selling.

Here’s a sneak peepinto Cashflow 202 e-game if you have not seen it before:

If you ever read the rich dad, poor dad series especially cash flow quadrant then this game would be familiar for you.

The origin of this game is in a form of a board game (like a monopoly). But if you have ever played it, there are significant differences.

The objective of this game is to teach the financial literacy and to understand more about financial statements in a simple manner. The best part of this game is that how you play the game reflects your perception about money.

At start, you will have to choose what dream that you want to be realized. Isn’t it interesting? In our daily life it is very important to set short term and long term goal.

After you choose your dream, the game will randomize the profession for you. The professions range from low to high salary. But, it is not very important that you get the low or high paid work. The most important is how you stick to your plan and manage your financial life to reach your dream.

 

Now, things are getting quite complicated for the beginners. You will counter the balance sheet and income statement. It is the chance to learn about financial vocabularies and their meaning in the simulation provided by the game. You will learn about stock, stock options, property and compound interest.

The game play itself is quite simple. The rat (representing our daily life) will face many circumstances that needed your attentions. Each of your decision will bring long term consequence to your financial position. Just keep in mind that the goal is to have enough passive income to cover all your living expenses.

 

A nice book to read, a nice game to try.

By KARA McGUIRE, Star Tribune 

Every other Tuesday night, Mike Jacka and at least a dozen others can be found in a Minneapolis hotel meeting room, buying and selling real estate, evaluating stock investments and leveraging their assets in the hopes of getting out of the rat race. In just hours, millions are made and lost.

Lucky for the losers, it’s only a game — called Cashflow 101. The object: To save your colorful plastic rat from too much work for too little pay and transport it onto the “fast track” to wealth. The winner escapes the rat race by making wise investments that increase passive income until it exceeds expenses.

Cashflow 101 was created by Robert Kiyosaki, best known for his “Rich Dad, Poor Dad” personal finance books. A new, similar game, the Millionaire Maker Game, was launched last year by Loral Langemeier, an author and former Cashflow 101 distributor.

Langemeier claims it takes three to five years to become a real-life millionaire if you read her “Millionaire Maker” books and play her game. She says most people have a hobby or perform tasks such as dog-walking or tutoring that could be turned into a business. “But we’re not taught to do that,” she says. Her game opens people’s minds to the possibility that they can “create an unlimited amount of cash.”

Langemeier and Kiyosaki are trying to tap into the growing market for personal finance help. The market has moved beyond financial self-help books to include an ever-expanding array of seminars, websites, games and televisions shows, all aiming to teach people about the tools to financial freedom.

Langemeier and Kiyosaki, based in California and Arizona, respectively, claim that their games help lay the foundations for becoming successful real estate investors, business owners and, ultimately, millionaires.

But some are skeptical of their advice, which often goes against the suggestions of financial planners and conventional wisdom. In a video that Jacka showed to the group at one meeting, Kiyosaki says boldly that investing in a 401(k) is “a suicide mission,” and that savers are “losers.”

“I don’t want to save for retirement,” he says. “I want somebody else to pay that for me.”

But paying for his advice can be pricey; Cashflow 101 costs $195. A Kiyosaki seminar running in the Twin Cities Jan. 8-10 (more information: http://www.richdadeducation.com/), purports to be free, but his materials will be for sale. And with workshops in multiple locations around the country during that time period, Kiyosaki can’t attend them all.

According to the Millionaire Maker Game’s website, pay $500 to distribute the game and you’ll receive sales training, two games, additional Langemeier materials and the option to buy additional games for $75. Her game sells online for $74.95 at Barnes & Noble ($67.45 “members price”).

Willing to pay

But devotees like Jacka gladly pay the price. He charges participants $10 to play Cashflow 101 with his real estate club, a group of veteran or wannabe real estate investors who pay as much as $399.50 per year for a membership for the group’s guest speakers, networking and educational events.

Jacka became a real estate investor in 1992, after being inspired by a late-night infomercial that touted the benefits of being a landlord. But without the game to play or a real estate club to join (he founded the Minnesota Real Estate Investors Association in 2002), he said he made “tons” of mistakes, selling properties too early and failing to generate extra cash.

Before Cashflow 101, “I couldn’t make heads or tails of my real-life balance sheets,” he says, and he credits the game for helping him grow his business of running the club, taking care of four single-family homes and evaluating potential deals.

Danny Hecker, who is pursuing real estate investing full time, says the game helps him with “the mind-set of minimizing your expenses and maximizing your assets.” He and his wife are thinking about selling their boat and possibly downsizing their North St. Paul home in order to free up cash for investing. “Instead of bringing on bigger luxuries, we’ll probably pursue more assets,” he said.

Hecker has played the game three times after reading some of Kiyosaki’s books. On this particular December night, he drew the lawyer identity — high income, but also high expenses. Joe Pepka, a part-time real estate investor, selects the janitor card. But it’s not long before he begins to clean up, despite his small salary.

Pepka draws a card. “Oh, yeah!” he shouts before reading aloud his option to buy real estate for zero down. “Oh, sweet. You got a good one off the bat,” says Jacka, who says you can still find zero-down offers in the real world despite tighter mortgage lending. That night, Hecker just wasn’t drawing cards that allowed him to reduce his expenses or increase his income.

For Pepka, he’s drawn to real estate in his real life because “it’s a way to make money — if you do it right — without a lot of investments.” He says he’s beginning to use strategies that he learned from playing the game, such as “partnering with people and using other people’s money to do deals.” After several profitable investments that night, Pepka won the game.

CEDAR CITY – Chris McCormick, a loan officer and financial adviser with Investment Lending, is on a mission to help people realize that financial freedom isn’t as intimidating as some may think.

And he’s using a board game – yes, with little, colorful guys and all – to get his point across. Once a month, he invites people from the community to play in order to better understand their own personal finances.

“We’d like to see people of all ages get involved,” McCormick said. “The key is if you can start having a better grasp of what this is, the better off you’re going to be financially.”

So what is it exactly?McCormick said this board game, which was created by Robert Kiyosaki, author of “Rich Dad, Poor Dad,” might be the answer for those who are interested in investing, but have no idea where to start.

However, Cashflow, as it’s called, is not your mother’s game of Monopoly.

The concept comes from real-life budgeting practices, possibilities and potential opportunities. Through simulations, players learn to calculate their incomes, assets, liabilities and, of course, cash flow. In this game, cash flow is a combination of investment returns and monthly income.

The objective of the game to get out of the “rat race,” as Kiyosaki calls it. Players begin with an assigned profession, which can range from an engineer, to a janitor, to a teacher, and then the wheelin’ and dealin’ begins.

“The thing I like about this is no matter what your job is, or how much you’re making, you can do this,” said Cade Stubbs, of Inwest Title Services, who, along with his co-worker, Cheri Skewes, sat down for a round with McCormick on Wednesday afternoon.

“This is just the best learning (experience),” added Skewes, a first-time Cashflow player.

McCormick said Cashflow is so accurate that he even encourages players to use the game’s worksheet to help manage their personal finances in real life.

Along with the worksheet, which includes lines for salary, taxes, mortgage payments, savings, child expenses and passive income, Cashflow also comes with big/small deal, market and “doodad” cards that players can draw depending on where they land.

To win, a player must be the first to buy their “Dream” or the first to accumulate $50,000 in monthly cash flow. It sounds easy, but there is a fair amount of strategy involved and a basic knowledge of the real estate and stock market comes in handy, too.

McCormick said the next community Cash Flow night is scheduled for Oct. 25 at 7 p.m. at the Crystal Inn in Cedar City. Everyone, he added, regardless of skill level is welcomed to participate, and the group will go as fast or as slow as it takes for people to catch on.

“If we push you, there’s no way you’re gonna learn,” McCormick said, stressing a no-pressure attitude.

Overall, after playing the game, Stubbs and Skewes both agree that Cashflow is a fun way to learn how to obtain financial freedom without fully diving head first into the real world.

Unfortunately, McCormick said, society doesn’t teach people how to think like a money savvy mogul. But, Cashflow does.

“It just gave me a whole new creative look at finances and how we can benefit,” Skewes said.