What I learned from playing Cashflow101 and Cashflow202

The 9 things I've learned from playing Cashflow101 and Cashflow202: Get a secondary income stream, Don't be satisfied with taking home a paycheck, Lower your expenses, Leverage is a great tool, Accumulation is key, Don't be afraid to cut losses and move to a better investment, A side business gives you a good chance at achieving financial freedom, Speculate only when you have the financial wherewithal to do so, Focus on income generation and not capital gains.
Have you heard about Cashflow101? Cashflow 202? They're games created by Robert Kiyosaki, author of the best-selling book Rich Dad Poor Dad.

The purpose of the game is to spread financial literacy and help people escape the rat race - the trap of being employed and yet ending up poor after retiring.

If you're interested in playing the game head over to livingcashlow101.com or contact +Ronald Cagape - he hosts cashflow101 games.

However, I didn't really have the time to attend a game session so I ended up playing online (free and legal, just google it). It's an entertaining and educational game. And in this post, I'd like to share what I've learned from several dozen rounds of playing it.

  1. Get a secondary income stream. There's just no other way of escaping the rat race. In real life you can get lucky and become CEO, president, a multi-platinum-album-selling musician, elite athlete, etc. But the chances of that are practically slim to none. Don't get me wrong, you should try to excel, but it's not the best way if you really want to escape.
  2. The most unsatisfying outcome (when it's your turn to move) is to just take home a paycheck. The worst is getting downsized, followed by getting additional expenses. But it's very unsatisfying to not get an opportunity. In real life opportunities rarely come to us - at least not in the obvious, just-waiting-for-us-to-take-it way. Which is why it's easy to get stuck in the rat race in real life. So if we really want to escape, we're going to have to actively look for an opportunity.
  3. It's easier to escape the rat race by lowering your expenses - and keeping them low - rather than simply increasing your income. I've tried it in several games. I have a far easier time making a lowly janitor achieve financial independence than a well-paid doctor. With just a few small opportunities, I'm able to pay off all the janitor's debts. With a large-debt, large-expense doctor, I need a lot of opportunities or some really big ones to achieve the same result.
  4. Leverage (debt) is a great tool for increasing your income - as long as you can do the math and know you can make the payments. As +Ronald Cagape already shared in his site, taking on a big opportunity like owning a 12 unit apartment building will bankrupt you rather than help you if you don't crunch the numbers first.
  5. Accumulation is key. Don't be too picky. Even if it's a small income, every little bit counts. In real life, this can be tricky because you're going to have time (and energy) constraints. But as I've learned from Fitz, you should learn how to delegate and automate.
  6. Don't be afraid to sell your shares at a loss if it means you can get a secondary income stream in return. This is something stock enthusiasts will probably take issue with - or not. Even in stocks, it's not a bad idea to cut losses and hitch your money to a better stock. So if you're sure the money can give better returns if invested in a different vehicle- like a business or rental property - just crunch the numbers and convert the investment if it makes sense.
  7. Getting a side business is a giving yourself a great chance at a good income stream. The game is heavily biased towards real estate - not surprising because Kiyosaki is a real estate investor. And real estate can be a fantastic investment if you know what you're doing. But even in a heavily biased game, there were times when I won due to having a side business that paid off. In real life, a business can be even better than real estate (again, depending on your skills and knowledge). So it's good to remember that investing alone (even in real estate) usually won't be enough. Those that got rich off of real estate have done so by being brokers, fixer-uppers, and buy-n-sellers - meaning they made it their job/business.
  8. Buying a speculative asset (Like land to be sold at a higher price later), is best done when you have loads of cash just sitting around or have lots of income streams already. Otherwise, it's not a great investment as a better opportunity for your money might arise before the right buyer for your land comes along. In the game I got really loaded with cash by buying land and flipping it at huge profits. But it can take a long while or even not happen at all. The same concept can apply to a certain degree to other speculative investments.
  9. Acquiring an income-generating asset (i.e. an additional stream of income) is the key to getting out of the rat race. You generally want to acquire instead of just re-selling them for profit because passive income streams can eventually allow you to free your time for other pursuits. But look at your debts first. The debt payments eliminated by paying off loans (funded by the sold asset) may be greater than the income generated by the asset. If not, don't bother; just keep the asset and keep paying the loans off. It's similar to what we've already tackled before on how to decide if you should pay off your debts early or not.

I do have a few gripes about the game: stock investing is much more unprofitable and inconvenient than in real life. Real-estate is over-emphasized (though understandably so). And winning and losing can really depend on the roll of the dice as much as your skills and knowledge - but then again, life can be that way too.

But overall, it's a great game. And I'd encourage you to play a game or twelve:) you can really learn a lot from it.



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photo credit: seasonal wanderer via photopin cc

4 comments:

  1. I love #3!! I've always been finding ways to lower my expenses. I've been simplifying my life constantly, getting rid of stuffs and activities I can do without.

    The good thing about having a low expenses is you only have to save a little emergency fund!

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    1. Yeah, our emergency fund just ballooned every time we added an expense. hayz hehe

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  2. Ooohhh...will play this game too! Thanks for the great idea!

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    1. It's a really good game. one game can last more than 30 minutes (for me it's usually more), and you'll likely feel like playing again right after. Just so you can't say you weren't warned :) hehe

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