Have you ever heard of a game called Cashflow 101? If no, it’s a board game invented by Robert Kiyosaki. If you have heard of it, have you played the game before?
Basically, the game has two stages. The first stage is the “rat race” and the second stage is the “fast track.” In the rat race, you’re supposed to accummulate assets/investments and gain a total passive income to match you expenses. Once you have achieved this, you’re out of the rat rate and move on to the fast track. You either win the game by purchasing your dream or by further accummulating assets/investments in the fast track so that your passive income reached a certain target.
What do I think about this game? I think it’s fabulous. It is inaccurate in terms of reflecting what actually happens in real life but the basic principles of the game are pretty accurate. I learnt a lot from this game.
Before starting the game, you are assigned a profession and you are provided with a list of income and expenses. Income and expenses are set in accordance to your profession. A chef for example has low salary, thus low expenses. A doctor on the other hand might have a higher salary but also really high expenses. This is true in a sense that if one has a lot of money to spend, he/she tends to spend more. If your expenses is high, that means it’s harder for you to get out of the rat race. So, the principle is, it doesn’t mean that the higher your salary is, the easier it is for you to get out of the rat race. In other words, having a high salary doesn’t guarantee that you’ll be better off. It all comes down to how you manage your expenses.
In real life, if you earn a huge salary but you can maintain a low-key life with low expenses, then by all means, you’ve got an advantage there. If you earn $20,000 per month but can still maintain only $2,000 of expenses, you’ll be able to exit the rat race quicker. Think about it the next time you get a pay rise or a lump sum of cash. Don’t spend it on something useless. Think long-term.
Another lesson is that you need to get creative in scoring yourself good deals. For example, if you come across a real estate deal that gives you 98% ROI (return on investment) and you do not have enough cash to pay for the down payment. In the game, we could raise money by taking up a bank loan (personal loan) instead. Yes, the interest rate might be high, but in the long-run, it still is a good deal. Your net cashflow from the real estate might ease the burden. You can then sell the real estate in the future at a higher price. This extra wad of cash can then be used to fund further investments. In real life though, most of us would just pass up the deal. How many of us give excuses like “No, I don’t have enough money” when faced with investment decisions? Remember the saying, when there is a will, there is a way?
All in all, to succeed in getting out of the rat race and be financially free quicker, we need to develop our financial intelligence and be creative.