Cashflow Game — The Key to Achieving Financial Freedom
For those familiar with the book Rich Dad Poor Dad, the author Robert T. Kiyosaki created this board game named Cashflow. It is about personal finance and introduces the basics of cash flow, real estate, investing and business building. The game was described to “help people learn how money works”, and is available at the author’s site https://www.richdad.com/products/cashflow-classic for anyone with a free account.
Basic Rules
Ultimate goal: Earn enough passive income to cover monthly expenses; and eventually be able to afford the life goal.
At earlier stage of the game:
- An occupation, salary, assets (a house and a car) and liabilities will be assigned to you at random.
- Players take turns to roll the dice and move within the inner circle.
Possible scenarios:
- One-time expense such as vacation, new furniture and birthday parties.
- Recurring expense such as a new baby that adds on to the monthly expense.
- Deal opportunity to grow your asset: buy ownership of a startup company; invest in gold or stocks; purchase a new flat or store.
- Surprise event: new buyer for your holding assets; change in market conditions that might cause your stock holdings to rise or drop.
- After the first goal is achieved: having more passive income than the monthly expense, player will then proceed to the outer circle, when the game accelerates, and player is free from the day-to-day hassles and moves on to acquire much more expensive assets before finally able to purchase the life goal.
Winning Tips:
- Acquire as many assets as you can, at a reasonable price of course. A stock with trading range $10-$40 priced at $5 is definitely a great buy, but a over-priced house in a terrible neighborhood? Not so much.
- Make sure there is some buffer in your cash and payday earnings. The last thing you want is to take on too many loans, bringing the payday and cash amount below zero. Besides, you never know when you might need to add a new baby to your expense list. Your only option then will be to liquidate your assets at a huge discount until both payday and cash are positive again.
- Read the offers for your assets carefully as there might be a catch. Think twice before you agree to sell the house to your brother-in-law who is basically broke.
Key Takeaways
Achieving financial freedom is not about having a lot of cash in hand, but rather have enough passive income to pay for the regular expense. The game does present a lot of options for passive income stream: owning a piece of business, be it a software or a coffee shop, a house or hotel with rent income, a stock that grows in value, or some other assets that you acquire at a discount. Some might not be so affordable for normal investors, but there are far more possibilities to help achieve that goals with similar ideas.
As said by Naval Ravikant, the famous tech billionaire and venture capitalist, about wealth creation:
You’re not going to get rich renting out your time. You must own equity — a piece of a business — to gain your financial freedom.
Final Note
The game is obviously only a simplified version of the real life events. You never know the future trading range of a stock. However there is the option to avoid some expensive purchases in life, especially before the payday when cash is low. It does gives you an idea of how financial freedom is achieved though. For those who do not have a clear knowledge of what personal asset management or a balance sheet is about, it is definitely recommended to try out the game!
