Getting out of the rat race! Fun at the cashflow game

Just played the Cashflow 101 boardgame with a great bunch of friends from our Financial Freedom Club this afternoon and we all had fun!  

The Cashflow game was the very 1st activity that my husband and I organised for our Financial Freedom Club members. We selected this game to kick start this club’s activity because the game is about getting out of the rat race, a.k.a achieving Financial Freedom! It was great to see everyone having fun and learning from the game.  

 About the Cashflow game 

This is a board game designed by Robert Kiyosaki that teaches the concepts of personal financial management and investment strategies to get out of the rat race. In the game, each player takes on a different profession e.g doctor, engineer or janitor, each with his or her own set of financial statement (monthly income, expenses, assets and liabilities). 

The objective of the game is to get out of the rat race and the way to do so is by building passive income through investments until

Passive Income > Monthly Expenses => OUT OF RAT RACE!

Along the way, there will be opportunities such as stock investments, real estate or business deals which you can invest in, just like in real life. Some of the investments have the potential of generating capital gains e.g when the stock doubles in value, while others e.g real estate deals can generate immediate cash flow. How you make use of opportunities and manage your cashflow will determine how fast you can get out of the rat race. 

  

Some lessons I learnt from the Cashflow game 

1. “How we do anything is how we do everything” 

Indeed, it is interesting how we play in the game actually reflects the way we handle our finances in real life. When I first played the cashflow game a few years back, my whole focus was on collecting my paycheck month after month and saving it. Even when opportunities such as stock or real estate deals came up, I either invested very small amounts or passed the chance completely because I was afraid of losing my money. 

In the end, I missed out on many good opportunities to grow my capital which would have brought me out of the rat race! On hindsight, I realised that was exactly how I was managing my money in real life! Back then I was still working in the corporate world, earning a stable, decent salary. Every month, I just spent whatever I need and saved the balance in the bank. Watching my bank account balance grow gave me a sense of security. I hardly invested any of my money and was totally oblivious to all the wealth building opportunities around me.

“Looking back, I realised how much I have missed out on and it’s really a pity…”

As I play the game more and more, I realised that many people are unaware of their real life financial statement and what their money is doing for them especially ladies who tend to save a lot but are not investing their money sufficiently to work for them.  

 The financial statement in the Cashflow game is in fact a very useful tool for everyone to start understanding and managing their own finances and this means knowing: 

1) How much do you spend per month? This represents the amount of passive income you need to acquire to become financially free

2) What is your monthly cashflow? 

3) What assets do you have working for you?

2. Leverage vs Debt 

Since young, I have been brought up and taught not to borrow money or incur too much debt as it may lead to a lot of problems. Personal family experiences also created my belief that I should try not to borrow money as far as possible and it’s good to clear off whatever liabilities I have. Guess what? I also focused on paying off my debts in the game! Whenever I made some money from my investments or accumulated enough savings, I would try to repay off my liabilities and debts e.g school loans, credit card debt, home mortgage, hoping to reduce my expenses so I can get out of the rat race more easily. But when I did that, I used up all my cash reserves and was unable to participate in any investment deals. And I totally didn’t consider taking a loan from the bank to finance big investments.   

After some time, I realised that people who successfully got out of the rat race were the ones who leverage on the bank’s money to finance investments which generated significant passive income to pay for their expenses! Of course this was after careful calculation to make sure that the investment returns still made sense after factoring in the bank interest rate. 

In real life, there are good debt/ leverage which allows us to ride on good opportunities and grow our money more effectively. There are also bad debts such as credit card debts which incur exorbitantly high interest rates and drags us behind. It’s about balancing between the both depending on which makes sense. For example, many people like to repay off their home mortgage as soon as possible and they would pay off a bulk of their loans whenever they accumulate some savings. Is this always the best strategy? This depends on the home loan interest rate. If this is an HDB loan at 2.6% and you have means of generating a return of more than 2.6% on your cash, then isn’t it more worthwhile for you to invest your free cash?

3. Team work 

 In life, it’s about team work and no man is an island. Through the cashflow game, I also appreciate the importance and fulfillment in helping others get out of the rat race. Once out on the fast track (after getting out of the rat race), people realise it can actually get lonely and boring. By working together to support each other to get out of the rat race, everyone will have more company and fun on the fast track together! This is also our vision for starting this club – to create a team who will support and help each other to achieve our Financial Freedom together!

Stay tuned for our next game and other upcoming activities!

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