Financial Understanding

Recently my family and I dug out a game we love to play called Cashflow 101. If you’ve heard of Robert Kiyosaki, the author of the Rich Dad Poor Dad series, you’ve likely seen or heard of this game. Cashflow 101 (yes there’s a Cashflow 202 expansion) is a board game that is fun to play but helps you learn something while you play it.

In the game, you are given a profession and you fill out your game card with financial information about your profession. Every profession has the typical things most Americans would have on a financial statement. Things like a mortgage, a car payment, school loans, how much you make, etc.

The idea of the game is to build up your passive income (that is – income you don’t earn from a job like investments) to the point where it exceeds your monthly expenses. Once you do that, you haven’t won the game but you move on to the next level that helps reinforce how nice passive income is.

What Do You Learn?

One of the most important things you learn is how to figure out where you are financially. Many of us have never learned how to calculate our net worth. As Mr. Kiyosaki puts it, we have “a low financial intelligence.” You learn how to create and read your financial “report card” (your Personal Financial Statement) which just happens to be your game card to play the game.

This is a valuable tool to understanding where you are and where you want to be. Banks require them of businesses when they’re seeking a loan because it gives an indication of the financial health of the company. You should make one annually too.

The other thing you learn in the game, debt is great! Playing the game you quickly realize that to win, you have to take risk. The risk you take is up to you and can greatly affect how quickly you reach your passive income goal. This game highly rewards leveraging assets (going into debt) to build passive income, mostly through creative rental property financing.

When the game was created this made perfect sense. You could finance any potential rental property very easily and start building your passive income. However, after the housing market crash it became far less easy to do.

As you know I’m not a fan of debt however, I realize that sometimes you need it like when purchasing your home. So I decided to play the game without taking on debt and by paying off the debt I had. Because the game rewards you for taking on debt, this took a much longer time to win but I was able to do it. Another interesting way to play the game is to use your real personal financial statement to see how long it takes you to win. You may be surprised how easy it is.

Even though the game focuses on debt as the best tool, I still enjoy it. I plan to modify the game a little however to favor becoming debt free and saving money more by adding these types of cards to it. You should also be more at risk than you are in the game by using debt. I think that would make it more realistic.

Over all, I think the game is a great learning tool although it is a little expensive. Just don’t use what you’ve learned to leverage everything you own to buy rental property. That’s dangerous and asking for trouble. Just ask all those who got burned in 2008.