Robert Kiyosaki gave us Rich Dad Poor Dad and we thanked him profusely for it. It launched a series of eye opening moments in peoples lives. More so, it gave way for many others to become inspired to write their financial experiences down, and share their accounts with the world. 

It wasn’t enough that Robert Kiyosaki gave us one of his best selling books, but he also gave us the most realistic board game that resembles the day to day life of the average person. Choosing your dreamCredit: G.K.JonesCashflow is a fun and easy way of learning how to get out of the rat race.  If you want to get onto the fast track you need to learn how to build up your passive income to overshadow your total expense. It seems like an easy concept, however it can be a challenging process to implement.  Hopefully after you have read this article, you will be able to get yourself on the fast track of mastering the game and your financial life.

When you are playing, it is important to be attentive to your financial statement. We’ll break it down into 4 groups of focus. 

Income

Income is what your occupation, business or assets brings in the form of money.  One of the most important elements to aid you in the escape from the rat race.

Expense

Expenses are things you spend your money on. Things you use the income you’ve earned to purchase, pay for or repay.

Assets

Assets are items that bring value in the form of income. This will be the key element to reaching your monetary goals. Once you understand what assets are, this knowledge will propel you further towards your dreams.

Liabilities

Liabilities are items that create set backs to your finaces. There are some that are not avoidable but are definitely manageable. 

Being attentive to the four groups in your daily routine, should be a prerequisite to the course called life 101.

What the game teaches you

It is fundamentally on of the best teachers when it comes to personal finance and money management. It allows you to get a first hand look at some of the tools that the rich use to make their fortune.

A brief look into Stocks

Stocks are considered the proprietorship element in a corporation that is usually divided into shares. Simply put, you buy a certain percentage of a company for a set amount. If and when the company is profitable, you become profitable. There are gains to be made if the price of the shares you purchased go up in their value. For example: Company - Gabe Jones sells it’s stock shares for $2.00 a share. In three years, the shares go up to $25.00 a share. Robert bought one hundred shares, three years ago, when the stock was at $2.00 a share. If he were to sell half of his shares, he would make $2,500.00. He initially spent $200.00 on his investment three years ago. 

An alternative scenario

Robert buys one hundred shares of Gabe Jones company, three years ago for $2.00 a share. The price of the stock drops to $0.50 in three years. If Robert decides to sell half now, his return would be less than favourable. $25.00 on a $200.00  initial investment.

The system in the game, is very similar to the examples described.  However, there are many variations on making a return on your investment in real life. Nevertheless the concepts are very much the same and with careful planning can be a tool to your life of riches. 

A brief look into Real Estate

Real Estate is considered to be property in buildings or land. To make it as simple as possible, you have ownership in a home or a piece of land that can be used for the purpose of building a home or commercial property.

There are great benefits to owning property. With proper management, a portfolio of homes could be the ticket to your financial freedom.

Here is an example:

Francis finds a property in an up and coming neighbourhood. It is listed on the market for $200,000. Francis has $30,000 to use as down payment. This means he needs $170,000 more. His local bank, reviews his request for a loan. After doing the necessary background checks, they agree to loan Francis the $170,000 to make a purchase of the home.  The mortgage is for twenty years and listed mortgage payments are $1,300 a month. 

It’s a beautiful 3 bedroom 2 baths and a finished basement with 1 bedroom, bath and kitchen.  

Francis decides it’s a great opportunity for him to rent out the home and basement.  He finds one family to rent the main 3 bedrooms 2 baths for $1,300 and a college student to rent the basement for $800.00 a month.

The Family covers the mortgage payment of $1,300 a month, while the college student creates the passive income of $800.00 for Francis.

In the game, the process works in a parallel fashion. Another way for someone to create a path that will lead to the fast lane towards wealth.  Not to mention, if the home was to be resold for a higher value, Francis could see a gain in capital. 

A brief look into Loans

A loan is the act of lending something temporarily. In the financial world, loans can be very helpful or very destructive. In the real world, loans come with many strings attached, in the form of interest and late fee penalties. How some have avoided interest and penalties, simple by not borrowing. Could everyone function without borrowing? Absolutely, however, after playing cashflow, you can get a better understanding of how you can use borrowing to your advantage. This requires discipline and constant monitoring of your expenses and your assets. 

In Cashflow, borrowing comes in increments of $1000.00 at a 10% monthly expense. What this means is you pay $100.00 of monthly interest for every $1000.00 you borrow. It stays that way until you pay down or payoff the loan. For example:  Randy has a monthly expense of $700.00. He goes to the bank to borrow $5000.00 to make a purchase on real estate. His new monthly expense, based on our cashflow rule would increase to $1,200.00. ExpenseCredit: G.K.JonesTo really maximize your borrowing, you need to make sure that your monthly expense never exceeds your monthly income. Coupled with a well designed plan to make your borrowed money bring you more income, will surely guarantee your speedy movement towards the fast track of high income.

Tips on sheltering your money

Sheltering money is an art form that takes some skillful planning. Remember that the best way to shelter your assets is through legal methods. It’s best to consult specialist who practice in the field to better assist you. 

However it is always good to have the basic knowledge to get you started. 

One of the ways that the rich shelter their money, is through holding companies. [1]Holding companies can serve two purposes:

  1. An investment vehicle 
  2. Risk management tools

The rich have made use of the tools of holding companies and the great benefits they provide. 

Such as: 

  • Protecting investments
  • Transferring of wealth to beneficiaries

Allow you to structure business deals with more money to manage. Simply put, holding companies offer the option to provide capital and people. 

In conclusion, if there is one thing that the rich can teach us when it comes to generating healthy revenue, it’s to keep a mindful watch of what your assets are. Assets are things that are bringing you money. Keep watch over your expenses, things that take money out of your pocket. And finally, stocks & real estate are vehicles to use to get you to reach your wealth destination.  Learn to use it 

The rich have made it their ritual to practice the lessons. This allows them to constantly generate cashflow. Simply adopting these best practices, will help anyone looking to change their economic situation, from negative to positive.

Cashflow