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Cashflow 101: Using the Game to Define Your Investing Strategy

Tom Sylvester
7 min read
Cashflow 101: Using the Game to Define Your Investing Strategy

“The greatest mistake you can make in life is to be continually fearing you will make one.”

Elbert Hubbard

My father worked in construction and did contract work on the side.

I remember being with him on some of the job sites when I was a kid.  He would give me simple tasks to do, but not tell me how to do them.  Instead, he would let me try to figure it out for a while on my own.  I almost never got it right the first time, but the process of making mistakes and trying to figure it out on my own before having his guidance has always made me remember the lesson.

Cashflow 101: The Game

As the introductory quote to this blog states, one can’t be afraid to make mistakes.  I agree wholeheartedly with this and believe that making mistakes is one of the best ways to learn.  With that said, I also believe that mitigating risk is an important concept to understand as well, especially when it comes to investing.  So the key question becomes “how can one make mistakes so they can learn while at the same time reducing the impact of those mistakes?”  Introducing Cashflow 101.

Click Here to Buy Cashflow 101 From Amazon

Cashflow 101, created by Rich Dad Poor Dad author Robert Kiyosaki, is an educational board game aimed at teaching investors concepts of accounting, finance and investing.  Each person is given a profession cards that defines their income, expenses, assets and liabilities.  The objective of the game is to “get out of the rat race” by accumulating enough passive income that exceeds your expenses.  This is accomplished by doing “Small Deals” (buying/selling stock, single family homes, land and starting small businesses) as well as “Big Deals” (buying multi-units, businesses and franchises).

Occasionally “The Market” will shift and your investments will be worth more or less than you initially paid.  You may also have to purchase “Doodads” (shopping trips, lottery and the ever popular boat.

Once your passive income exceeds your expenses, you move on to the second phase of the game called the “Fast Track”.  This phase is comprised of “Dreams” (Pro Team Box Seats, Cruise the Mediterranean on a Private Yacht, Golfing Around the World) and “Really Big Deals” (franchises, large apartment buildings, IPOs).  To win the second phase, a person needs to either land on their dream or accumulate $50,000/month in cashflow.

Learning in a Safe Environment

So at this point you may be saying, “That’s all great Tom, but how can playing monopoly on steroids help me make money in real estate?”  Great question, and the answer is that playing the games vicariously provides you the experience of investing in real estate without having to actually invest in real estate.

A game of Cashflow takes between 1-3 hours to play and can be played over and over.  In one game you may be “The Doctor” who makes $13,200 each paycheck but also has a $200,000 mortgage, $150,000 school loans and $9,650 in expenses.  In another game you may be “The Janitor” who only makes $1,600 each paycheck but who only has a $20,000 and only $950 a month in expenses.  Some games you may try to go after some “Big Deals” right away and be very successful, but in others “The Market” may change and leave you bankrupt because you do not have cash reserves.

You may decide that you want to go a more traditional route of investing in stocks and avoiding real estate, or maybe you start with paying down some debt and doing small deals.  Each time you play, you get the opportunity to look at the game from the perspective of a different role (profession) and try out various strategies.  This allows you to try the make mistakes in a short period of time (1-3 hours), explore different strategies and practice analyzing potential opportunities each time you play.

The impact of winning or losing in the game is far less than if you were investing in real life, which means trying out different strategies to see what works is encouraged.

Lessons Learned by Playing Cashflow 101

There are a lot of great things that can be learned by playing Cashflow 101.  Here are just a few that I have found.

  1.  There Are Various Investing Strategies
    Many people do not realize that there are various strategies for investing.  The game provides a portion of the available strategies that allow people to start to realize how many different strategies there are, such as stock, mutual funds, bonds, real estate, small businesses and large businesses.
  2. The Market Changes
    Anyone that was investing in real estate around 2008 probably learned this first hand.  After years of appreciation and property values going up, the bubble burst and property values fell a lot in some areas.  The game shows changing markets and their impacts on the investing strategy that you are using.
  3. Financial Freedom Can Mean Different Things
    A lot of people think that being financially free means being rich.  The game shows a different approach, which is financial freedom by having more passive income than expenses.
  4. More Income Does Not Always Make Financial Freedom Easier
    The first time I played Cashflow I was disappointed that I was the teacher when others were doctors and lawyers.  The light bulb moment I had that game was that I was able to get out of the rat race much faster than them because my expenses were much lower as the teacher.
  5. Your Risk Tolerance
    It is very important to understand how much risk you are comfortable with.  As you play the game, you will be able to understand your personal risk tolerance and that of the people you play with.
  6. The Impact of Your Risk Tolerance
    Different risk levels carry different rewards in downsides.  The riskier investor may score big one game, but go bankrupt the next.  The risk-adverse player may not get out of the rat race, or may take a longer time.  Understanding the impact of your risk tolerance will assist you in setting realistic expectations and goals.
  7. What Income Statements & Balance Sheets Are
    It is important for everyone to understand their personal finances and how they are calculated, but it is especially important for investors.  The game provides an introductory way to learn about 2 two important reports, how to generate them and what they mean.
  8. Paying Down Debt vs. Investing
    There are different schools of thought on whether it is better to pay down debt or invest.  In general, you want to pursue what has the highest return, but you can try out both strategies in the game.
  9. Partner Thoughts
    Many people invest in real estate with a spouse or other partner.  Playing this game with your partner will allow you and them to understand each other’s risk tolerance, investing thoughts and strategies.  After the game, you can review the game and discuss the impacts to your real life investing.
  10. Your Ability to Partner
    Many people see real estate as a cut-throat industry where other investors are your competition.  In reality, there are a lot of benefits to partnering with others, especially in a situation where you have a good deal but don’t have the means to complete it alone.
  11. Impacts of Life Events
    The game contains life events such as losing a job, having children or getting divorced.  This allows you to be aware of these events and figure out how to handle them when they occur.

My Real Life Investing Strategy

I first played Cashflow 101 in a 3 day guru seminar.  I had previously read Rich Dad Poor Dad and it changed my life and how I viewed money.  Playing Cashflow 101 again changed my life.  Since playing the game the first time, I have played it over 50 times.  As a result of playing the game and testing out various scenarios, my real life investing strategy emerged.

Start with Stocks

I wanted to start investing in real estate right after college, so I did not have a lot of money saved.  I took money each week from my paycheck and purchased stocks.  I spent time learning and researching the stock market.  I could have lost money given that I was only investing for 1-2 years, but in my case I made a little bit of money from the stock market and had enough for my first deal.

Move On To Small Deals

I decided that I was somewhere in the middle with risk tolerance.  I wanted to invest, but did not want to grow too big too quick.  I was more comfortable with the slow and steady approach.  So I picked up a series of duplexes and single family homes.  I also started an IT company part time (no profits during startup, long hours, no extra pay).  I decided that there were better uses of my time, so I sold the startup to my partner to focus on real estate and other business opportunities.

Transition To Large Deals

After purchasing a bunch of small deals, I decided that I had enough in reserves and knew what I was doing to step up my game.  I purchased a 4-plex containing 2 residential units and 2 commercial units.  I then decided to diversify and start a retail business.  I opened a wine and liquor store and put it in one of the commercial spaces of the 4-plex.  I plan to continue to purchase larger multiplexes and have a few other potential business ideas.

Some Long Shots

Although my risk tolerance is somewhere in the middle, I do like to take a small percentage of my portfolio and make some riskier investments.  Back around 2005 when we had the war in Iraq I purchased several hundred dollars of Iraqi Dinar.  The currency was valued very low and had/has the potential of revalued.  Currency trading is high risk, so I only put a little money into this.  I am also looking into some other items that I deem riskier, such as purchasing some raw land.  Some of these investments may not pay off, but if they do the return could be sizable.


Many new investors get caught in analysis paralysis.  They read books, read blogs, listen to podcasts and talk to investors, but for one reason or another they struggle to jump into that first deal.  Being able to “practice” investing in a safe environment like playing a board game is a great opportunity for new investors to try experiment with different strategies with little risk.  Investors should understand that Cashflow 101 is just a game and therefore it can’t cover all of the situations that may occur in the real world, but it will provide a great transition step from education to actually investing.

If you have played Cashflow, what have your experiences been?  Were you able to transition from the game to real life?

Photo: svet

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.