Recently I read a post my cousin wrote on Facebook citing a speech given on a TED Talk by entrepreneur Nick Hanauer. The premise of his speech was to persuade the listeners that consumers are the true job creators. This led to many comments on Facebook regarding his theory, but one in particular stuck out to me. One of the readers commented on the game Monopoly. He was equating the wealthy in this country much to that of the winners in Monopoly. It sparked quite a conversation, but more interestingly to me, it showed me how little people understood the game and how it really equates to life in America.
In America, there are several avenues you can take when you finally decide on a career path. However, little education is offered by the universities and colleges on how to play the game of Monopoly in real life. Until I read Robert Kiyosaki’s “Cash Flow Quadrant”, I knew very little about the various different asset classes. Most people believe that a diversified portfolio is a mix of stocks and bonds. After reading Cash Flow Quadrant, I realized that the stock market is only one asset class and true diversification takes advantages of all four: Paper Assets, Real Estate, Business, and Commodities. This is where the game Monopoly comes in.
The Facebook post on Monopoly was selling us on the idea that wealthy people play the game of life much like Monopoly. In Monopoly, the game continues as long as people have money. Once someone has all the assets and the rest of the players are broke, the game is over, hence the name of the game. After all, that is what a monopoly is defined as. What most people miss about the game is a simple concept, that when applied appropriately, will change your life.
In Monopoly every player starts off with the same amount of money and at the same place. Although life isn’t this way, every American starts off with the same opportunities. Many will argue with this point, but that is for a different blog. The game of Monopoly is simple. You move a certain amount of spaces based on a roll of the dice and when you land on a square it offers you an opportunity. Every player that passes “Go” collects $200 (i.e. their paycheck). What they do with that paycheck and the money they have in the bank is entirely up to the player. Typically, the player that buys the right properties and manages their cash correctly will go on to win the game. Let’s face it though; in Monopoly there is a bit of luck that plays into it. In Monopoly, you will go broke if all you do is travel around the board waiting to pass “Go” and hoping you don’t land in jail or one of your opponent’s properties with all those hotels. Well, life isn’t much different. If all you do is go to work every day, save some money and spend the rest on toys, you will one day be broke. You won’t be able to pass “Go” and collect $200. That simple concept of Monopoly is available to every one of us. The difficult task is learning how to play the game.
Most of us get up every day to go to a job. We work hard and save money in a retirement plan, hoping that one day we will retire. The major flaw with this concept is that unless that income you saved is in some type of asset that generates income, you will have a hard time retiring. Few 401(k) accounts are valued at $1 million or more, but even if that describes you, you’re still limited to what you can withdraw without depleting the account before you die. We all go to work (“Pass Go”) and collect a paycheck. What we do with that paycheck will affect our lives dramatically. Remember that simple concept I spoke of earlier? It is so simple that some of you may laugh, yet so many readers likely aren’t presently applying it in their financial lives. This simple concept is to take the income you make and purchase assets that generate income. Just like in Monopoly, after a while of acquiring enough income producing assets, you won’t think twice about passing “Go” again.
The most difficult part of this concept is to get your brain to change and accept it. There are all kinds of warning buzzers going off right now. You will most likely scour the internet and read tons of articles from people that have tried this and went broke. Well, this is no different than Monopoly. There are some people that never win in Monopoly and others that never seem to lose. The main difference is the way the two people think. One person suffers from failure in a whole different way than the other. There isn’t a single wealthy person out there that hasn’t suffered some type of setback. There isn’t a single real estate investor that hasn’t purchased a money pit. The difference is that they recognize their failure and learn from it. The biggest difference is they got off the bench and started playing the game.
The concept is simple, but the game still requires practice and hard work. The hardest part is to change your behaviors. Number one rule is to stop listening to those that are not in the position you would like to be in. If you want to purchase assets that generate income, go find people that have done it and are successful. If they won’t share their insights then keep looking. Start your own game of Monopoly today. Invest in an education that shows you how to apply this simple concept. Start using your income to purchase assets instead of toys. Once you have acquired enough assets that allow you to maintain your current lifestyle without having to pass “Go”, you can then choose to do what you want with your time.
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