How to play Cashflow 101

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all right so here is an instructional video on how to play the cash flow 101 board game uh by Robert kosaki so first of all there’s three versions of this game uh there is cash flow 101 uh cash flow 202 which is the more advanced version uh and then there is a new version that is just simply called Cash Flow um personally I prefer the older versions of cash flow 101 and cash flow 202 um so the game as I mentioned is created by Robert kosaki he’s the author of Rich Dad Poor Dad um and the goal of the game is to help you uh learn how to invest and create passive income um there’s actually um two different um places that that you are playing this game uh the first place that you’re playing is on the board that you see here um the second place that you participate in the game is what’s called an income statement and balance sheet which we’ll talk more about um in a little while so those are the two different uh Parts you’ll see some of the U pieces of the game here so you’ll notice every single player has a couple different things every single player has a game piece which is a wrap like this and a piece of cheese all right so the very first thing that you do when you’re playing the game is you take your cheese and you put it on one of the dreams which is of the pink squares on the outside and you can read through them uh there’s protein box seats there’s bi a forest mini Farm in the city um Cruise the Mediterranean just whatever dream that you would like to select and then you place your rat at the starting point uh these right here you’re going to use um later on in the game but you can discard them for now so um the game is played in uh two distinct uh areas the first area here is called the rat race and this represents life with the job and the second area is called the fast track and that’s the outside Circle here the goal of the um the first part of the game is to get out of the Rat Race to quit your job and the way that you do that is by having more passive income than what you have for expenses once you do that you don’t need a job anymore the second goal or part of the game is on The Fast Track and when you’re on the fast track that’s where you want to land on and buy your dream there’s a secondary way to win as well um however the main goal here is to land on and buy your dream so essentially your two goals in the game number one is to create enough passive income to quit your job and then number two uh pursue and and buy your dream so uh that’s the super basic uh version of how to play the game I’m going to give you um a little bit more of of example here um now I mentioned before that um the goals of the the game was to exit the rat race and purchase your dream one more important piece is that you want to do that within the time limit every time you play the cash flow game my recommendation is uh to set a timer for either an hour and a half or for two hours but do not exceed 2 hours if you cannot get out of the route race within two hours it means you don’t understand the game yet so you always want to play um with a time limit and essentially you’re racing yourself versus the clock so I’m going to go and explain a couple things here on the board um so once you get started in the game uh you roll the dice and you move clockwise so if you rolled and you landed on or passed paycheck then you will receive what your paycheck is um your paycheck comes from the income statement and balance sheet so uh the very first thing you do when you start the game is you take one of these profession cards and you take the information from that card and you move it over onto your income statement and balance sheet which looks like this so it looks exactly the same I’ll give you a bit of more details here on on this in a minute but essentially this is the income statement in balance sheet and you just want to move all of your information onto this um you want to make sure that you use pencil because you’re going to be erasing quite often so what you’ll notice um on this income statement give you an example here so if you notice on here we’ve got income which is our salary uh we also would have any income from any assets like real estate or things like that that we have then we see all of our expenses underneath that so we’ve got the income column we’ve got the expense column we also have the asset column and the liability column every single liability right here will have an uh uh an corresponding expense so if you paid off the $31,000 mortgage your $300 per month mortgage payment would go away if you paid off your $1,000 retail debt then your $50 a month retail payment would go away okay so um basically all of your income together equals this number right here all of your expenses together equals this number right here your income minus your expenses is your monthly cash flow it’s how much money you have left at the end of each month so when you land on or pass your paycheck um this is the amount of money that you’re going to take from the bank in cash so uh that is the paycheck um Square you’ll also notice that there are red doad squares the red dudad squares uh are things that you can purchase so this one says uh play your lucky lottery number lose $100 now the doad squares um they are not optional meaning that when you land on it you don’t have a choice to buy it or not buy it you have to make the purchase uh if you don’t have enough money you can take a loan from the bank at any time and I want to explain that a little bit later in this video so that’s the doad section um there’s also charity spot and a baby spot and a downsize spot uh those all have instructions right on the Square the majority of what you’re going to be doing in the game is small deals big deals and Market cards so if you land on one of the green squares like this um it will give you the choice to choose a big deal or a small deal and I’m going to give um some more details of how to actually purchase one of these deals and put it into the balance sheet um but when you land on this Square you can either choose a big deal or a a small deal um and essentially um generally speaking big deals cost $5,000 or more and small deals are $5,000 or less so if you have more than $5,000 in front of you you you might want to consider a big deal if you have less you should probably be getting a small deal so an example uh is a house for sale 32 rental House suddenly available due to real estate closing well-maintained older property uh with existing tenant use this your card yourself or sell to another player 38% Roi may sell for 65,000 to 135,000 cost 65,000 down pay 5,000 mortgage 60,000 cash flow 1 60 so we’re going to use this as an example uh in just a moment here and I’ll show you how to actually fill that out into your form uh but whenever you land on a card like this you want to read the card out to the entire group read it out loud and then decide whether you’d like to purchase this card or not so that is something that you’ll see um inside of the small deals and big deals the market cards on the other hand uh these cards cards will affect everyone in the game so this one says buyer offers 30,000 per unit for all units in any combination of duplexes fourplexes or eight plexes everyone may sell so not just the person who drew the card this represents what the market is doing meaning that if you have a duplex right now that you bought for $440,000 um you can now sell it for $60,000 because it’s a duplex that means there’s two units and they’re $30,000 each so 30,000 plus 30,000 is 60,000 which would be the selling price um if you want to sell you get rid of the cash flow you’re receiving from the property and you pay down um whatever you owe left on the mortgage so that is the market cards I’m going to show you how to fill these out um on the income statement and balance sheet all right so here we are with the income statement and balance sheet uh income statement is just the income and expenses balance sheet is assets and liabilities and then uh this over here is actually called the statement of cash flow so essentially you’re going to start the game by taking one of these uh profession cards this one’s a mechanic and we’re just going to transfer all the information over so we’ll type the profession your name the auditor the person to your right and then we’ll just transfer all this information over so right now we have a salary of $22,000 so all we don’t have any other income types to start the game so all of the income types together added up equals your total income which is $2,000 over here we have our expenses so we’ll just transfer this over 360 300 0 60 60 50 and 450 and all these add up together to be 1,280 our total income minus our total expenses is our monthly cash flow this is what we have left at the end of each month which is $720 this is also the number that you’re going to get every time you land on or pass paycheck we’re going to write in our savings soon as you start the game you’re going to actually erase this number and take this in cash and then we have our liabilities so we’ve got a mortgage of $3,100 you might notice that this mortgage has an existing payment of $300 per month same thing with our car loan credit card debt and Retail debt now if I was to uh pay off this retail debt and pay off the full $11,000 I would pay $1,000 to the bank and then I would erase my retail payment of $50 that would become zero that would mean my expenses would go down by $50 and now when I go income minus expenses my monthly cash flow actually goes up by $50 so I’m keeping more money every single month so uh the goal of the game of course is to get your passive income to become greater than your expenses one way to do that is to increase your passive income another way to do that or to assist in that is by uh decreasing your expenses by paying off liabilities over here so I’m going to give you a couple of different examples um of how that uh you would do this so we’re going to start with this card right here so this card is a house for sale and I’m going to show you how you would enter this all of the different numbers on here have somewhere to go on the income statement so we’re going to start off by going down to the bottom here and we’re going to type in three bedroom two bath which is what it says right here home our down payment is going to be $5,000 and we’re going to say that I had that 5,000 cash and I paid it to the bank um our cost our total cost is going to be 65,00 so three bedroom two bath house our asset is the $5,000 down payment and the $65,000 cost the liability is the uh mortgage that we owe so we’re going to write down three bedroom two bath and the mortgage over here is 60,000 okay from there I’m going to come up to the top and I’m going to write three-bedroom two bath um and the cash flow here is $160 and so what that $160 represents or what that means is um we’ve got this mortgage payment here of $60,000 some people say what about the mortgage payment what this card is saying is that we’re renting this house out and the tenants of the house are paying the whatever the the monthly payment is on the mortgage and all the the bills um and after that we’re left with $160 meaning that their rent covers all of our expenses is plus $160 so we’re going to write plus $160 right here our total income now goes up by $160 and our monthly cash flow goes up by $160 so now every time we pass or land on paycheck we’re going to get $930 our monthly cash flow has gone up our passive income is now $160 once this number exceeds our expenses uh we have finish the first part of the game so that’s the first card um I’m going to show you a second card here and this one is mighty for you Electronics I’m going to show you two different things on this card the first is how to buy a stock and the second is how to take a loan I mentioned earlier you can take a loan from the bank at any time you must take loans in ,000 increments and your interest payment is 10% per month which is 120% per year so let’s say I’m going to take a $1,000 loan over here I’ll put that into the bottom my loan payment now becomes 100 10% of my thousand so for every th000 you borrow it’s $100 per month my total expenses now go up which means my monthly cash flow goes down all right so I’ve now successfully taken a loan now we’re going to say that I’m taking that $1,000 and I’m using it to buy this stock so the stock is myt for you number of shares well it’s $10 per share and I’ve just uh spent $1,000 so that means I have 100 shares at $10 each and uh that’s it so now these shares stay in my um app that column if I had cash I wouldn’t have had to take this loan um I would have just used cash to buy these but we’re assuming um that I uh took money to borrow from these now how do you make money from the stocks because it says right on the card that the ROI is 0% and what that means is I’m not getting a monthly dividend from this so I’m buying it low hoping to sell it high so let’s say we’re rolling we’re playing the game a little bit longer and another card comes up this time it says Mighty for you booming Market leads to record share price of this home electronic seller only you may buy everyone may sell so what that means is if I’m an owner of this stock which I am I can now sell it for the price of $40 per share even if I’m not the person who pulled this card so only the person who pulled this card can buy at 40 but anyone at the table can sell so I’m going to say that I want to sell all of my shares I could have sold a portion but I’m going to sell all of them so 100 shares at $40 each means that I get $4,000 from the bank and the bank I erase these shares essentially the bank is buying the shares from me and now I have $4,000 if I wanted to I could use some of that money to pay off my loan which would in turn erase my payment this would go down and this would go up okay so now I’ve got $4,000 in my pocket um how do you sell your houses well your houses actually get sold through the market cards these blue ones so this one here says um actually this is a bad example but some of them will say uh they’ll all have a different amount so normally it would say uh you can sell this for uh $50,000 you can sell it for $100,000 so let’s say a card came up and said you could sell it for $100,000 if that’s the case what I would do is uh I would say yes I’m going to sell this and I would take $100,000 minus whatever my mortgage is so I still owe $60,000 on the mortgage and this number never changes it always stays the same we’re assuming that you’re paying only interest um on these loans that’s not going down every month okay so I would take $100,000 I would minus this 60,000 which means I would take $40,000 profit from the bank so I would go ahead and get that money from the bank it also means that I need to erase everything to do with this home because I’ve now sold it so I lose my16 over here so this 160 goes away it’s now zero this 160 now goes away is now zero so this is back to 2000 uh and then this goes down by 160 so should be 670 I believe and I’ve now completed that transaction um on the other hand sometimes Market cards are bad so I could have got something like this one that says hey inflation goes to 10% and interest rates climbed to 20% you just lost your three-bedroom two bath house and you get nothing for it okay so Market cards can go either way sometimes they’re positive sometimes they’re negative um the bottom line is um this game is going to teach you to grow your financial intelligence allow you to practice these things a few times over and most importantly get used to this income statement and balance sheet and start to control your your emotions when it comes to money so uh that is the cash flow game in a nutshell it’s a quick version here of what to do to get yourself started and to get playing um and I really recommend that you play this game at least once a month um kosaki challenges you to play once a month for a year and uh it’s a really great idea to change some of your thinking around money and mostly to change your habits it’s not about there’s some lessons you need to learn it’s that there’s habits that you need to create and change and for most of us I mean I was taught to go to school get good grades save money you know hopefully retire by the time I’m 65 and that was you know um put into my head over and over and over for 18 years so it’s not just going to be that I read one book and all of a sudden 18 years of programming is gone it takes time to develop new habits and that’s what this game is really phenomenal at so um underneath this video there’s a quick link if you’d like some further tips about how to win the game how to get out of the rat race faster I’ve provided some tips there uh and they apply to the game and a lot of them apply as well to real life so go ahead and you can enter your email by clicking on that and I’ll be happy to send you some additional videos um outside of that I really hope that uh this tutorial has been helpful for you and most of all um I hope that you really enjoy the game and play it on a consistent basis so thanks a lot for watching and I’ll see you soon

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