Lessons from the Cashflow Game

After playing and facilitating Cashflow Games, I understand more about the various ways to achieve financial freedom. There are really many lessons that I've learned from the game itself. For those that does not know about the game, here's a brief description, the main aim of the game is to get out of the rat race and into fast track. Which is like get out from our employee cycle (rat race) to achieve financial freedom (fast track) in reality. There's still a pint of luck that's required to win, but the key to it is still in identifying the good deals from the bad deals.

Some of the lessons I've learnt are:

• It'll be much easier to get out of the rat race if we, the players can collaborate with each other during the game. 
• The lower our expenses, the easier to get out of the rat race.
• If my monthly cashflow is low, I would need to aim for higher "savings" amount to buy the good deals that I want.
• If I have a monthly cashflow is higher, usually, my pay might be higher and same goes for my expenses and hence, sometimes, I need to use higher leverage to make things work better when I do get a good deal.
• If I keep taking small deals, it'll take a much longer time to get out of the rat race as compared to taking a bigger deal when I have enough money to do it.

The main lesson you will learn from the game is that how you play the game is actually a reflection of how you are playing the money game in reality. By understanding yourself more, it does help in fixing issues that you may not have realized on your own.

In fact, there's even a version for kids that I think parents should get for their kids so that they are educated in the way rich thinks from a younger age. Last time when I'm young, there's only monopoly and I only get to pay at my cousin's house as we couldn't get one. In fact, no one ever gave us a debrief on how to win that game and we really need to figure everything out ourselves. How I wish that I get to play such a game when I'm just a kid!

But do take note that in reality, things are not as simplified as the game itself. It's the idea that's important and when we know about the strategy, it actually takes much longer in reality to get the results when applied as our loan system isn't that simple. I'm still wondering, is there a Singapore version to this game?

Interested in playing Cashflow Game?

If you have heard about Robert Kiyosaki, you probably have heard about his CASHFLOW 101. The game helps to open our mind and teaches us the key towards achieving financial freedom (getting out of the rat race). Only upon understanding how the game works, can we get out of the rat race and get on fast track. At times, it depends a bit on luck but the major part of it is more about whether or not we grab good opportunities that comes along our way. Well in order for us to know whether the opportunity is a good one, it also requires some form of skills and understanding.
To understand more, you may want to join us in the upcoming cashflow game that we will be conducting:-
Date:           29 Jul 2010 (Thursday)
Time:           7pm to 10pm (registration starts at 6.30pm)
Location:     International Plaza #10-26 (Singapore)
Investment:  $25 per pax
FREE if you come along with your Cash Flow game board…
Note: Light refreshments will be provided
To register, drop me an email (peiru27@gmail.com) with subject "Cashflow Game 29th Jul 2010" with your name, email and handphone as well as whether you will be coming with your cash flow game board. :)

Tips on Investing your funds towards Financial Freedom

Here's some tips that you may want to consider with regards to investing the money you've set aside towards achieving financial freedom.

1. Ensure that you have 6-12 months worth of expenses in terms of savings in either money market fund / savings / current account so that it is safe enough and easily available when you might need it. For funds put in money market fund. These money must be in a separate account that you will not touch unless in times of emergency. (Adjust the 6-12 months according to how much security you will want to have, with 6 months being the normal standard and 12 months being more secured / safer.)
   
2. Alternatively to step 1, you can also keep 3-9 months worth of income in terms of savings, provided that your income is at least 30-50% above your expenses. (Adjust this by the amount of security you need)
3. For the above savings, you will need to at least keep about 1 month worth of expenses at all times in cash just in case and put the rest of this fund in somewhere safe, yet easy to withdraw, such as money market fund, high interest savings account, fixed deposit account without premature withdrawal penalty, etc.
4. Invest 90% of the balance in investment instruments that you understand and will be holding for long term, such as undervalued stocks, good dividend yield stocks that has high upside potential, index equity mutual fund, or any trustworthy equity mutual fund, good investment grade property that gives your great rental income.
5. For the remaining 10%, you may invest in high risk / high return instruments, that gives you high potential gain but very high risk as well. This is the amount of money that you are ok to risk with, which means either you get a lot of return or you may lose everything, and you are fine with that idea. E.g. of such investments might be things like property options that you may want to flip, 99 years highly speculated property bought for high potential capital gains, bird nest investment, certain type of gold investment (e.g. genneva gold), land banking, and other types of alternative investment etc. But if you don't like the idea, you may consider putting 100% of the balanced after setting aside point 1, in instruments mentioned in point 2.

Manage Your Cash Flow

Here's some suggestion on how you can manage your own cash flow condition:

1. You will need to track your expenses for about 3 months to find out exactly what's your expenses per month so that you can find out if you can cut down your expenses. Keep 1 month worth of expenses in cash in a separate spending account just for spending every month and stick to that budget.
2. You need to pay yourself first and put aside at least 20% of your income per month to a separate savings account towards achieving financial freedom. Increase this percentage whenever possible.
3. Set aside about 8-10% to invest in your own education so that you can improve your income actively or passively.
4. Donate about 5-10% of your income to any charity you like, such as world vision, red cross etc, so that you share your wealth with the universe, as sharing will help you achieve more!
5. Set aside 5-10% of your income towards insurance of any form. Try not to stretch yourself too much on this and that's why I prefer to buy term insurance rather than any other form of insurance. This is to ensure that you are well protected should anything happen.
6. Set aside about 5-10% as for long term spending on bigger items, e.g. tour, car, big plasma tv, laptop, etc
7. Spend  about 5-10% of your income to pamper yourself, use this to splurge on things that you love and is fun, spa package, 5 star hotel stay, high class dinner etc. Make yourself happy. This it to keep you motivated in life and recharge your energy.
8. Keep your required expenses to < 40% of your income.

Here are some tools I've created that you may want to use to help in the management of your cash flow:

• Track your Networth - This excel file helps you track your current networth so that you can understand more about your current financial condition and find out exactly how long can your current savings last you.
• Expense Tracker - This excel file helps you track your expenses on a daily basis. You'll need to add in the monthly part yourself by copying the current worksheet to a new month. But with this tool, you'll be able to find out exactly where does your money goes to so that you know where you can cut down your expenses.

Financial Freedom

Perhaps you may be wondering what exactly is this Financial Freedom thing that I'm always mentioning and talking about. Here's some lights to it...

Financial freedom is something that I would very much look forward to, i.e. my passive income is able to pay for all my expenses, so whichever amount I earned on top of that will only improve my life further and I no longer need to worry about paying off my bills, my expenses, etc. As even if I'm not working, I'll still be able to afford to pay off all my expenses.

Then you may be wondering so what's this passive income thing about? Well passive income is an income source that you will get no matter what happened and you do not need to work actively (everyday) for it. Examples are: rental income, interest, dividends, etc.

Now that you've understand what is all these about, would you love to pursue and strive for financial freedom so that you can then be free to do whichever you wish to do in life and no longer need to worry about your job / career / business. If you are interested in having financial freedom, it's now time to think of how you wish to achieve it, i.e. through what means, stocks / shares, property investment, business, passive internet marketing, royalties from songs / books etc?

When you are clear on how you wish to achieve it, do drop me a comment, wherever possible, I would like to lend you a helping hand on that. :)