Episode: 365 - Unlock Financial Wisdom with the Game of Monopoly
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Summertime often brings challenges as well as opportunities, especially when it comes to entertaining family and friends. If you're looking for an engaging way to pass the time and learn valuable money management lessons, consider the classic board game, Monopoly. This nearly 100-year-old game, created during the Great Depression, offers timeless insights into financial principles.
The Value of Assets
Monopoly provides an excellent platform for understanding the concept of assets. Traditionally, an asset is something you own that has value. However, reframing this concept can be incredibly beneficial. Think of an asset as something that not only holds value but also generates income. For example, in Monopoly, owning a property allows you to collect rent when others land on it. This is a reflection of how real-life investments can work.
Play by the Original Rules
For the richest experience, play the original version of Monopoly with paper money. Follow the classic rules precisely—no house rules that alter the original gameplay. Start the game with $1,500, money that signifies your initial savings. This amount is pivotal as it enables you to invest in properties, businesses, and utilities.
Invest in Growth
In Monopoly, success comes from investing your savings and salary into opportunities that generate returns. Each time you pass 'Go', you collect a $200 salary. Use this income, along with your savings, to invest in properties, railroads, or utilities. Each investment should be seen as a step towards building assets that provide passive income.
Leveraging Properties and Businesses
Own a full color group to increase your rental income, and improve the property’s value by building houses or hotels. The game’s objective is to enhance your assets to maximize returns. Railroads and utilities offer additional revenue streams, teaching the importance of diversification.
Lessons in Financial Management
Beyond the enjoyment, Monopoly teaches crucial financial lessons, emphasizing the importance of saving, investing, and achieving financial independence. Avoiding debt is another key principle. In Monopoly, debt is represented by mortgaging properties—it's a sign you're not managing your resources effectively.
Achieving Financial Independence
The end goal is to accumulate assets that yield returns enabling you to experience financial freedom. These principles apply to real life: transitioning savings into investments can let you cover necessities and luxuries alike, from vacations to purchasing property.
In conclusion, Monopoly is more than just a game; it can be a fun and educational way to grasp essential financial concepts. As you play, let the strategic thinking required in the game inspire you to explore similar strategies for managing your own finances. Whether you’re relaxing at home or hosting friends and family, breaking out the Monopoly board could be the enriching activity you’re looking for.
Enhancing Your Financial Journey
If you're determined to break free from the cycle of living paycheck to paycheck, focusing on building savings and reducing financial stress, start by applying these Monopoly-inspired principles. Begin your journey to a stress-free financial life by creating a roadmap tailored to your financial goals. Implement strategies that streamline money management, and gain the confidence needed to tackle financial challenges head-on.
Understand and invest in assets that work for you, with the end goal of creating a self-sustaining financial ecosystem. Learn to value investments that provide returns, and allow these to fund your future endeavors. Transform your financial habits with these actionable insights, aiming for a life where your assets align with your aspirations.
Resources Mentioned
The Totally Awesome Debt Freedom Planner https://www.debtfreedad.com/planner
To learn how to take the stress out of your finances so you can breathe again, follow this link: https://www.debtfreedad.com/lwp-masterclass-opt-in-page-podcast
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Transcript
Chris Hawkins:
So right now it's summertime and maybe you have the kids at home and you're trying to figure out what to do with them. Maybe you're on vacation and you need something to kill some time. Maybe you've got friends or family in town and you're looking for something cheap to do one evening. Well, in this podcast episode, I want to share with you a game that I think you should be playing, and play it as often as you can, and you just might find you learn a few things about how to manage your finances. So let's find out what game that is and talk about it in today's episode of the Debt-Free Dad podcast. This is the Debt-Free Dad Podcast, where we help normal, everyday people like you take control of your finances so you can live a happier, less stressful life. My name is Chris Hawkins and I will be your host for today's episode. From 2005 until 2008, my wife and I we paid off just under $100,000 in debt and we have been debt free except for our house now for well over almost 20 years now.
Chris Hawkins:
Let me give you a little bit of background into today's podcast episode. Back when I was learning how to get out of debt, how to manage my money, I did a lot of reading and you've probably heard me mention this multiple times on this podcast that I love to read, that I'm a lifelong learner and so I read a book and I have to admit up front, the vast majority of it I'm not extremely a fan of, but there were a few very good golden nuggets that I took from the book that I still use today, and the book was by Robert Kiyosaki Rich Dad Poor Dad, and one of the things that he mentioned or mentions in that book is the idea of reframing how we think of the term asset. By textbook definition from an accounting perspective, an asset is something that you own that has value, and in the book the Rich Dad Poor Dad, he talks about reframing the definition such that an asset is something that you own that makes you money. Let me say that again, he wanted just to think about an asset as being something we own that makes us money, and further in the book he goes on to explain that how wealthy people will actually accumulate assets. They will accumulate things that make them money and then let those assets buy stuff for them, and that's been a principle that I have tried to use ever since I read that book and again, I'm not a big fan of the overall book, but that is one takeaway I think is absolutely a gem. So he encourages people to accumulate assets again, things that make you money, and then use those assets, or the money that I guess is generated from those assets, to then buy you things.
Chris Hawkins:
So what does that have to do with playing games? Well, he mentions that he thinks the game of Monopoly is a game that you should teach your children to play. The game of Monopoly is a game that you yourself should play. So let's talk about why I want to encourage you to play the game of Monopoly and what you can learn from it to help you in your daily financial lives. First of all, the game is almost 100 years old and in some accounts maybe older than that, but officially it's going on almost 100 years old, and it was made and printed and sold during the Great Depression. And if you think about that day and age, if you wanted to pay for a piece of property or pay for a house, you had to save up the money and pay cash. And so I want to begin this story on why you should be playing the game of Monopoly by reminding you of a couple of things, or I should say, encouraging you on a couple of things.
Chris Hawkins:
First of all, play the original version, the one that has paper money. Don't get these new versions where they've got the little debit card and the electronic banking. Go and get you a copy of the original game that has the paper money and then read the rules and follow the rules of the game exactly as they're written, meaning no house rules. I know a lot of people like to play rules where you can't buy a piece of property until you've gone all the way around the board once. Nope, that's not the way the original rules are written. In fact, what it says as the first person goes, when they roll, if they land on a property that is not owned by anyone else right off the bat, first roll, buying that property at the value that's on the board, or the bank will auction it off to any player in the game, and it can include the person who landed on it. So imagine if you roll first and you land on a property and you choose not to buy it, the banker is going to put that up for auction. That's the original rules and you can't end up buying that property for less than the value that's on the board. So get the original version with the paper money. Read the rules, play exactly by the original rules. No free parking money, none of those things that you typically see that are house rules.
Chris Hawkins:
So, with that said, think about how you start the game. You start the game with $1,500, money that supposedly you saved up. So if you think about, almost 100 years ago, a board game that's created that values having money in the bank at the beginning of the game, that money is what will allow you to then invest and buy things, things that are going to make you money. Now, if you notice carefully when you pass go, if you remember, you get paid $200. Well, what is that $200 called? It's a salary. If you look at the board, it actually says collect $200 in salary. So the idea of the game was you start off with savings as you go around the board. Every time you go around, you collect $200 in income.
Chris Hawkins:
The whole goal of the game was to take your savings and your salary that you earn every time you go around the board and invest it. So what are the things that you can't invest in? Well, we just said a piece of property, and if you own that property and somebody else lands on it, what do they have to pay you Rent? So, by owning a space on the monopoly board, you now have an asset, something in the game that makes you money when other people land on it. Now how do you make that land more valuable? Well, one way is to create a monopoly where you have all two or all three of the same color group. If you own all two or all three of the color group, you get paid more in rent. How else can you improve the value? You can build a house on it, develop the land and then eventually you can build a hotel on it. And every time that you build a house when somebody lands on it, the rent goes up. And then, of course, if you can get to where you have a hotel, somebody lands on it, the rent is even higher.
Chris Hawkins:
So the whole game is about buying assets, things that make you money, whether it be one piece of property or all of a color group, or then putting houses and then eventually hotels on it. It's a way to invest, accumulate more assets, so that it pays you more money throughout the game. But that's not the only thing that you can invest in. Well, there are businesses, and, particularly at that day and age, railroads were still really big, and so there are four railroads, and the more railroads that you own, the more businesses that you own, the more you get paid anytime somebody lands on that space. So there's a value or a premium of collecting more than one railroad.
Chris Hawkins:
What else can you invest in? There are two utilities, the electric company and waterworks, and again, owning those, if somebody lands on it, you get a multiple of their role. So the whole goal of Monopoly obviously to win the game is to own everything, but the lesson to be learned is savings is important, and then taking your salary and using that to invest, and continue to invest, whether it's in properties, continue to invest, whether it's in properties, homes, hotels, railroads, businesses, utilities, things that are going to make you money. And as you make more money in the game, you have more money available to invest more, which, down the road, creates even more income. So it's a form of compounding, and so there's so many lessons to be learned. So let's go back to you land on a space and you decide not to buy it and the banker auctions it off and you are able to pick up that piece of property for less than what's on the board. Well, you paid a little bit less for that asset, but when somebody lands on it, they still have to pay you the same amount of rent. So what happens to your rate of return? It went up. So I could go on and on and on about all the various things dealing with monopoly, but I'm going to share one more here to show you how this can even further help you manage your finances.
Chris Hawkins:
In the game of Monopoly, debt is bad. Debt is bad. If you're to the point in the game where you're having to mortgage your properties, meaning take out a loan, that's bad. You're probably not doing as well as you would hope to. There is a couple of spaces that have debts. There's certain some community chess cards, some chance cards, that have debt components to them, but the game is largely about accumulating assets, things that make you money.
Chris Hawkins:
So go out and play the game.
Chris Hawkins:
Play it with your kids.
Chris Hawkins:
Play it with your kids.
Chris Hawkins:
Play it with your friends when they come over.
Chris Hawkins:
Maybe you're on a family reunion.
Chris Hawkins:
Sit down and play a game.
Chris Hawkins:
Maybe you're on vacation, or you're on vacation with friends and family.
Chris Hawkins:
Break out a game of Monopoly.
Chris Hawkins:
Yes, it takes a while, but as you play the game, think about the things that I've shared with you the old-fashioned way of managing money, the concept of accumulating assets, assets that are things that make you money, and when you get out of debt, you will then be in a position to get a larger emergency fund to begin to invest for retirement and maybe, just maybe, maybe, start accumulating some additional assets, things that you can convert your savings and or your income into rather than spend them, so that the asset will generate money and you can use that money to go on vacation.
Chris Hawkins:
You can use that money to buy a good used car over a few years, you can use that money to add to your home or improve your home. You can use that money to maybe pay cash for some rental, real estate ie monopoly and begin to grow your wealth in a way that you value buying things that make you money, so those things can then buy you things that you want. I hope this makes sense and I hope it encourages you to break out one of those original Monopoly game boards and have some fun this summer and, heck, any time of the year is a good time to play Monopoly.
Brad Nelson:
Now listen if you're ready to break free from living paycheck to paycheck which, if you're listening, I hope you are. You want to reduce financial stress. You want to build savings. You want to finally pay off debt for good, but you're not sure where to get started. Don't worry, we've got you covered here at Debt Free Dad. Simplify my Money is sent each Sunday to your email. We make it easy and Simplify my Money. It's your step-by-step roadmap to better financial control, and you're also gonna learn easy to follow strategies to manage your money effectively. You're gonna get stress-free money decisions that will help you simplify your financial life with proven tips that actually work. You're also gonna gain the tools and the confidence to tackle your financial goals head on. You can sign up for Simplify my Money by clicking the link at the top of the show notes. Thanks for joining us on today's show and we will see you guys on the next episode.
