We continue the lessons I've learned from Cashflow 101 and Cashflow 202 from the previous post.
More principles I've learned from the game:
- It's better to pay in cash rather than via credit card. Credit cards give you an added recurrent expense. Exactly like in real life, huh?
- Check to see if your purchases and investments aren't making your cash flow negative. My big error at the start was that I kept hoarding assets, not seeing if they created a negative cash flow for me. In the end, I crashed and burned in bankruptcy several times. In real life, watch how you use credit and if your debts are piling up. Bravely sit down and see if your cash flow is still okay or if you could use a little help. Don't hesitate to get jobs on the side or keep some of your payments on hold so that you could pay down those that have accruing interests or are more urgent.
- Not all opportunities are good. Check to see if they actually bring in money. Some opportunities are added costs and liabilities instead of income-generating assets.
- On the flip side, some seemingly non-earning assets and opportunities (company startups, undeveloped land) could actually be sold/flipped for a huge profit.
- Mutual funds are a true asset. Once they hit a high and you sell, you get a great return on your investment. In fact, it could help you out of a pinch. It's happened to me before, too. I used my mutual funds, which had then gained a profit, for some urgent expenses. Sure is much better than letting your money stay in the bank!
- You won't fear a crisis situation like being downsized, IF you have a good amount of Cash On Hand, OR if you have a cash flow source that is stable and gives you a margin after all your expenses are paid. In real life, Cash On Hand could be a general savings stash, but it would be best if you had a fat emergency fund to dip into.
- There is Good Debt and there is Bad Debt. Bad Debt is money you've gotten on a loan and will never profit from, but would need to pay. In the game, if there are really great properties or opportunities that you just HAVE TO buy and will still add or just minimally dent you cash flow, it won't hurt to get a bank loan. In real life, PROCEED WITH CAUTION. Personally, I'd rather put away little increments of money that I can use to invest in mutual funds when they reach the minimum investment amount.
- Don't make the mistake of not selling because you fear that your regular income will diminish. Count the cost and the difference of selling vs. keeping property. Would you rather have a lot of liquid cash to reinvest? Or would you rather have a stable income?
More learnings, gleanings and the conclusion in the next post.
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