I played Cashflow 101 with my brother and his friend the other day.
Neither of them had played before.
My profession was Airline Pilot.
I had no school loans and a pretty high salary, my expenses were also high.
The first game I played, I had basically ignored liabilities and their interest rates.
After that I thought more about them.
They are different, some are worth paying, others aren’t.
In the game, you can buy a house or other investment and get a certain ROI on it.
The liabilities also have an “ROI” but it’s money that reduces your expensive. Essentially it does the same thing.
For a $1000 retail debt, you pay $50 each month.
So if you pay it off, you’re saving $50 each month.
Some of the houses in the game return $100/month. And the downpayment will be about $4000. Sometimes more, sometimes less.
(100*12)/4000= 30% ROI. That’s an all right ROI.
Other investments have much higher ROI’s.
Paying the retail debt will save you $600 in a year for a cost of $1000 to pay it off.
$600/$1000= 60% ROI.
60% ROI is pretty decent. Not the highest ROI in the game, but not too shabby.
The credit card debt that I had in this game was 22k and I was paying $660/month
So paying that off was a 36% ROI.
The car loan was 300/month.
Paying it off was a 24% ROI.
So the retail debt had a higher ROI than the credit cards which was higher than the car loans which are probably higher than school loans. But I didn’t have any school loans as an airline pilot.
The liabilities are also things you can pay off without drawing an opportunity card, so I would say the retail debt is probably a good thing to pay off early on.
You can compare it to the deals you’re getting. So if a house with a 120% ROI came up, that would be a better use of your money.
Note on bank loans: Bank loans cost 10% of each $1000 increment. So in a year you have to pay $1200 for a $1000 loan. They’re only worth it if you come across a really good deal and then probably only if you have a good chunk of the money already and just need some more.
I was more agrressive with my investments and had a group of houses, 8plexes, a software company, and some other things.
Ended getting out of the ratrace first with a buyout of 780k or so.
He stayed in the ratrace a little longer since his buyout was going to be pretty low. I had an issue with that before when I got out really early but couldn’t afford my ‘dream’ when I landed on it.
My brother got out right before I won the game.
And I had bought his dream just for kicks when I landed on it.
