After a lively game last night at a local bookstore, a few of us die-hard players were sitting around casually “debriefing” the game. We do this to get the maximum benefit of our new learning, as well as share ideas about investing in general.
What came out of that conversation was a distinction about how many different ways we can use the “paycheck”, and what the various benefits of each might be.
In Cash Flow, the Paycheck is really your discretionary income, the net once your total expenses are subtracted from your combined salary and passive income.
This amount is usually fairly low, and most players begin with only one or two thousand dollars.
So, what can you do with it?
Depends on your imagination, but here are some examples:
1. Save it until it grows into enough to buy an asset.
2. Fritter it away on Doodads until it’s gone
3. Ignore it
4. Use it as to leverage a loan into an immediate property.
5. ?
This Paycheck amount is often treated by new (and some experienced) players as a monthly “savings” or accrual of funds to be used “someday” to buy an asset – if it is not eaten up by “doodads” first.
That would be item #1.
The more I played, though, the more I began to look at this number as a factor of leverage, rather than an amount in itself -see item #4.
For example, when I play, I think of my paycheck in terms of how much BORROWING power it gives me – or how much leverage.
Since a back loan is rated at 10% interest PER PAYCHECK, I know if I have a paycheck of $1,280 I have about $12,000 buying power before my monthly payday becomes negative.
So if I start with a $7,000 small deal, I know I have used my paycheck to the best advantage.
What would happen if I had it sitting in the bank?
Well, one big gap in the game is that there is NO interest if you leave your money in the bank, and in fact the longer it is there, with no passive income to boost it, the more time it will take to exit the Rat Race and win.
This also gets me in the game faster, and allows me to benefit more quickly from any good market cards that might come up.
And one big thing it gives me is the feeling right from the start that “I can do this”, and there is no price on that feeling.
Have fun!