Children around the world grew up playing Monopoly, and many more adults still get together for some friendly – and sometimes not so friendly – competition. But is there more to it than that? Is Monopoly more than a way to pass a few hours, and are there lessons we can take from a monocle-wearing millionaire, for use in our own personal finances?
Of course there are, because the history of Monopoly is rooted in the state of the global economy, with the game first being played to raise morale during the Great Depression because in Monopoly anyone could become a property mogul and a financial genius. Therefore it is important we learn the lessons Monopoly has to teach, and apply them to our own personal finances so that one day we can all wear monocles. I’ve outlined nine.
1. Life is What You Make It
The first rule of Monopoly is that everyone starts out with the same amount of money – a healthy $1,500 – and we all start from the same place at the Go square. From there the game can be anyone’s and it is the person who takes the greatest advantage from their opportunities who can triumph over their opponents.
For example, the player who rolls first has an advantage over the other players and the player lucky enough to roll a double has the advantage of a free turn and if that player is not you, you simply need to acknowledge that life isn’t fair. Maybe your parents didn’t start a savings account for you when you were born, perhaps you have lost your job because of cutbacks at work, but it is how you deal with the roll of the dice which matters.
Plus, as Monopoly will prove, there are both good and bad surprises in life and you can just as easily end up in jail as you can win a beauty pageant, as long as you accept these surprises for what they are, and find a way to excel regardless by doing what works for you.
2. Seize Opportunities
In a game of chance like life you will eventually have an advantage turned your way and you need to make sure you seize that opportunity and make the most of it. If you do get the first roll of the dice you have the first chance to buy up as many properties as you can and you have a free run to avoid a lot of rent payments early on.
The fact is there are probably a lot of lucky breaks which come your way in life, but you’re not in a position to take advantage of them. That is why you need to always be looking for ways to expand your experience and knowledge base, so that you can recognize opportunities for what they are, and you have the confidence to act on them. While you don’t need to become an expert on everything, look at ways you can build on your skills within the sphere of your current experience so that if an opportunity does present itself, you can show you are prepared and turn that luck into skill.
3. Build a Strong Asset Base
Ultimately it is the player with the most properties who will gain a monopoly control of the board and this is an important lesson to apply to your personal finances because building a strong asset base will allow you to earn a passive income. Other players will pay you rent and with good assets you can make improvements and ask a higher rent.
In real life, if you have real assets, you will be able to live off of the passive income from them. Instead of relying solely on your wage, look closely at your assets and what they can do for you. You may be able to make improvements to what you already have, like upgrading a house to a hotel in Monopoly, so it’s not always trying to overextend yourself to buy more property.
4. You Need an Emergency Fund
Out there on the Monopoly board you never know what a chance card is going to throw your way – you could be required to pay for improvements on your hotels, pay taxes or school fees, or advance to the nearest railroad and pay twice the rent.
If you don’t have the cash then you’ll have to mortgage or sell your assets and in life there are a lot more emergencies than on the Monopoly board. Plus, you have just learnt the importance of your asset base, so rather than selling assets to pay for emergencies, make sure you leave some money tucked under the corner of the board for a rainy day.
David’s Note: Luckily, MoneyNing readers already know this. You did setup an emergency fund already right?
5. Take Time Out
In the real world we’re all doing our best to avoid going to jail, but in a game of Monopoly, a stink behind bars can come as a welcome reprieve from rental payments at every turn. Back in the real world remember that you need a reprieve too, whether just for a minute or one day or one week, it is important to step back from the grind and remember why you’re doing it all – and to see whether your efforts are having an impact.
Taking some time out gives you a chance to refocus on your goals, approach obstacles with new enthusiasm and look at savings or investment strategies which aren’t working, and find a way to fix them.
6. Shortcuts are Not the Answer to Success
The luck of rolling a double is rewarded with another turn, but if you try and take a shortcut through the game by rolling three doubles in a roll, you will land yourself in jail. Then you’ll find yourself stuck behind bars, unable to expand your property portfolio and in some versions even forfeit rental income.
Similarly, stop looking for shortcuts to financial stability and wealth and acknowledge that you have to work hard and you have to plan to be successful. You’ll need to make the most of opportunities which come your way and while a double roll will get you ahead, don’t be greedy because you might just land yourself in jail.
To be a successful Monopoly player, you will learn to budget and plan your purchases so you know how much money you have, and how much you’ll need to get around the board again. Monopoly budgeting can also teach vigilance in your personal finance because if you just depleted your cash reserves, you will be treading on thin water until you pass Go.
8. Small Steps Can Make a Difference
If you can’t afford to invest in a four bedroom home with a high rental income, that doesn’t mean you are not ready to enter the property investment market. If the lower income neighborhoods of the Monopoly board have taught you anything, you will know that even the cheapest property on the board with houses and then hotels on the land can still sting your opposition with $450 in rental payments just as they are passing Go.
Therefore, don’t be discouraged from investing or saving just because you have to start out small. Even small investments can see big capital growth over time.
9. Work On Your Relationships but Don’t Rely On Those Relationships
As you make your way around the board you will soon realize your chances of landing on three properties in a series are quite slim. This is where you need to be able to cultivate the relationships with your fellow players to negotiate, sell or swap to secure a set and move onto the construction of your houses.
In the real world you also need strong relationships with trusted professionals and advisers – an accountant, a lawyer, a financial planner – as these people can help a small business grow or be the answer to your next employment opportunity.
However, don’t forget the lessons you learned from a big brother who aimed to send you bankrupt every time you played. While relationships are important, you can’t always rely on them. Ultimately the success of your personal finances comes down to you, so build a diverse asset base and a healthy emergency fund. While you can utilize the services of other if you want to, there is no better alternative than being self sufficient.
This is a guest post from Alban, who helps run Home Loan Finder, a home loan comparison website.