**Cashflow 101 and percentages**
**Reply:** 3.1.1.2

**From:** Sim' Hampel

(In response to Geoff Whitfield's post)

My experience with playing Cashflow 101 is that there tend to be two extremes of strategy that inexperienced players will take.

The cautious types will make a bit of money on some shares or some property trades - without taking too many risks. This money they then pour into paying off their debts, figuring that one of the best ways to make it easier to get out of the rat race is to decrease your expenses.

These people will generally get out of the rat race successfully - although they will rarely win the game with more experienced players around... this strategy simply takes too long.

Essentially this becomes like a retirement strategy... save a bit, decrease some expenses... eventually you will be able to stop work, but you will not have much time left in life. There should always be a time limit on the game, as there is a time limit on life. Failing to exit the ratrace before the time is up, is losing the game. So the slow strategy is a rather low percentage one.

The other strategy is the "gung-ho" strategy of gearing to the maximum, some even to the point of being in a negative cashflow situation (they borrow the downpayments on the properties) on the hope that they will be able to sell the property (or shares) at a good enough profit before they run out of cash.

If it works (depends on luck mostly - if your cards don't come up or you land on a nasty doodad - or get downsized - or have kids - or... etc.), then this strategy often will get you out of the ratrace quite quickly. However, in my experience it has a very high failure rate. Essentially you are gambling on getting good cards. In my view, this is not a high percentage play either.

Going bankrupt is not an option... you cannot just dust yourself off and start again. Once you are bankrupt you have lost any chance of winning the game.

The goal is to win the game... if you are not playing to win, then all strategies go out the window - and you may as well be playing solitaire. There is no point in playing a game not to win... if you never win you have never learned anything, so what was the point ?

Note that I am not talking about a "win at all costs" strategy... I'm just talking about goals - if you set a goal and then don't pursue it then you have already lost. I am also saying that "I'm just playing for fun" is a pathetic excuse - you can play to win and still play for fun.

However the "I'm playing to learn from others or to teach others - so the game is more the means than the end", excuse does have some merit ;-)

So anyway, assuming that we don't have a good excuse, and we are playing to win, and failure is not an option, then surely we want a high-percentage strategy.

Look at the bigger picture then... say if we play a tournament of 10 games. The aim of the game is to exit the rat race with the fewest number of turns within the allowed time. A scoring system is devised to allocate points based on how many turns it took people to get out of the ratrace. Of course, zero points are awarded for failing to get out within the time limit or for going bankrupt.

So, the goal is to get out quickly and get out frequently. Note that being the first out will not necessarily win you the tournament ! Also note that it has nothing to do with how much money you made when you got out !

Now the low percentage strategies will not serve you terribly well in this position, as you need to get out more times than you don't. Like tossing a coin (which relies purely on luck), if you only play one game you have a 50% chance of choosing the right side of the coin. If you play 2 games, you have 25% chance of choosing the right side both times. If you play 10 games, you have less than 1% chance of choosing the right side all 10 times.

So someone who goes through life using high risk and low percentage games and often goes bankrupt, dusts themselves off and starts again with another high risk low percentage strategy will most likely never succeed.

Now of course this is over simplifying, and hopefully people do "learn from their mistakes" along the way - thus increasing their percentage chance of success, but I hope you can see where I'm going with this line of thinking.

Surely if we come up with a high percentage strategy (remember that saving cash and paying off debt is NOT a high percentage strategy because it simply takes too long) for getting out of the ratrace before we are out of time (ie. too old), then even given some failures, we are much more likely to succeed.

So the obvious question remains... what are the high percentage strategies ?

Well... that's a topic for another post, but I will let you all in on a secret... I think that most of these "magical" high percentage strategies for real life have already been discussed right here on the forum, and our successful property "gurus" have been using them for years !

So what about high percentage strategies for winning Cashflow 101 ? Umm... I'll get back to you on that ;-)

*Sim' rushes off to practice his Cashflow 101 and to see if he can work out those high percentage strategies before someone challenges him to a tournament*