I recently got a hefty HOA assessment. My initial thought: “Ugh, this is just like drawing a bad 'Chance' card in Monopoly.” Except rather than handing over pastel paper play money to the bank, I had to, you know, pay with real money. Growing up, Monopoly was one of my favorite games. Any time I was home sick from school, my grandma would come over, we’d set up the game and, for hours, our tokens (my little Scottie dog and her top hat) would trot around the board. Little did I know at the time, but Monopoly was passively relaying some pretty spot-on money and real estate lessons. When your opposition is cash-strapped and needs to unload properties, it’s akin to a buyer's market, yes? Here’s what else the board game gets right about investments and managing money.
1. You need to have an emergency stash of cash
Do you wince a little when you pull from the “Community Chest” or “Chance” card piles? In some cases, you’re lucky, nabbing a “get out of jail free card” or coming into some money. Other times, though, you’re instructed to hand over money to make “general repairs” on all of your properties or you’re notified you were elected as chairman of the board, and have to pay each player $50. (That card always confused me!)
Drawing those random cards are akin to fixing burst pipes or paying a special tax assessment in real life. And, of course, it helps to have an emergency stash of cash so you don’t have to borrow from the bank (i.e. mortgage your unimproved properties in Monopoly or, in real life, rely on your credit or start selling your furniture on OfferUp).
2. It’s best to diversify your investments
Yes, you can rake in some serious cash by snapping up Broadway and Park Place and popping up hotels on those high-end properties. But, every Monopoly player learns that it’s good to purchase property all over the board so that they can collect rent from opposing players at each turn of the board.
We won’t get into the debate of whether it’s better to own railroads or utilities. But one thing is clear: It’s best to have a diverse portfolio.
3. Generating passive income will give you an advantage
You pass go and collect $200. That’s a given (unless you get sent to jail). But, in order to stay afloat in Monopoly, you need to be generating some passive income by charging rent on your properties.
Similarly, making an investment by purchasing a property could create a steady stream of revenue for you down the line. Investing your money in a 401(k) or Roth IRA retirement account also helps your money grow—without you having to lift a finger.
4. Negotiating is a powerful skill
Once you’re an hour or so into Monopoly, the real estate wheeling and dealing starts to happen with your board game mates. Of course, negotiating skills are important here and are good practice for real life, whether you’re bidding on a home, negotiating with your employer for a raise or trying to get the best deal on a vehicle.
5. Patience is important
When you get out of the gate, it’s easy to want to snap up as much property as you can, hoping you can eventually develop it and charge your opposition every time they land on your properties. But, when you get all of your money tied up in real estate investments, and don’t have a steady cash flow, it can be tough to stay afloat.
You should take risks–but make sure they're smart risks. And always do your research first.
Take a lesson from Warren Buffett, who, in the late-1990s was criticized for not investing in Internet companies while others took some painful losses after the dot-com bubble burst, Investopedia points out.
This story originally appeared on Don't Waste Your Money. Checkout Don't Waste Your Money for other great tips and ideas to make the most out of life.
