Many of us use a default money-management system that goes something like:
- Do I have money?
- If yes, then buy it (whatever “it” is)
If no, then don’t buy it (or worse: then buy it with the credit card)
That works tolerably well in an employee’s life. Not great — it will never get you ahead, financially. But since a fixed amount of money keeps rolling in every other Friday, you can do this for years and not notice that you’re falling farther and farther behind.
It won’t work for you. If you’re going to run a business, you need to be able to spend your money intentionally to further your goals. If you’re going to be self-employed, you need to run your personal finance as a business. Either way, money management is in your future.
It’s hard to practice with your own money, though, because it’s a really complex resource-management problem. Board games often simplify problems for the sake of easy game play; this feature, in turn, allows you to practice on easy problems, then harder problems, then really hard problems, until you’re ready to tackle actual money management. I hereby provide, therefore, three games that can help you be a better businessperson.
In this game, you’re acting as a rail baron in the 1800s: you have your starting capital of $50 million, and you must invest it wisely to (for example), build track to Detroit, pick up steel, then build track down to Omaha to drop it off, in order to get paid. The winner is the first to build a nationwide rail network and get $250 million in cash.
How the resources work
You don’t pay anything to operate the train — no coal, no wages, and no maintenance on tracks. And it costs you nothing to pick up a load of steel or fruit. So there’s very little cashflow management necessary — you just have to figure out which set of deliveries will make you money the fastest.
How to do that in your life
Keep enough cash on hand that you can always buy the materials you need to make your product (raw materials, products from your wholesaler, employee salarties, etc), and keep enough cash on hand that you can always pay your day-to-day expenses. To be safe, you’ll probably want to keep at least a 3- to 6-month buffer in your account: 6 times as much as you usually spend on a month.
Whenever you make a sale, first use the proceeds to refill your buffer to the desired level. Everything left over is your net profit, and may be used for whatever projects or luxuries you choose.
This is a great plan, and certainly the easiest and least stressful method of managing your money. But it requires that you have 3- to 6-months’ worth of expenses sitting around in cash, and that may not be an option at the moment. If you’re not quite that wealthy yet, read on.
Empire Builder, Mayfair Games
(If you’d rather work in a different area, you can also get EuroRails, Australian Rails, India Rails, China Rails, British Rails, Russian Rails, Lunar Rails, and Martian Rails).
In this game, you’re acting as an early European settler in Puerto Rico. Your goal is to gain honor and glory by sending good stuff back to Spain. But the good stuff can also help you expand your operation, and thus result in more good stuff.
How the resources work
Everyone starts with a certain small amount of money and land. Throughout the game, you make decisions that allow you to get more money, more land, cultivate the land you have, and then send the resulting goods either back to Spain (for victory points) or to the market (for money). To win, you must strike a balance between sending goods to Spain (which is, after all, your goal), and selling them in order to fuel further growth.
How to do that in your life
Figure out what you want from your business. Are you in it to replace the income lost when you got downsized? To provide for your retirement? To create an asset you can pass on to the kids? To learn more about business? To spread the word about a great product? To change the world?
Business management consists of deciding how to allocate limited resources towards possibly-conflicting projects. Each time you make money, check out your financial situation: how much money do you have? How much will you need to meet your basic operational needs in the next month? How much will you have left over? Should the leftover be withdrawn from the business to help support your goals? Or reinvested in the business to support growth?
Puerto Rico, Rio Grande Games
Race for the Galaxy
In this game you are a race of sentient beings that is, well, racing to populate the galaxy. You play cards from your hand to build space stations, settle planets, and to produce and trade goods from your planets. At the end of the game, the person with the most victory points wins.
How resources work
Almost all of the accounting in the game is done with the cards themselves, which is good inasmuch as you don’t have a lot of fiddly bits to keep track of. But it means that your cards have to serve a lot of different purposes: they’re the things you build (space stations and the like) and the places you settle (planets) and the way you pay for those developments, because every card you play must be “paid” for by discarding cards from your hand. So in deciding what to do, you have to determine if each card is most useful as a development, or as payment for another card.
Also, you start with 6 cards in your hand, and the average cost to play a card is 3. So you have to pay very close attention to how much things cost and how much you have available to pay, because you’re running close to the wire most of the time.
How to do this in your life
Actually, odds are pretty good that you’re already doing this in your life: you have about twice as much stuff to do as you have resources with which to do those things. And you have to figure out how best to use those resources to get maximum value, given that you can’t have it all.
The advantage of Race for the Galaxy is that (a) losses don’t go on your credit report, and (b) each game takes a lot less time than a month of real life does. So you can get a lot of practice in without hurting yourself when you screw up.
Race for the Galaxy, Rio Grande Games.
Play Games! They’re Good!
Most mammals (possibly most creatures) learn through play: puppies get good at fighting by wrestling, kittens learn balance by jumping on and off of narrow ledges, and humans get good at social interaction by fighting over playground equipment.
Games are a great way to spend quality time with friends and family, to do something interactive instead of watching TV, and … to learn new skills.
Resources for Further Reading
The Role of Finance in business