What video games can teach us about money

[Mounds]

I notice a trend in a lot of video games. Often times, there is a really easy way to make money that can be repeated to no end. For example...

Fable 3. Fable 3 is a recent video game that allows you to make all sorts of choices and it happens to be surprisingly easy to make money. Here's how you do it...

-work a job until you can afford a house
-buy house and rent it out
-work a job until you can afford another house
-rent it out and keep collecting rent

You collect rent every five minutes. So if you own a ton of houses and shops, you make a lot of money per five minutes, regardless of what you are doing (ie. bumming around, on a quest, whatever). Eventually, you make so much money off of the rent, you can buy another house with each pay check. Money becomes a non-issue.

Try applying that logic to real life. Invest time, get money. Invest some more time and your new income. Eventually, you should be able to only invest money while doing whatever you want. There are people who live this life. Wouldn't you love to be one of them?

My dream is to supercharge this theory. Many people seem to build passive income for one of two reasons: spending money or to quit their full time job. I happen to love my full-time job so I won't be quitting. I already have spending money so I don't need more of that either. I'm going to use my passive income to bake a PIE.... acronym for PASSIVE INCOME EMPIRE!

Normally I would talk about what the endgame is, after I've baked my PIE. This time, I'm not going to do that. I've noticed it puts my focus on the wrong thing (visions of grandeur, laying on the beach, working less). Right now, the focus is on working more! I don't give a rip about what comes after. All I need to know is it's going to be great.

Anyone got ideas of how we can apply these principles to real life? I've got a few...

-e-books
-freelance articles
-investing in the stock market
-apps for various gadgets

Please add more if you can think of anything!

-Tim

[WarrenG]

I just had an idea:

-work a job until you can afford a house
-buy house and rent it out
-work a job until you can afford another house
-rent it out and keep collecting rent

[WarrenG]

Also, anything you can get royalties from - I hear if you write a popular christmas song you're set for life.

[escapeplan]

Yes it would be fantastic if real life were as simple as the computer games. One of the problems with real life is that you want to make the RIGHT decisions because the wrong ones cost you time. My view is that when it comes to making money passively you must follow the markets.

Building websites and designing e-books may seem a good idea logically but the effort and time these methods take to make real money can be excessive. Meanwhile the clock of your life goes by, tick tocking even faster with every passing year.

Property is always a good bet if the yields add up, and it's less of a gamble than the stock market- it just depends how quickly you want to do things. Even the stock market has varying degrees of "gamble". You could spend hundreds of dollars and hours of your life building up a "passive business", or you could go and buy an antique and re-sell it on for hundreds of profit. What I'm trying to say is that in those early days, don't worry whether the income is passive or not. Just focus on getting more income via the quickest possible means- passive or otherwise. When you have the money to invest in more property, shares with dividends, art etc... then you are truly living a passive income lifestyle. I'm not there yet, but it's the strategy I'm working on and it's rapidly getting closer!

[Mounds]

Originally Posted by WarrenG

I just had an idea:

-work a job until you can afford a house
-buy house and rent it out
-work a job until you can afford another house
-rent it out and keep collecting rent

Lol, too big of a headache for me. I have no desire to be a landlord.

[Mounds]

@escapeplan - Good advice on following markets. I like that idea a lot and I'm actually practicing that in my personal business.
I used to read about "following markets" and didn't really know what it meant. Rather, how do you follow a market. In my experience, it's a matter of becoming involved in whatever market your looking at. Read all the information you can find (there's magazines on almost anything these days), attend the seminars and read the paper.
My major reasoning for now looking at real estate is the maintenance aspect. My father owns four or five properties and if there's no one living there, that's a lot of grass to maintain, things to fix, on and on. Not for me thanks!
I'm a lot more attracted to digital products that I can produce in my spare time. Even oddball things like breeding mice, crickets and meal worms as pet food (all you do is throw some food and water in the tank; easy to implement in my day to day life). I also like things that are easy to stop.

[escapeplan]

Originally Posted by Mounds

@escapeplan - Good advice on following markets. I like that idea a lot and I'm actually practicing that in my personal business.
I used to read about "following markets" and didn't really know what it meant. Rather, how do you follow a market. In my experience, it's a matter of becoming involved in whatever market your looking at. Read all the information you can find (there's magazines on almost anything these days), attend the seminars and read the paper.
My major reasoning for now looking at real estate is the maintenance aspect. My father owns four or five properties and if there's no one living there, that's a lot of grass to maintain, things to fix, on and on. Not for me thanks!
I'm a lot more attracted to digital products that I can produce in my spare time. Even oddball things like breeding mice, crickets and meal worms as pet food (all you do is throw some food and water in the tank; easy to implement in my day to day life). I also like things that are easy to stop.

About properties: Appartments are better for residential letting primarily for the reasons you stated. Also have a look outside the US- think Europe and I mean places you can get cheap properties (think credit cards not mortgages- use google for this, you'll understand!). Then have a look at the yields, and then say you don't want to be a landlord!!! Anyway, only a suggestion- for what it's worth I'd hate to be a landlord in the US or UK right now.

[Mounds]

Never considered buying property overseas, not a shabby idea. I'm a dual citizen (Dutch and Canadian) so I wouldn't have a problem buying some property in The Netherlands or around Bosnia (wife's home country). I was even thinking about stuff in Arizona, as the houses are very cheap there right now. Another one is farm land, which I'm sure will only become more valuable.
At this time though, buying property isn't much of an option but it might be someday.
Can you give me a link on what you mean about credit cards? As in, property so cheap it can be bought up front?

-Tim

[escapeplan]

Originally Posted by Mounds

Never considered buying property overseas, not a shabby idea. I'm a dual citizen (Dutch and Canadian) so I wouldn't have a problem buying some property in The Netherlands or around Bosnia (wife's home country). I was even thinking about stuff in Arizona, as the houses are very cheap there right now. Another one is farm land, which I'm sure will only become more valuable.
At this time though, buying property isn't much of an option but it might be someday.
Can you give me a link on what you mean about credit cards? As in, property so cheap it can be bought up front?

-Tim

Check pms

[Curtis2011]

Originally Posted by WarrenG

I just had an idea:

-work a job until you can afford a house
-buy house and rent it out
-work a job until you can afford another house
-rent it out and keep collecting rent

Many people actually do this in real life, in case you didn't notice!

[Daffy Duck]

Originally Posted by Curtis2011

Many people actually do this in real life, in case you didn't notice!

Indeed. Renting out a house can be a pain in the ass, but ultimately it's worth it, especially if you can find really good tenants. Don't lease it to college kids.

[goldberg]

Well unfortunately in the game of life it does not work that way. If there is a niche where you can make these profits then other people tend to get interested in them and they push down the amount you can make.
All the things you mentioned are by no means easy, they require hard work and at the end you have no guarantee of a stable income. As opposed to say becoming a plumber.

[Mounds]

That's why I say do both. Become a plumber and build your PIE on the side

[curiouslyrandom]

Thing is, in Fable 3 you aren't required to eat or sleep, they're optional.

The bigamy part was kinda fun, too.

[Angela]

Your thread reminds me of one of my favorite of Steve's blogposts, Your Wealthy Avatar.

Real life has more wealth building opportunities than all the virtual worlds combined.

[SnerpGoodWord]

The method you describe is called "value investing" and it's a very popular investing method.

Value investing is simply buying investments on the basis of maximizing future payouts relative to the cost of the investment, and then re-investing the payouts. There's some additional stuff that goesinto it dealing with the future value of money (aka inflation) and the probability that your investment will blow up somehow, but in general that's the idea.

So you're on the right track

However, the world is not like Fable. Video game investments have a tendency to pay off at astounding rates, all while producing no hassles for the investor. Hell, videogames typically don't even have taxes. Videogames also tend to have trivial pricing models for assets, whereas in the real world there were only 2 or maybe 3 good times to buy rentals in the last 20 years. At many other times (especially the mid 2000's), you would have gotten hurt bad.

And of course you never have to repair those houses in fable. In the real world, you do. And if you hire a maintenance man to do it for you, the real world rolls a 15% chance your maintenance man is an untreated alcoholic who will embezzle your maintenance $s and turn them into cases of Southern Comfort. They should have built THAT into Fable

[goldberg]

Originally Posted by SnerpGoodWord

The method you describe is called "value investing" and it's a very popular investing method.

Value investing is simply buying investments on the basis of maximizing future payouts relative to the cost of the investment, and then re-investing the payouts. There's some additional stuff that goesinto it dealing with the future value of money (aka inflation) and the probability that your investment will blow up somehow, but in general that's the idea.

So you're on the right track

However, the world is not like Fable. Video game investments have a tendency to pay off at astounding rates, all while producing no hassles for the investor. Hell, videogames typically don't even have taxes. Videogames also tend to have trivial pricing models for assets, whereas in the real world there were only 2 or maybe 3 good times to buy rentals in the last 20 years. At many other times (especially the mid 2000's), you would have gotten hurt bad.

And of course you never have to repair those houses in fable. In the real world, you do. And if you hire a maintenance man to do it for you, the real world rolls a 15% chance your maintenance man is an untreated alcoholic who will embezzle your maintenance $s and turn them into cases of Southern Comfort. They should have built THAT into Fable

15%? More like 90% I have only had one tradesman yet come in and sort out the problem in good time and for what they estimated.