Learning about Debt Through Monopoly…

After much coaxing, I started playing monopoly again. My girlfriend loves board games, so she kept trash talking, after deciding that guilting me by telling me I didn’t spend enough time with her would not work. The trash talking worked because, well, I’m a guy.

The first time I played, I got beat. After figuring out what my mistake was, I handed her ass to her two times in a row. My mistake the first time was not leveraging the value of properties to buy more properties. This would allow me to break up monopolies because it would make it difficult to own a whole set. The reason she beat me was because I didn’t make the move to mortgage some of my properties to purchase every piece of land I landed on. I horded my cash, and bought what I could afford at the time, which is the old way of thinking about saving and spending.  As a result, she was able to build a monopoly, and bankrupted me. Had I purchased that plot of land, there would have been no monopoly, and I probably would have won again.

This applies to real life too: Good debt vs bad debt. If I have to finance my TV set, that is bad debt, because it will continue to depreciate, and not make me money. Plus I’m paying the interest. If I mortgage a house, that is good debt, because I’ll make money on it in the long run when I sell it. Same with investments. Taking out money to buy investment that yield a higher return than the interest is good debt. In Monopoly, the bank will mortgage your properties and give you the mortgage value. To buy it back, you pay the mortgage value, plus ten percent. But in the meantime, I have all this extra capital to buy all the property it would take to prevent a Monopoly from forming, and allow me to build my own. I can mortgage undevelopable sets to buy houses and hotels for my finished sets, and when someone lands on them, I clean them out. What I gain is more than what I spent in interest, so, good debt.

I mentioned earlier this week that I got a killer rate on a secured line of credit, and I will most definitely be putting it to use on some GOOD debt. Afterall, I want to retire in style!

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