If you prefer experiential learning, then the best way for you to learn financial planning is through Nintendo’s hit game, “Animal Crossing”(AC). If you have already played the game, then you will know how important money management is, in order to survive this game. For now, let us keep the gameplay aside and focus on the finance part. However, before we get there, here is a gist of the game’s storyline.
In the game, you own an entire island. However, you often get loans from one of the characters Tom Nook. Hence, for repaying it as well as to customise your island, you will take part in various chores. Although it is appealing, the real fun is making off of it. For instance, selling the fishes that you caught for “bells”. Above all, you have to make a profit from your sales so that you could sustain life and have some cash reserves to invest in “Stalk Market”. Through this article, we will draw an analogy between the game and reality.
Arbitraging is a crucial element that helps to expand your business at a rapid pace. The underlying concept of arbitraging is reselling for a bigger profit margin. In other words, you buy a product from a seller and then, you sell this to a buyer at a higher price, to make a profit. Surprisingly, this is very profitable. In fact, it is more profitable than producing a product on your own. While playing “Animal Crossing” you would surely notice this concept. In the game, if your island has some fruits and you sell it for “bells”. However, if you are to purchase fruits from a different player’s island and then sell it on your island, then you can earn even more “bells”.
The law of supply and demand
The very fundamental law that drives any business operation, the law of supply and demand is accurately depicted in the game. Essentially, the law states that with an increase in demand the seller would increase the prices. Furthermore, when the price is high, buyers will demand less while the seller will supply more. However, this changes if a seller sells a popular item. In AC, the prices for a particular cat named “Raymond” skyrocketed after the character became popular online. Hence, if you see high demand and a guaranteed purchase, supply your product at a higher price. Now you know why companies like Apple Inc, sell their first wave of iPhones at a relatively high price. This strategy, however, is called “Creaming Pricing”
If your objective is to own that new Lamborghini or Tesla, then you must sort your budget. If you still don’t understand the significance of Budgeting, then it is highly recommended that you try “Animal Crossing”. The game flaunts the importance of building a budget all through its storyline. While you are given an island to make money, if you venture out and spend all of your hard-earned “bells” then you can’t spend on pricey things. In fact, it is these expensive things that play a pivotal role in your game progress. Just like how, Zen Bridge, which costs 228,000 “bells” , is essential for collecting more “bells” across your island and cliff.
Prioritise high paying tasks
If you want a lucrative career then you can not waste time on jobs that pay less than what you deserve. However, at the onset, you might have to struggle a bit, but over time you must prioritise better-paying tasks. In the game, you rely on manual labour to earn money. But once you have made a sufficient lump sum out of it, you can work on other tasks. Such as, catching tarantulas, digging up fossils, or planting rare flowers to catch expensive bugs. Let’s face it, life is pretty expensive. You can’t afford to stay in your comfort zone and work on low-paying jobs to sustain life, despite realising that what you’re doing for money isn’t sufficient enough.
The ideology behind negative prices and interest rate
Recently, the price of oil went negative. Although you might think that it is worth $0, the concept of negative prices does exist. If you don’t understand it, then here’s an analogy to “Animal Crossing”. In the game, having more “turnips” than required will unnecessarily clog your inventory. Meaning, you are paying the price for producing something in excess. Similarly, oil prices dipped to negative because the price at which it would be stored until sold is larger than what it could sell for. Hence the net value is negative.
Therefore, a key takeaway from this, is that do not hold on to something for too long hoping for a better price. On the other hand, if you have excess cash, invest in bonds with negative interest rates. By doing so, you are paying the seller interest to hold them. Similar to how leaving the “turnips” as it is will make them vulnerable for theft.
If there is one investment that all economists jointly agree upon, then it is the infrastructure investment. To clarify, “infrastructure” here refers to the physical systems of a business. This includes transportation systems, land, communication networks, computers etc. This holds true in the “Animal Crossing” game. Initially, when you’re put on the island, you won’t have enough resources to assess the place. Hence, you are encouraged to invest some of your in-game money to create bridges over rivers and create stairs in cliff-sides. Subsequently, this will help you move around the places and collect “bells” easier without wasting too much of your time. Now you know why the U.S government’s Interstate Highway System is crucial for its economic growth.
Selling old utilities
Oftentimes, you may find yourself amidst a pile of useless junk. Old and used utilities that don’t serve a purpose in your life. But just like how “One man’s trash is another man’s treasure”, you can earn some good amount by selling them on eBay. In fact, this is a popular way of earning “bells” in “Animal Crossing”. Players often sell their old stuff to pay their mortgage or upgrade your lifestyle. Similarly, you can sell your old television, game console or even your shoes on eBay. To sum up, if you are short of money, start scouting for such utilities.
International trading and cross-border collaborations
Cross-border collaborations and international trades should be taken seriously. If there’s something that “Animal Crossing” taught us about teams, then it would be the possibility to trade furniture. Moreover, some players let others access their market to sell some turnips. Similarly, investors often collaborate with others to diversify their portfolio gains. This collaboration need not be restricted to their familiar border. In other words, it would be illogical to not take advantage of profitable gains found outside their country.
Start investing if you are tired of 9-5
Similar to how prioritising high-paying tasks assist you in achieving your career goals faster, investing can help you get passive income. This passive income will play a crucial role in your career progression. Once you have saved enough money from your 9-5, start finding effortless ways to make money. Much like the “turnip stalk market”, planting money trees, and saving all your bugs in the game. Furthermore, there is a limit as to how much you could earn per day before getting exhausted. Hence, do your homework and find ways to make passive income. Stock Market and Arbitraging are good to begin with! Also, invest in infrastructure(especially Land) if you don’t need the money urgently.
Life progresses with money
Last but not the least, you need money to thrive and live a peaceful life. Of course, you can debate on “Money doesn’t buy happiness”, but deep down we all know we need money to progress in our life. Just like how you can’t progress in the game without paying your debts to Tom Nook. Hence, materialise your plans and manage your cash flow wisely. Work on high-paying jobs, budget properly and if you can, arbitrage to get some passive income. Always make a note of your cost of convenience and try to exercise self-control to stray from meaningless investments. If you can do all of this, then you have covered a huge chunk of finance and money management!