One of the toughest things in life is to set a long-term goal and stick to it. If you get out of college and know your goal is to be financially independent by age 65 and peg a number to that, say, $1 million, on day one you know where you have to go. If you see every $1,000 you tuck away as a point, that type of thinking works. I think it keeps you focused on going straight toward your goal and not getting sidetracked by something that's tempting but off-target, like an expensive vacation or a fancy car.
You mention in your book you've seen some highly successful workers—doctors and lawyers—earn a hefty salary but they still fall into debt. What can Monopoly teach people about debt?
It teaches you debt can control your life. If you owe $10,000 in credit card debt, you not only owe the principal but you're paying a stiff fee for interest. Suddenly, you're not working for money—money controls you. Now, in Monopoly, you have a credit reserve in a mortgage value. Let's say you have 10 properties, so you have 10 opportunities to lean on the bank for setbacks or if you want to mortgage properties to bankroll more investments. But when you mortgage a property, you lose its income. So now you owe the bank a lot of money and you have no money coming in. The same can happen in the real world.
[Read: 5 Investing Mistakes to Avoid.]
Can people use their own house rules, or do you have to play by the book to learn how to be a better investor?
You have to play by the rules. For example, a lot of people play you put all the money that would otherwise go into the bank for penalties into free parking. While that's a lot of fun—and we all love hitting the jackpot—the point of the game is to bankrupt your opponents. Putting more money up for grabs extends the length of the game; you're really just giving players who are down and out an easy way to get picked back up financially. Most people in the real world who are in debt don't have that opportunity, so you want to keep the game as similar to the real world as possible.
In your book, you equate the winner of the game to the player who nurtured and grew the best nest egg. What are some commonalities between them?
Everybody starts Monopoly with $1,500, which just so happened to represent the average family income in 1935 when it launched. As a starting point, if you nurture the $1,500 through wise decisions, you'll turn it into $6,000, $7,000, maybe $8,000 by game's end. The symbolism there is if you make wise financial decisions in Monopoly, your initial nest egg multiples by four or five times, which is similar to what you do with human capital: You begin with your starting salary at your first job, and save and invest that money to work up to a nice nest egg.
You mention in the book handling money in Monopoly triggers a range of emotions. Are they similar to ones investors experience?
Yes, although I think in Monopoly they're shared more publicly. We gnash our teeth if we lose money, or we complain. On the other hand, we feel terrific if we've done something well. It dramatically improves our level of confidence and security if we invest well. Just like in the real world, our emotions can affect our investing strategies.
I know when I played Monopoly as a kid, I usually lost; let's blame it on my misguided faith in the top hat. What lessons can you take away from the game if you aren't the winner?
Well, the first is to be glad it wasn't real money. Then you have to ask yourself, 'How did I lose it? What determined my money was taken from me?' Allow that instinct to carry over into your own life. You should realize someone else always wants your money. Losing your [Monopoly] money is actually a good thing—if you can answer why you lost it.