THE RAT RACE (by Robert Kiyosaki)

The rat race is a term first used by Robert Kiyosaki.

The rat’s career perfectly represents the way of life of today’s society, a society slave to the money that usually lives almost without reaching the end of the month and always waiting for the next salary.

I’ll tell you what the rat race is and how to escape it, and although you may never have heard of it until now, he assured you that you’ll love it.

The educational system is designed to keep you in the middle class, after almost 20 years of academic training do not teach you anything about money, personal finance, wealth management, taking out a mortgage, managing your salary …

Financial education is passed on from parents to children and our parents have done their best: study, get a good job or become a civil servant and wait for your pension.

“We spend money we don’t have, on things we don’t need, to impress people who don’t care about us.”

Will Smith

As a consequence of the lack of financial education and the fact that we live in slavery to our debts, the rat race arises.

✅ The Rat’s Race, an all-too-common Story

I’m going to tell you a story… Gina studied nursing, and although she didn’t like it very much, she knew she had “enough career opportunities” so she soon started working.

She and her boyfriend, Brad, decided to buy an apartment. Buying and not renting, because as they were educated, renting a house is throwing away money, and what better investment than brick?

Then came the wedding. Marrying in style and with a dream honeymoon… Things didn’t go very well, and the mortgage was followed by a loan to cover the wedding expenses.

The car started to give him problems so they decided to buy a new one. Also, since they didn’t have children, they could afford to work longer hours and increase their income as a solution to meet their expenses.

So when they were 30, they had the complete package: salary, mortgage, loan…

Gina became pregnant and they had a child, so she asked for a reduction of the working day. Because they didn’t work overtime, they began to use credit cards to make ends meet.

They had a second child, and the apartment was too small for them, so the next step was to buy a bigger house.

The cheapest ones were in the outskirts so they would need a second car to go to work, take the children to school or to extracurricular activities…

Gina, as soon as she could, went back to her usual workday and Brad asked for a salary increase to face the mortgage, the loans, the nursery, the credit cards, the children’s dining room, the morning classroom…

Although his income increased, the situation didn’t improve. You know why? Because your expenses grew at the same time as your income. In other words, the higher your salary, the more you spend, the higher your standard of living, so you have to keep working to cover those expenses.

This is what is known as the Parkinson’s Act applied to finance: your expenses will expand until you spend the entire salary.

Years went by, and although the car credit might have already been paid, now, after the communion of his son, they had the “installment sale” of the trip to Disney …

✅ What is the Rat Race?

I think you’ve understood it perfectly, and I’ll tell you that it’s the way of life in which most of today’s society lives. It is a normalized fact to live stressed, indebted, being slaves of consumerism and accustomed almost to live a day waiting for the next salary.

Without realizing it, there you are, in “the rat’s career” as Kiyosaki defined it in his book “Poor Rich Father Father”, like a mouse that runs non-stop inside its wheel and doesn’t move anywhere, but it can’t get out of it either.

Consumerism and debt keep you tied to your work, and your work marks your rhythm of life. If you are lucky enough to work on something you like and your schedule allows you to reconcile work and family life you may not feel so reflected in this situation.

But if you start the day early, you don’t come home until 8, you’re stressed, you run from one side to the other trying to get everything and your refuge is waiting for the weekend to rest, live, do your hobbies, be with your family, do everything you could not do during the week … read on because this article is for you.

I leave you with a great video to understand the race of the rat, if you have not seen this famous video, I recommend you do it right now:

✅ Don’t enter the Rat Race!

There are some unavoidable expenses that we should all be able to afford, such as housing, transportation and food, so it is normal that someone who is starting to work and earns little cannot save much.

What you shouldn’t do is raise your standard of living as your income increases, which is something that most people do and makes it impossible to save for a lifetime.

Earning more money, whether due to an increase or other reasons, doesn’t justify starting to spend more money.

Even if your income goes up, don’t buy a more expensive car, a more expensive mobile phone or a more expensive house, as this way you will never have money.

If you earn $1,500 a month and are able to live well on $1,200 a month you can save $300, 20% of your salary, which is very good.

If one day your salary rises to $2,000 a month, don’t increase your expenses to $1,600 following that 20% saving, continue living with the $1,200 of before and start saving $800 a month, assuming 40% of the salary.

If you want to achieve financial independence or financial freedom, leave the rat’s career, stop increasing your expenses just because your income increases.

There is a quote from the film The Fighting Club that perfectly sums up the rat’s career:

Advertising makes us want cars and clothes; we have jobs we hate to buy things we don’t need.

We have jobs we hate to buy things we don’t need.

Stop buying things you don’t need and you can stop working on something you don’t like.

✅ Still don’t know if you’re in the Rat Race or not?

Well, you can ask yourself some questions that I’m sure will clear it up:

  • Do you have a control of expenses and a budget?
  • What you earn gives you to save?
  • Or is what you earn the same as what you spend?
  • Could you stop working for a while and still have income to support you? Or does the money you earn only depend on your time invested?
  • Do you call your luxuries “needs”?
  • Do you buy things you don’t need to feel better?
  • Do you complain about what you earn and think that if you earned more all your problems would be solved?
  • Do you use your credit cards more than you should and even if you don’t have money in the bank to back them up, do you always carry them with you “just in case”?
  • Do you buy things on promotion even if you don’t need them, and even worse, on credit?

But something if I tell you, and that is that when your expenses grow at the same time as your income, that is, the more you earn, the more you spend, you never have enough money and you always think you need more.

There you are, and without realizing it, in “the race of the rats”, like a mouse that runs non-stop inside its wheel and doesn’t advance anywhere, but it can’t get out of it either.

And it’s not that it’s wrong to have a house, or a car, or to make a trip, or to please yourself, the point is that, if you decrease your liabilities and focus first on investing your money and generating assets (or in penny words, on things that give you money), because over time those assets will give you the money to spend on what you need and want.

➨ But what is a liability?

Well, a liability is an expense, it’s something that takes money out of your pocket.

An example might be buying brand name clothes, it might be very nice and very comfortable and of excellent quality, but it’s an expense and it doesn’t generate any economic benefit in general terms.

On the other hand, an asset is something that puts money in your pocket, such as a business or real estate.

At first you will invest your money and your time in it, but then that asset will give you income with which you can pay your expenses.

✅ How to escape the Rat Race?

The main reason why you have reached this situation is the lack of financial education. You still have time to give another meaning to your life, and to take control of your finances, because let me say:

If you do not control your economy, someone else controls your life.

  • Wake up: I propose you the following exercise of reflection.
    • Calculate how much money you’ve made over the years you’ve been working.
    • Calculate how much of that money you have kept.
    • Depending on the result, you will know how your Personal Finances are.
  • Say YES to financial education.
    • Financial education is now available to everyone, on blogs like this one, on portals like Rankia, on the internet, books,…
    • And if you don’t have time put on your headphones and listen to podcasts while ironing, driving or being in the park…
    • No excuses! Learn to manage your finances and you will manage your life.
  • Say goodbye to consumer slavery.
    • As the great Warren Buffet says, “Before you buy something think, what will happen to me if I don’t buy it?
    • If the answer is “nothing,” don’t buy it, because you don’t need it.
    • When it comes to spending, you have to differentiate between what you need and what you don’t need.
    • Small actions today will lead you to a better future.
    • Do not spend more than you earn or try to live above your means.
  • Pre-save: Don’t underestimate how important it is to spend a minimum of 10% of your salary, nothing more to receive, and live with the remaining 90%.
    • With this simple exercise you will be able, little by little, to be saving money, which will allow you to have a financial mattress to face life in another way, to get rid of your debts, to change jobs if you need it, to reduce your working day or even to bring forward your retirement. Remember to pay you first.
  • Take the step from saver to investor.
    • Don’t just stand there and take another step.
    • You must give your savings a return that at least exceeds inflation so as not to lose purchasing power.
    • Acquire assets that generate cash flows.

✅ Can Trading take you out of the Rat Race?

Many of those who come to trading are in search of that longed-for financial freedom, but this is not as simple as they paint it and you have to put a lot of each one to achieve it.

Because trading is not magic, it requires a lot of training and practice. Something you should be aware of if you want to get into this.

The rat’s career tells you that in the end we work to get money to borrow, entering a vicious circle that does not end. As if it were a cage of a Hamsters and its wheel.

Trading is a job and must be taken as such. The difference is that it depends practically on ourselves and how we do it.

Can we achieve financial freedom with it? Yes, it is possible. But keep in mind that success will depend on yourselves and your intelligence.

There will be no bosses, no co-workers. It will be you against the market and no one else.

In order to beat it you have to train yourselves and be better every day. Your capital will increase, you must reinvest a good part of the profits for it to grow.

No “hey I’ve earned 200 euros, I’m going to have a drink with friends. No, don’t even think about it.

If to go apart a part to be given that some or another whim, but that the motive is always to reach the financial freedom. And this is only achieved if you make your money grow constantly.

If you work and you have a payroll, the growth of this will depend on your company. If you operate in the markets, the growth of capital will depend on your cunning and constant search to improve every day and be more efficient in your analysis. Above all if you dedicate yourself to forex, volatile market if there are any.

➨ Can you stay out of the Rat Race with Trading?

Yes, as long as you remember that money is to reinvest it, look for profitability and improve your day-to-day operations.

✅ Entrepreneur to get out of the Rat Race.

To get out of the rat race as entrepreneurs we must comply with the following laws.

  • Avoid debts.
    • Debt implies a negative vital energy. Maybe it seems to you something very freaky what I tell you, but seriously, the fact of owing money weakens us, takes vital energy away from us, for that reason we must avoid indebtedness to mount any business.
    • Robert Kiyosaki talks about the concept of good debt and bad debt. Good debt is debt that pays itself while bad debt is paid with our future income. In other words, we are going to have to pay with what we do not yet have.
    • On the other hand, according to the theory if we are going to generate income, when we start a business, there should be no problem.
    • Well, you’re wrong, if things go wrong you end up with serious problems with the bank. I don’t recommend it.
    • Only when we have more than validated our business idea and we know with a very high success rate will we be able to finance our project, then we go into debt.
    • For example:
      • Imagine you want to set up a hairdresser.
      • You’re a hairdresser but you haven’t had a business of your own, in that case we don’t get into debt.
      • The way to do this would be to first create a customer base in such a way that the day you open your hairdresser’s you are assured of income.
  • Learn how to manage your money.
    • The financial freedom goes from knowing how to manage your own money and with very little being able to create a capital.
    • If you don’t have the notions of money management it will be difficult for you to achieve financial freedom by undertaking.
  • The security fund.
    • To start a business you have to do it safely, starting a business means not to produce or enter for a while.
    • Many entrepreneurs run out of money before they are able to generate income in a sustainable way
    • So you need to have your expenses covered for at least two years, long enough to see that you can generate income on your own and in case you don’t look for a job.
    • In addition, the security fund will give you peace of mind that will be of great help when starting your business.
    • Think that when we start with our first clients it’s all nerves and worries. There is no time to think about anything at this stage.
  • Loss strategy.
    • When starting a project, all possibilities have to be considered.
    • That the thing doesn’t work has to be a possible option. That’s why we have to have a plan b, a plan c and a plan d in case everything goes wrong. You have to be prepared.
    • That the thing goes wrong does not have to end up being a slave of the banks for 20 more years, we undertake to have a better life.
  • Passive income strategy.
    • Leaving a job to undertake does not seem to me to be a good way to achieve financial freedom. Rather, it seems to me to be the best way to lose it.
    • You have to have consolidated income when you start. If you don’t have them, it’s like skipping several steps…

I know that a lot of people don’t take it into account, the difference is that we are going to make it.

We live in a society in which it is normal to live in debt, stressed out and run from one side to the other.

To have two cars, a house that you will end up paying for at 65 with luck, to make expensive journeys, to work many hours and almost not to be able to arrive at the end of the month.

Is this the life you want? Is it worth mortgaging your future income to live above your means? Although this may seem normal, this attitude can be very expensive…

Generally our financial education is minimal, and what little we know is what financial institutions, government and large corporations teach us, can you believe?

If they are the ones who benefit the most from this race, because they are the ones who receive our money, will the information they give us help us get out of it?

That is why one of the keys to get out of the rat race and avoid falling back into it is to educate ourselves and learn how to use our money intelligently.

But this goes a little further and has to do with our priorities.

If we really want, not only to get out of the “rat race”, but also to be financially free, it is super important to rethink our priorities. It is choosing to consciously restrict ourselves and to work focused today so that tomorrow those fruits will allow us to live the life of our dreams.

It is to put up with the desire to make a sancocho with the goose that lays the golden eggs, so that in return she will give us a golden egg every day.