Rat race is a term that Robert Kiyosaki first used and will be the focus of this article.
I will tell you what the rat’s career is and how to escape it, and although you may never have heard it before.
The rat race perfectly represents the way of life of today’s society, a society enslaved by money that usually lives almost without making ends meet and always waiting for the next salary.
Let’s look at a simple example to demonstrate what the Rat Race is.
Miguel is 23 years old and has just finished his degree and found his first job, in which he will be paid $1,200 a month. To celebrate his first salary, he buys his first car, for which he asks for a loan. Besides, due to the rent and some other whim, he cannot save any of the salary.
Years go by, and Miguel, at 26, already charges $2000 due to a series of promotions. Although Miguel lived before with $1,200, now he does not save those $800 that he overcharges since he lives alone instead of living in the company, and he goes to dinner at more expensive restaurants than before, so he still cannot save anything.
At 28 years old, Miguel and his partner, Ana, decide to get married and move in together, thus joining their two salaries and charging € 4,000 per month. Since they are already thinking about having children, they buy a house with 3 bedrooms, for which they ask for a mortgage for many years, since they have nothing saved from what they have worked so far. Between the mortgage, the loan of the new family car that they have had to buy, the trips, and other whims, the $4,000 are worth nothing, and they fly away, so they still cannot save.
Now with two children and 35 years old, Miguel and Ana already earn $6,000 a month between the two, a fairly high figure considering the way things are. The problem is that, between the mortgage, the car loan, the children’s private school, and the other luxuries, they still cannot save anything. After more than 10 years working, they have not saved anything, but they owe a lot of money to the bank due to the house and the car.
Miguel and Ana have been increasing their standard of living according to their salary increases and can no longer stop working since; otherwise, they will not be able to pay any of all their monthly expenses. Thus, Miguel and Ana continue working until 67, when they finally have the house finished paying, and they can also retire, finally. After a whole life worked, Miguel and Ana have practically no money saved; they only have their house and their pension.
The doubt remains that they will have a pension when they retire. If after all the years of spending the pension scam has already exploded, Miguel and Ana could well find themselves with almost no savings and with a pension so low that they do not even allow them to retire, having to get mini-jobs to make ends meet until they no longer have the strength to work more.
It represents the way of life that has a large part of today’s society, spending everything that is earned and increasing the level of spending each time the level of income increases.
We live in debt to buy things that we will be paying for years, making it impossible for someone who is 30 years old to consider stopping work before the age set by the State.
It is a vicious circle, a wheel that never stops turning.
There are some unavoidable expenses that everyone should be able to pay, 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 should not do is increase 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 a raise or other reasons, does not 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, since that way you will never have money.
If you earn € 1,500 a month and can live well with $1,200 a month, you can save $300, 20% of the salary, which is fine.
If one day your salary increases to $2,000 a month, do not increase your expenses to $1,600, continuing with that 20% savings, continue living with the $1,200 of before and go on to save $800 a month, assuming 40% of salary.
You may already be in the rat race, but don’t worry. Getting out of it is possible.
It is essential to spend less than you earn.
If you always spend what you earn, you will never be free, you will always depend on that month-end salary.
Start saving, and with each passing day, you will be freer.
Earn extra money.
Whether setting up a business or making money online, generating extra income will allow you to save more and therefore leave before the rat’s career.
Invest what you save.
Saving and doing nothing with that money is of little use. Investing what you save is essential, and I am clear about it. My preferred form of investment is undoubtedly an investment in the stock market.