What is Rat Race and How Do You Escape From It?

I am sure most of you is not new to the the term “Rat Race” coined by Robert Kiyosaki. We’ve been hearing it almost all the time as most of us are trapped in it.

We’ve been working hard with our jobs. Some of us are even working two to three jobs at a time just to sustain our needs. Each time money comes in, it usually goes out instantly to pay bills and other expenses. In this scenario, we are doomed to work hard for the rest of our lives. The end result is frustration and stress. Just look at how Kiyosaki describes the typical average-educated, hardworking person below:

RAT RACE

Kiyosaki tells that if you look at the life of average-educated, hard-working person, there is a similar path. The child is born and goes to school. The proud parents are excited because the child excels, gets fair to good grades and is accepted into a college. The child graduates, maybe goes on to graduate school and then does exactly as programmed – looks for a safe, secure job or career. Generally, as the child finds a job and begins to make money, credit cards start to arrive in mass, and the shopping begins.

Having money to burn, the child goes to places where other young people just like them hang out, and they meet people, they date, and sometimes they get married. Life is wonderful now because both men and women work. Two incomes are bliss. They feel successful, their future is bright, and they decide to buy a house, a car, a television, take vacations, and have children.

Now the happy bundle arrives. The demand for cash is enormous. The couple now decides that their careers are vitally important and begin to work harder, seeking promotions and raises. The raises come, and so does another child and the need for bigger house. They work harder, become better employees, even more dedicated this time. Sometimes, they go back to school to get more specialized skills so they can earn more money. Or perhaps they take a second or third job.

Their incomes go up, but so does the tax bracket. Their children reach 5 or 6 years of age and the need to save for colleges increases as well as the need to save for retirement. That happy couple, born some 35 to 40 years ago, is now trapped in the Rat Race for the rest of their working days. They work for the owners of the company, for the government paying taxes, and for the bank paying off their mortgage and credit cards.

Then, they advise their own children to study hard, get good grades, and find a safe and secure job. They learn nothing about money and work hard all their lives. The process repeats into another hard-working generation. And this is called the Rat Race.

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Now, are you in the rat race?

If your answer is YES to any of the questions below, then yes you are in the rat race!

1. Is selling your time and skills to other people your major source of income?
2. Do you have a loan (house loan, car loan, credit card debts) and you are working hard to pay for it?
3. Are you working for two or more jobs just to sustain your family’s day-to-day living?
4. Are you praying everyday that your company will not be hit by the recession so that you will not be laid off?
5. Do you have sales quotas or company bonds to meet or else you will find yourself applying to other companies?

HOW TO ESCAPE FROM RAT RACE?

The big question now is how do we escape from Rat Race? The only way to get out of the rat race is to prove your proficiency at both accounting and investing, perhaps two of the most difficult subjects to master.

As a starting employee or the moment you started to earn an income, you should already determine what do assets and liabilities truly means. Assets are gold mines that puts money into your pocket while liabilities are the reverse. The moment you get your salary, it’s the way you spend it that determines whether you will be a poor, middle class or rich person.

For poor people, it goes down directly to expenses. They have nothing left. For middle class people, as their incomes increase, they tend to buy liabilities they think are assets. As an end result, they go into debts. However, the rich people invests in assets that generates passive income for them so that they can enjoy liabilities.

Kiyosaki also devised the Cashflow 101 game simulating the real world of business and investing. In this game, “doodads” represent liabilities. The main goal of the game is to get out of the rat race and enjoy a successful and fruitful life.

Proper financial education is the key to escape from the rat race and this is Millionaire Acts‘ advocacy – to teach readers to escape from the rat race and ultimately achieve financial freedom.

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