How To Get Out Of The Rat Race

The Rat Race is a term used to describe the frustrating financial grind, a hard-to-break financial lifestyle that most people are stuck in. It conjures the image of a "lab rat trying to escape while running around a maze or in a wheel, expending much effort, but ultimately achieving nothing." A rat race is an endless, self-defeating, and pointless pursuit. It is very much alike to people who everyday work their butt off in a time-consuming nine to five job, for five days a week just to be able to pay their high expenses: a heavy mortgage/rent, bills, children, and liabilities. 

They have to wake up early in the morning when the alarm goes off, commute to work in a traffic environment, do the work that they probably dislike in their office cube, then commute back home in another hour of traffic, and then repeat the same procedure the next day. The problem with the rat race is that there's no finish line. The illusion that working at the same job will somehow lead them to their answer to happiness. They are trap in this vicious cycle believing the more money they make will solve their problem. 

However, this is not necessarily true. When income increases, they tend to boost their spending, which can quickly spiral into dangerous, overspending habits. The wheel just keeps spinning, and the longer they are caught in the cycle of consumption, the harder it becomes. Sadly the cycle gets worse as they age if not prevented. Many people reading this article probably to find the solution to escaping the rat race. So how do we stop this insanity and get out of the Rat Race? This article will answer your problem of being stuck in the rat race.

1. Acknowledging it.

The first step to getting out of the Rat Race is to admit that you are in it and realize that you have to do something about it to get out a vicious cycle. Sadly enough, most of those in a rat race do not even realize that they are in one. Acknowledging it is crucial, because if you don't even know that you are in one, then you'll probably be trap in it forever. 

I have seen many people who work countless hours at their job they probably hate. With the wage they receive, they blindly spend it on things they do not need and expenses that can be reduced. Often, they are stuck to needing to pay for these expenses and unable to save up for anything for the future. Because of the high expenses, they need to upkeep, and they need to keep working in the same job without being able to take a break. They are unable to quit the job they hate since they have to keep upkeep the monthly expenses.

By acknowledging you are in the rat race, you will then make your first decision that you want to get out of the rat. If you don't realize this wrong behavior, you won't overcome it and still be trapped in this vicious cycle. I am fortunate that I am not in the rat race and always had a plan to never be in one since the day I read the book "Rich Dad Poor Dad" by Robert Kiyosaki. I learned that making a smart financial decision in my life prevents me from entering the rat race. Because of that, I have always lived below my mean. This is so that I do not have expenses that I need to upkeep monthly.

2. Get Your Finances Organized, and Create a Financial Plan.

Set a financial goal and have a long-range plan to reach it. I once heard a quote from the Art of War by Sun Tzi, "Every battle is won before it's ever fought." I believe this is the same when trying to escape the Rat Race to achieve your Financial Freedom. You'll need to plan it, figure out the financial strategy in order to achieve it. This usually involves knowing where you currently sit financially. 

Also, know how much your monthly income and expenses. If you have a difficult time keeping track of your finances, I suggest using Personal Capital free service. It's going to save you a lot of time and the hassle. The best part of all is that it is available in any smart mobile device, which enables you to keep track of your finances anywhere in the world. I guess there's no more excuse for not becoming organized with your finance. 

I personally use this app myself so that I can be updated and stay organized with my finances. I always make sure that my expenses are below the income I receive monthly. Using this application made me updated on what expenses I have, and make sure that I stay on top of my finances. 

3. Know the Difference Between an Asset and a Liability.

Understand the difference between assets and liabilities. Assets bring money into your pocket, while liabilities are something that takes your cash coming out of your pocket. Remember your car, the big house you live in, or anything that takes money away from your pocket is NOT an asset, but your liabilities. 

Knowing the difference between both is crucial to escaping the rat race. You want to build your asset column first before purchasing or owning liabilities that take money away from you. If you have too many liabilities, in the beginning, you can end up being stuck in the rat race since you have to keep working and working just to upkeep the expenses you need to handle. 

I was lucky to find out about this early stage of my life. I was inspired by the book "Rich Dad, Poor Dad", written by Robert Kiyosaki. I learned that if I start creating more assets in my personal finance, I would later have expenses and upkeep be paid with the cash flow I receive from my assets. My goal is to keep working on my asset column so that I can one day be financially free from worrying about any expenses. Moreover, I also can retire early in my lifetime if I keep up working on my goal towards financial freedom.

  

4. Cut Unnecessary Expenses to Increase Your Savings Rate.

Figure out how you can cut unnecessary expenses so that you can save up more money. The importance of wealth creation is not how much money you make, but how much money you are able to keep. For example, I have a friend who makes way more money than me annually, but he saves way lesser than me. I don't know why he's not able to, but I guess he wants to spend more to compensate for his hard work. 

The point is that being able to save up more enables you to get out of debt quicker and start investing early in life, which can lead to your financial freedom. If you have difficult time-saving money, then I would suggest you to follow my steps. What I personally like to do is after I receive my monthly salary paycheck, I will put aside a fixed amount of how much I want to save into a different account. I then use the money that I put aside into an investment stock portfolio where It can grow and compound in value.

I think this works best for me since I would only have the remaining money to spend. Only having that remaining portion amount of money left, I will tend to be more conservative with my money. I'll end up creating a monthly budget in order to spend the remaining amount of money wisely. You'll need to determine & discipline when it comes down to saving and budgeting. It's important not to let your emotion control your finances. If the product is beyond your budget, then you should find a cheaper alternative. Learn other saving tips in this website so you can get a big bang for the buck.

5. Create more Passive and Residual Income Stream Early in Life.

It's quite difficult to get a second job if you are already working a nine to five schedule. What you want is to create a passive income stream that will pay you over and over again for the work you put into a business or the money that you put into work. 

An example of a passive income business that I'm currently working on is this blog. I wish that I can monetize this blog with Google Adsense one day, which will create passive income for me. Moreover, I also start businesses such as online shop and online courses to create an asset column that can eventually create cash flow for me. Furthermore, I also try to do everything myself, from creating the website to writing the contents and also maintaining the sites. This is a great way to save costs in my startup business, and ultimately you'll learn something valuable for myself, which will enhance my knowledge.  

Another great example of a passive income stream and also one of my favorite is my Dividend Growth Portfolio. I am invested in high-quality dividend-paying companies that will generate a passive income (dividends) for me. This is a great way of investing since you are able to create this snowball effect to your portfolio, where you reinvest the dividends you collect into more great valued companies and let the portfolio compound itself. It will be even better if you are also contributing additional money that you saved up each month to your portfolio, which can amass you with great wealth. 

Conclusion

At the end of the day, it is our decision that will lead us into the future. Even though we are all still trapped in the Rat Race now, we all have a choice to make, and the sooner we get started on the right path, the sooner we will reach our financial freedom. It is important to acknowledge the problem you are in and aim for a dream so that you are no longer stress out over your everyday expenses. The result is so great if you make the right decision early in life. 

Create your asset column first before you purchase and own liabilities. This way, you have cash flow coming to you in order to pay for the upkeep. You don't want to do it in reserve since you could end up being stuck in the rat race. Create businesses that produce passive income stream to you. You can start by writing a simple blog or a small business venture like starting an online store. 

I hope this article gives you an understanding of what it means to be in the rat race. Moreover, please make the right decision now to escape the rat race and have the mentality of an entrepreneur who wants to reach financial freedom.