What is the “rate race”? It is an endless cycle of borderline poverty in first-world countries. It’s the result of a toxic culture of consumerism and want. It is becoming content with average and okay with “good enough”. It is to not be free.
How do you beat the “rate race”? People who beat the rate race are individuals who recognize it as an unhealthy way of life and take action to avoid it. These people are financially responsible, willing to sacrifice, and goal-oriented.
If you feel like you have the motivation to become one of these people, you will find this article helpful. Otherwise, good luck.
Step 1: Evaluate how you feel about your current life scenario.
People who talk about the rat race tend to vilify the 9 to 5 job or working what is essentially a typical job. By taking this standpoint, they often miss the mark of exactly what it is that even drives people to visit a post like this. Not everyone hates their job and not everyone wants to be an entrepreneur. Instead, many people are just frustrated with different aspects of their life related to either their job or home life such as a lack of money, lack of free time, overdependency on their job for income, or even just mental fatigue from their job.
So consider exactly what it is that is driving you to escape this rate race. Not everyone arrives here for the same reason, but the reason is important. Your reason will determine how it is that you need to go about tackling these steps, especially steps 3-6.
Step 2: Evaluate your financial scenario.
Consider all of the items listed.
Assets: What assets do you have? A house, bonds, stocks, gold, real estate, silver, etc. What do you own that holds its worth and is capable and likely to create wealth for you? These items should appreciate in value.
Liabilities: These items cost you money to maintain and provide you with no return. These are things that depreciate in value the longer you possess them. A car, multiple TVs, tons of new clothes, etc. You should be able to list “like items” for these in your possession.
Income: What is your income? Do you have more than one stream of income? Will you, for a fact, be receiving more income in the near future? Are you an employee or an employer? How long could you survive if this income were to be cut off?
Savings: How much do you keep in your savings account? What about your checking account? Do you keep cash? Do you possess an “emergency fund” of some sort, and how long could you sustain yourself with that emergency fund?
Expenses: What do you pay for on a timely basis? Things such as a mortgage, car payment, TV subscriptions, music subscriptions, beaty products, the typical house-related bills (water, trash, electricity, exterminator, etc.), a phone bill, a cellular data bill, etc. If it helps
Tip: You may find it helpful to create a P&L statement or a profit and loss statement (as businesses do), but for yourself.
Step 3: Set a goal for yourself.
The goal you set is dependent on what you hope to achieve or free yourself from financially. This is why it is important to take “Step 1” seriously.
Are you interested in starting your own business? Would you like more free time? Do you need to save more money for retirement? Are you trying to save for your kids college? Etc.
Your goal determines which steps take priority for you. Here are some examples: If you wanted to quit your job most of all, then “step 7″ ,creating another stream of income, could take precedence over the other steps for you. But if you are swamped with unnecessary subscriptions and debts, steps 4″ and 5” would take priority for you.
Step 4: Get rid of liabilities.
Getting rid of liabilities can be a huge money-saver. To be specific, you are not expected to rid yourself of every liability to your name, but do the best you can to get rid of or reduce liabilities that are costing you excessive funds to maintain. By doing this, you will be getting a small amount of money back but will be saving much more in what you would not be spending to maintain these liabilities.
It’s important to note that many of the things we buy demand that we purchase even more accessories to use them properly. As each TV may require an additional remote, TV stand, house speakers, etc. Try to be mindful of this principle with each purchase you make so as not to enslave yourself to future purchases due to one poorly thought-out purchase.
Step 5: Create a budget.
A budget can help as much or as little as you want it to. It depends on how willing you are to dedicate yourself to creating and following an effective budget.
A budget provides structure and stability to your spending and saving habits. It makes sense of all the non-sensible spending carried out by people on a day-to-day basis. Budgeting should allocate space for necessities, savings, and spending.
There are a multitude of different popular forms in the finance world. A few of these include the 50/30/20 rule, the envelope method, the pay yourself first method, etc. Check out our post on budgeting here.
Step 6: Start a form of investing and create another stream of income.
Investing is an essential part of escaping the rat race and building a form of financial freedom. Why? Because you have no investments, you are subject to your employer for any financial needs you have. This relationship demands that you devote yourself to your employer, with no opportunity for financial growth besides maybe a raise.
There are many forms of investing. The question is, what are you willing to invest? Time, money, luxury? The more you are willing to invest, the more you are going to get out of it.
If you are willing to invest money, the stock market is a great place to start. Here, you can invest in things such as index or mutual funds, which take no time to look into and are incredibly cost-effective. Many of these funds have 70-plus-year track records of creating positive returns for their investors.
If you are willing to invest time, taking on a side hustle may benefit you. Take on a business that has a low cost of entry, is scalable, and at which you are confident you can produce an income. By doing so, you can create a secondary stream of income in your spare time.
If you are willing to invest time and money, you can take on a more bold challenge, such as entering the real estate business. By doing so, you will be required to front both funds and time. To make a long story short, real estate requires plenty of funds, no matter how you go about it. It could be a down payment and the following mortgage payments, or it could be buying the house in full and flipping it with renovation costs. The time aspect of this is extensive, from finding the home to either fixing or renting it; this process can take quite a bit of time.
Step 7: Be patient.
Be Patient. It can take time to navigate your way through these different steps and to fulfill your financial goals. Dealing with money is tricky, and most people receive a poor financial education to begin with anyway. Keep your nose to the grindstone, and you will find that everything will find its place.
