Want to know how to get out of the rat race?
We’ve all heard the term Rat-Race at some point in our lives.
Usually people reference it when saying things like: “I’m stuck in the Rat Race.”, or “I wish I could escape the Rat Race.” or something similar.
First and foremost, we need to define what Rat Race really means:
a way of referring to the situation in modern society in which people compete with each other for money and power that leads to an endless, self-defeating pursuit.
Now that you’re aware of what it really means, you might be wondering how to get out of the rat race.
To be completely honest with you, escaping it isn’t something that will happen overnight. It’s a process that might take a couple of years and a couple of personal sacrifices, but if you’re able to succeed it’ll be 100% worth it.
Without further ado, here are the 3 steps that can help you escaping the Rat Race.
1. Understand What’s Keeping You Trapped
There are many reasons that might be keeping you stuck in the Rat Race.
The most common ones are:
At the end of the day, they’re all related with the one thing we all need, Money, but we’re going to take a deeper look at each one of them.
Number one: Fear
Fear usually comes when we don’t understand something. It’s a natural reaction humans have towards the unknown.
When you have a nice and secure job, your biggest fear is losing that job because you know that once that job is gone, the cash-flow to pay your expenses is also gone.
Ever since we’re little kids, we’re told to find a good job and work harder than our coworkers so that we can have a stable life. The problem with this is that no matter how good you are or how hard you work, you can still lose that job in a blink of an eye. The era we’re living in showed us that.
You need to ask yourself: Are you afraid of being an investor or a business owner or are you afraid of just being an employee? Both of these fears are valid, but only one will lead you to escape the Rat Race.
Number two: Work
Vince Lombardi once said: “The only place success comes before work is in the dictionary.”
In this world nothing is given. If you truly want to achieve success, you’re going to have to work for it.
Don’t think for a second that creating passive income is something easy. In fact, at the beginning you’ll probably have to work even harder than if you’re just an employee. That’s why I said at the beginning that escaping the Rat Race isn’t something that will happen overnight.
It will require time and effort and you’ll need to overcome the fear of working really hard. You’re going to make sacrifices that at the moment will seem the hardest thing you’ll ever did, but in the long run it’ll be totally worth it.
2. Spend Less & Save More
Money is a tricky thing for a lot of people.
We all need it to carry on with our lives, but for some mysterious reason it seems that we never have it.
The reason why most people live paycheck-to-paycheck is because they spend all of the money they make.
Of course there’s some expenses that we can’t really avoid such as:
- Rent/Mortgage payments
- Utilities bills
- Health Insurance
Nevertheless, I can assure you that if you look at your monthly expenses you’re going to see some things that you can cut off your life. At least for some temporary time. Nobody needs to eat at a restaurant every other weekend, or to buy that $50 t-shirt you saw all your friends wearing, or even that $5 coffe you drink twice a day. Like I said before, you’re going to have to make sacrifices.
If you want to learn how to get out of the Rat Race you’ll need to find a way to reduce your expenses habits in order to save and invest some money.
You won’t be able to quit your job immediately nor should you do it.
One thing that can help you save a little bit more money is budgeting. Having a monthly and yearly budget is crucial to help you save money. That way you can track where your money is going.
Before you start investing and producing cash-flow, you want to make sure that you have 3–6 months of expenses saved up.
When you reach that goal you’ll finally be able to start putting your money working for you.
Make sure you remember what Warren Buffet said:
“Do not save what is left after spending, but spend what is left after saving.”
3. Start Investing
Now it’s time for you to start investing.
Your main goal should be producing as much passive income as your expenses. That way you’ll finally be able to escape the Rat Race and start living life on your own terms.
First let’s look at the definition of passive income.
Earnings derived from some sort of investment in which a person is not actively involved.
The only way you can earn passive income is by investing in assets that will produce you cash-flow.
The three main assets classes you can choose from are:
- Real Estate
Investing in stocks might seem something that only the riches and most financial literal people on earth can do. In the past this was actually pretty accurate, but due to the digital revolution, this is now something that is available to everyone.
The most attractive aspect about the stock market is that allows you to start small and gradually scale your investment account. You don’t need $100.000,00 to start. In some cases you can even start with as little as $1. Yes, you read it right, you can start with $1, although it’s not really recommend it to start with so little money. Starting your own business or investing in real estate are also really good investments, but they often require much more capital to start. That’s why we’re going to focus more in the stock market.
When you invest in stocks you don’t need to spend all day looking at your computer screen. You can do it in your spare time while you still have your job producing you your main source of income. Remember that in order for you to invest, you first need to make money.
The other reason people love the stock market is because you don’t need to be a genius to make money. Everyone with average intelligence that is willing to put in the work and has a desire to learn can gain the right skills to be successful.
One of the most common strategies used is the Dollar-Cost-Averaging.
An investment strategy in which the investor divides up the total amount to be invested across periodic purchases of a specific asset in order to reduce the impact of volatility on the overall purchase.
With this strategy you don’t really need to stress about a sudden drop in your portfolio, because you’re goal should be long-term investing. You can reinvest the dividends you’re getting and due to one of the eight wonders of the world, Compound-Interest, your passive income will grow until it covers your expenses.
When that happens, you can put a smile on your face, because you’re finally able to escape the Rat Race.
How To Get Out Of The Rat Race: Final Thoughts
At first, escaping the Rat Race might seem something only a few can accomplish, but if you set a plan and you stick to it you’ll eventually be able to escape it. Try to remember that it’s not a sprint, it’s a marathon.
It’s a process that will take time and you just need to accept that. Some things just take time. Like Warren Buffet said:
“No matter the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.”
To recap, the three steps you should follow to help you escape are:
- Understand What’s Keeping You Trapped
- Spend Less & Save More
- Start Investing
We’re all different, so make sure you draw a plan that fits you better. For some people real estate might be easier than the stock market. For others creating a start-up might be the path to follow. You are the only one who can decide that.
I hope this article will help some of you achieve financial freedom because we only have one life, so don’t waste it doing something you hate.
This article is for informational purposes only. It shouldn’t be considered Financial or Legal Advice. Some information might not be accurate. You should always consult a financial professional before making any significant financial decisions.