Rat Race
Rat RaceWhen you've won the rat race, you're still a rat. -- anon
"A sudden destruction, collective security for surety yeah! Don't forget your history, know your destiny In the abundance of water the fool is thirsty Rat race" - BobMarley
A reference in RobertKiyosaki's book "Rich Dad, Poor Dad" (http://www.richdad.com), that describes the vicious cycle of working harder to earn more money to pay off continually increasing liabilities.
The RatRace is driven by fear. Fear of not being able to pay bills, losing a job, not having enough to retire. This pattern is often instilled in children by their parents, who tell them to "get good grades so you can get into a good college and then get a good job".
This pattern is often instilled in children by their parents, who tell them to "get good grades so you can get into a good college and then get a good job".
What's wrong with it?
It prepares children to increase other people's assets while taking on liabilities.
There is obviously a healthy middle ground here. Our society requires doctors, engineers, artists, teachers, etc., who must learn their profession through schooling. It's still possible to have wages as primary income while accumulating assets that someday will generate sufficient income.
Unfortunately, this group of people are in the minority, because they were not taught about money in school or by their parents.
This attitude ("Get good grades...") has nothing to do with the vicious liability cycle of the RatRace. The "Getting good grades to get a good job (and thus a good life)" attitude is very prevalent in Asian countries, e.g., it has over 1,000 years of history in China, yet the savings:income ratios of Asian countries are very high. The problem of the RatRace is simply living beyond your means, that going to school has something to do with it seems to be an AmericanCulturalAssumption that people need a big loan to get through college, thus starting the debt cycle. Notice the solution to RatRace below (which I agree with) does not even mention the "Get good grades..." attitude.
Just read the book and you'll see how 'Get good grades' is part of the RatRace problem. It's not the school loans that start the RatRace (many students have school paid for by their parents, and therefore do not learn independence). It's what is taught and reinforced while in school that starts the RatRace. Living beyond your means is just one of many RatRace symptoms.
I've read some RobertKiyosaki. He's not what I'd classify as a proper role model for the world, but he does say some very intelligent things. But that's because I am getting more pragmatic as time rolls on.
The main thing that makes the RatRace a very bad thing is the never-ending cycle of debt, with no hope of paying it off. This is part of why people permit awful things like 120-hour weeks to be done to them. For most people, if they got laid off from their well-paying job, they'd be immediately drowning in bills because they don't actually own their car, house, and whatever hasn't been paid off from financing plans and credit cards.
On the other hand, it's very hard for one to make the transition from a debt-based RatRace lifestyle to the lifestyle that Kiyosaki advocates. Most of his strategies involve making your money work for you, which means that you need to have money free to put towards that.
This dilemma is the same as the one software developers face when they're told they can't get a job without experience and they can't get experience without a job. There are thousands of ways to get capital to start investing. You just have to open your eyes and be resourceful.
As an alternative, RobertKiyosaki discusses IntellectualProperty as a royalty-bearing asset. Instead of watching TV, many of us could be writing a book or software that could one day pay off. This only requires time as an investment... not money.
This is true. Unfortunately, OverlyBroadIntellectualPropertyAgreements cause problems for that. No... not IP you develop for employers. Your IP done on your own time. I think that the biggest reason why more people don't transition away from the RatRace is because of the time investment over the near term with only long-term rewards. The rat race is comfortable compared to fears of ending up broke and flipping burgers.
Comfortable for you maybe! :-) The RatRace sucks and all attempts should be made to get out of it. If you're financially literate, 'long term' may be only 2 or 3 years away.
However, one can also avoid many of the problems of a RatRace by switching to a cash-based lifestyle and not spending money until you have it. But that does mean years of scrimping.
But remember you do more scrimping when you are constantly in debt. When you're debt-free, you aren't paying interest.
If you want out of the RatRace, here are some strategies:
These aren't solutions because in all cases you're still working for your money rather than putting money to work for you which is what Robert's principles are about.
The solution is to invest in bonds, real estate, mutual funds, create intellectual property, or start a business. Eventually income from those assets will get you out of the RatRace.
Isn't this just saying "retire early"?
The main reason people are caught in a RatRace is because they're loaded with debt and they have no choice but work. Stop getting into debt and you'll have enough money (or more importantly time) to do these other things.
I don't think most people would end up with enough money in this way. By the time the investment had built up enough to provide a living income, they'd be dead. Look at the problems most people have building up enough of a pension fund (it's essentially the same aim) - not many people get to retire early because they have enough to live on.
This article by ThomasElpel? has a lot of good points about escaping the RatRace: "Escaping the Job Trap" http://www.hollowtop.com/cls_html/jobtrap.htm.
I'd be careful about invoking RobertKiyosaki too much. He sounds like he makes sense, but it's mostly because he disengages your rational brain. I'll post about that in his page.
Part of the problem with the RatRace is that, unless you are extremely lucky, you are not going to like the cost of leaving it. You are being programmed to desire flashy toys, a nice house and car, etc. But an old Honda will work just as well to get you to work, a smaller house that you have the potential to pay off is just as nice of a place to live, etc. You think-then-buy instead of buy-and-worry-about-it-later. And, in a touchy-feely sense, you have to learn to really love, instead of mimic the love you see on TV. You are forced to deal with your family in a different way, I think.
I visited a friend who is taking a hiatus from the RatRace. He has very little furniture. His only toys is his musical equipment. But he lived way below his means for several years and now can figure out how he wants to live outside of the RatRace at his convenience.
This is why people like RobertKiyosaki and Robert Allen and other folks exist. You want to think that there's some way to bypass the hard part and go straight into debit-free monetary bliss. And the big thing is that there's hundreds of things to do with a reasonable sum of money - buying distressed properties and fixing them up, investing it in the financial markets, owning an apartment building, etc. So they talk about what to do with that lump of money without really talking about how to get that lump of money and/or encourage you to spend more money you don't have on relatively speculative investments.
The problem is that you are preyed upon on both side. One group of people makes money keeping you in the RatRace, the other group of people makes money from people who try to leave the RatRace. I'm sure there's a conspiracy theory that connects the two. ;)
Once you make the change to a cash-based lifestyle, it can be passed down. My parents were cash based, therefore, I didn't have a college loan, which meant that I started my post-college life debit-free. And because it worked out for the prior generation, I'm also on the cash-based track. Unfortunately, I'm not free of the RatRace.
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