THE RAT RACE
"If you are always sad on Mondays and happy on Fridays, then there is something terribly wrong. You should be looking forward to each day, every day."
WHAT IS THE RAT RACE?
The rat race is an endless pursuit of money in hopes that it will provide happiness. It goes something like this:
Go to school -> Go into debt -> Work -> Get paid -> Pay bills -> Buy more things -> Get into more debt -> Work harder -> Do overtime or get another job -> Continue until your 60s +
A majority of people are not satisfied with their jobs.
But then we must ask, what about the people that are satisfied? What are they doing differently?
TRAPS THAT KEEP YOU IN THE RAT RACE:
Here are a couple of things that you should NOT do as they will keep you in the rat race.
1. DO NOT KEEP UP WITH THE "JONES’S"
When your neighbor buys a new car, what is your natural reaction? Some people feel the urge that they want to upgrade as well to keep a certain “status”. Why bother impressing other people that don’t really matter?
2. DO NOT BUY A HOUSE YOU CANNOT AFFORD
This is in my opinion, one of the biggest traps that keep the middle class in the middle class and the poor poor. You buy a house that is sucking a majority of your monthly cash flow every month. You continue to work and pay for it for 15-30 years of your life. You are essentially stuck with that house and end up spending your entire life paying for it. As a general rule of thumb, don’t buy a house that is more than 30% of your monthly AFTER tax income (ideally lower, or if you can - house hack it). There is a tremendous cost of up-keeping a house that people tend to underestimate and it ends up becoming their biggest liability. Keep in mind that there are situations where it is better to rent vs. buy.
3. AVOID LIFESTYLE CREEP
When you get promoted or get a salary increase, maintain the same lifestyle and use the extra cash to obtain more assets. If you do have to splurge, use the interest or income from your assets. Don't touch your principal investment!
4. DON'T BE A DEBT SLAVE
We already talked about the expensive house that you can't afford. Another big problem that a lot of people have is credit cards. We live in a nation of instant gratification built on credit. When you are about to buy something, think twice. How much time value are you wasting by buying that new watch or new purse that you don't really need? If you make $25 an hour (post-tax) and you just bought a $250 purse, that's 10 HOURS worth of your time. That's 10 hours you'll never get back! Start equating everything to time. Rich people buy their "stuff" using the gains from their assets, not the principal investment.
Spend your interest, not your principal. Translation: "Make your money work for you and use the money that your money created buy you your stuff". I hate to be repetitive, but this has to be ingrained in you!
You should only use credit cards if you can pay them off in full every month. Once you have that discipline, then credit cards will actually help you. You need it to build credit and take advantage of points and rewards. Credit card debt that accumulates has insanely high interest rates: 18%, 24%, 28%, even as high as 36%! Those are insane gains by market standards! Pay those off FIRST if you have them.
Not all debt is bad debt. For example, a 30 year fixed rate low-interest mortgage on a rental property. But to use debt to make wealth, you need even more financial education.
5. DO NOT FOCUS ON YOUR HOURLY PAY
Your income will be very limited if you focus on your hourly pay. Instead, you should focus on other ways to produce different income streams. Ideally, focus on a side hustle that you are passionate about that will potentially become your primary income stream. The potential value you can create using your TIME is worth MUCH more than your hourly pay rate. Overtime = trap. You might be getting paid more, but at its core, your time is still being used by someone else.
6. DO NOT LEAVE YOUR MONEY IN LOW INTEREST SAVINGS ACCOUNTS
This is perhaps the worst thing you can do to your money since its value deteriorates every SECOND due to inflation. As long as the government keeps printing money, the purchasing power of your hard-earned money keeps going down.
7. DO NOT FALL UNDER THE TRAP OF THINKING THAT YOU ARE ALWAYS “BUSY”
Everyone is "busy". But it's how you prioritize your time and what you do during downtime that truly matters. When you always think that you are "busy" you end up self-identifying that you have no time to do anything else. And that becomes a very dangerous trap. You come up with too many excuses: kids, spouse, you tired, had a bad day at the job, too many things to do, have to clean the house, etc.
You do what you have to do to reach your goals. Set up a time. Wake up early at 4 AM if you have to. The sacrifice now will be worth it in the long run. It's so hard to get the ball rolling but once you do, little accomplishments will become self-reinforcing. You will look back and notice how far you have gone. You will also develop good habits as you see progress. Do something every day to reach your goals.
The Retirement Crisis:
There is undeniably a significant lack of true financial education in our system and it has caused one of the greatest silent diseases of our society: the inability for people to retire until a much later age (if at all). And yes, this affects ALL generations. It is heartbreaking to still see +70-year-olds working at "x" company. But the unfortunate reality is, they cannot stop working as they simply have no retirement income.
What are some of the major problems of society?
Lack of true financial education
Devaluing of currency
Reliance on the government
The tax burden on the poor and middle class
Shrinking middle class