Escaping The Rat Race | Why Is It Important Today

In our last post about escaping the rat rat race of life we saw people in spite of having high paying jobs still finding it hard to financially retire with a good retirement fund to back them up over their later years of life.

So lets see why the 6 figure income goal can be just a myth if we don’t plan well.

Now we may think a six figure income is great, the question is it really?

Lets find out why I think NOT!

Just Imagine …

Someone how has an income of over $100K a year.

Firstly lets look at what he needs everyday…

He needs a roof over his head,
Clothes over his body,
Food in his tummy,
Needs to get to work and back,
Internet & phone.

Lets call these necessities and lets see how much money will he have after he pays for his necessary daily/ weekly/ monthly expenses.

Now his yearly Income before tax = $100,000
Tax at 40% tax rate = $40,000

Yearly Net Income after Tax =$60,000 per year
Monthly Net Income after Tax per month = $5,000

Lets see what these monthly necessities are That are keeping you from ‘Escaping The Rat Race’:

Home – $3500. This will account for a $500K mortgage at 5% interest spread over 30 years. This also takes into account insurances, utilities and the maintenance of the property. Next …
Car Repayments – $600. This takes into account you buy a car at 5% interest rate for 5 years on a $30,000 car loan. Next…
Other Car Expenses – $600 . Takes into account insurances, gas and maintenance. Next …
Clothes – $100 . Though this may seem over the top to spend one hundred dollars a month on clothes it will surprise you that most people will spend much more than that quite easily. Just a pair of shoes costs that amount or more today. What about a hand bag, underwear or toiletries. What about …
Food – $300 . I feel this amount should be far higher as food can be very expenses when you shop for groceries each week. Next comes …
Entertainment – $200 . At fifty dollars a week this will give you just enough to have a decent main meal at a restaurant with no alcohol. Most people will spend two or 3 times this amount just in one weekend. The last expense on my list here is …
Cell Phone – $100 . Now days phone and internet is a necessity and a must. We just cannot do with. Most people will spend close to and sometimes much more on their phone bills.

So lets add all these up and see what it all amounts to. From the figure below you will see that we get a zero balance once we have taken all our expenses away from our income. Now can you see why I need to make more money today! Can you imagine that!

Zero money left over.

The Rat Race Trap: May be this is why you want to earn extra income now and stop complaining about “I need more money now’. Now I want you to think about something very seriously. Possibly this is the reason why you say -“I need more money now”.
The expenses listed above are classified as survival expenses. We just cannot do without the house, car, food, clothes, phone, etc. These needs are to be paid for each week, each month. Can you see why you keep saying ‘I need to make more money today’.

Escaping The Rat Race!

Learn from the book – The Cash Flow Quadrant by Robert Kiyosaki. Lessons that will help you not worry about “I need to make more money today’.

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What About These Missing Expenses – How do they help towards escaping the rat race?

So what about the expenses that are not accounted here such as:

Credit Card Debt: Most people have multiple credit cards to cover their huge lifestyle choices. This is probably one reason why their cant live within their means.
Children’s Expenses: Such as clothing, schooling. If you have a child in private school who then goes on to University in Brisbane this can be close to $250,000 for the life this child is studying. Are you saving up for this expense. Imagine if you have 3 children to put through school.
What about medical and emergencies: With the way the medical system is going especially in Australia one needs to take out private medical cover. This could very easily be a few hundred dollars a month for a small family of four. Yet another factor to consider.
What about savings for holidays: Now you may feel holidays are not so important and even if you do have a break from work it should not cost too much. Don’t fool yourself. Holidays are expensive and while you are on holiday you are not earning.
Retirement Savings: And most importantly what about savings for retirement. Will you be able to enjoy the same level of income at the time of retirement. Have the same holidays you enjoyed during your working life and eat at the same restaurants or would you need to adjust your budget to suit the low pension you may have to live off during your golden years of retirement? Have you thought about escaping the rat race?

With a zero balance each month it is next to impossible to have enough cash left over to cover the expenses listed above. We just need to make more money if we want to think about escaping the rat race. Now can you see why you must address the fact that “I need to make money now“ .

Get out of the rat race, more tips on escaping the rat race – Email me back if this email has made sense to you and quitting the rat race is important to you.

Claude Fullinfaw
Brisbane