Concept
Rat Race
The rat race is the loop in which every rise in income is matched by a rise in spending, so you keep working harder without ever opening the gap that would buy you assets or freedom.
Robert Kiyosaki uses the term in Rich Dad Poor Dad for a pattern most people never notice, because no single step in it looks wrong. You get a raise, so a bigger flat seems reasonable. The bigger flat needs furniture, the longer commute justifies a car loan, and a card balance absorbs the rest. Income climbs, expenses climb right behind it, and the surplus that could have bought income-producing assets never appears. In Kiyosaki's framing, you leave the race when money from assets covers your expenses, not when your salary gets big enough. One caveat: his line between assets and liabilities is blunt, and his story is partly a parable. The core observation still holds. A raise that has no destination gets spent by default.
A real-life example
Leila, a product designer, gets a 20% raise. Within six months she has moved to a flat that costs €300 a month more and leased a car for €250. Her card statement now carries a balance that doesn't clear. Each choice was defensible. At year end her savings rate is exactly what it was before the raise, about 3%. She earns more and owes more, and she is no closer to being able to stop.
How to use it
- 1Before the next raise lands, decide in writing what share of it goes to savings or investments. Half is a sensible default. Then set the transfer to run automatically on payday.
- 2Before taking on any new monthly obligation, work out what it costs over three years. Ask whether it buys freedom or only a bigger life to maintain.
- 3Once a quarter, compare how fast your income grew with how fast your expenses grew. If they move in lockstep, you are in the race no matter how much you earn.