The “rat race” is basically living paycheck to paycheck. A person will work hard and go to work day after day, yet never get ahead. It is as if they are constantly looking for the next paycheck. This is what the “rat race” is. A person moves but never moves forward. Effective financial planning is the only way to escape it because many individuals fall into the trap without knowing.
If an individual wants to get out of the cycle of living day to day, they must plan ahead.
Have a Plan of Action
In order to get out of the “rat race” one must have a plan of action. Your plan of action must also be written down. Your plan should answer the following questions. Do you plan on working forever? How much do want to have saved in the next five years? These are just some of the samples that you will want to answer. If you do not want to work a 9 – 5 for the rest of your life, plan your life accordingly. Make it so that you will be able to live off your money without working. Your plan is the blueprint for the existence you desire.
The next step is to establish measurable goals. These goals would be one, five and ten year goals. Have a goal as to how much money you plan on having in your savings account. For example, you can say ” By January 1,2011 I will have $20,000 saved. This is how you make it happen. Make it real by stating the steps in how you plan on saving that $20,000. For example, ” I will set aside $200 a month automatically for the next 3 years. This is precised and concrete.
Aside from your goals, make saving money a lifestyle. Save your money consistently and see it add up. Make it your business to look for bargains and pay less for items. Save the change you get from the cashier and put it towards your savings account. Over time you will see this money grow and it will provide some peace of mind for you.
Establish an Emergency Fund
Even if you are working on a regular basis, establish an emergency fund. It will help. 8 months to a year is helpful. This would be the equivalent of your one year salary plus expenses. For example, let’s say you make $60,000 a year net. Let’s also say your monthly expenses add up to $1000. Your emergency fund should have $72,000 in it. This is safe. No matter how much sun shines the rain comes eventually. Be prepared.
Create Passive Income
Passive income is income you do not have to work for. Your money works for you. In order to make this happen, you would need to acquire certain investment instruments. For example, real estate is good. You could purchase some property and rent it out to tenants. You could charge them $600 a month. If you have 3 tenants. That is $1800 a month cash. Dividend stocks are the types of stocks that produce dividend return on a monthly or yearly basis.
Getting out of the “rat race” is a choice. If you want to live a better life, take the necessary steps. Save and invest your money so that it can make you money in the long run.