Remember your first paycheck? Maybe it was half of what you make today, and yet the end of the month feels about the same: the money runs out before the month does. If that sounds familiar, you already know the rat race, one of the core ideas in Rich Dad Poor Dad by Robert Kiyosaki. Picture a mouse running on a wheel: lots of effort, no progress.
How the wheel works
The cycle is simple and very common:
- You work and get paid.
- You pay the bills, and whatever is left goes to spending.
- You get a raise or a promotion.
- Your expenses rise along with your income: a better car, a bigger apartment, more subscriptions, more installments.
- What's left at the end of the month stays close to zero, and you have to work harder and harder to keep up the new lifestyle.
This has a name: lifestyle inflation. It doesn't come from one big mistake, but from small, reasonable decisions that, added together, swallow the whole raise. The result is someone who earns a good living but would be in trouble after three months without a job.
Why the raise disappears so fast
Three forces keep pushing you back onto the wheel.
Part of the raise isn't really a raise. If your salary went up 5% in a year when prices also went up 5%, your purchasing power stayed the same. You can check how much purchasing power an amount gained or lost with the inflation calculator.
Fixed costs are hard to undo. A car payment or a pricier rent become commitments that last for years. The raise, on the other hand, may not happen again next year.
The social bar goes up. When your income grows, your reference points change too, and "normal" gets more expensive.
As the book sees it, the root problem is that all of your income comes from your job. If the work stops, the money stops. And all the extra money goes into liabilities (things that take money out of your pocket every month), never into assets (things that put money in your pocket). If that distinction isn't clear yet, it's worth reading the post asset or liability: is your own home really an investment? first.
How to get out of the rat race
Getting out doesn't mean quitting your job or dropping everything to start a business. It means changing where your leftover money goes, especially the money from raises.
- Save before you spend. Set aside part of your income as soon as your paycheck lands, instead of waiting to see what's left. That's the habit explained in pay yourself first.
- Split every raise in half. Half improves your life today, half goes into investments. You enjoy the win without getting trapped by it.
- Build a cushion. With an emergency fund, a surprise expense no longer turns into debt. And debt is the fastest way back onto the wheel.
- Buy assets little by little. Fixed income, real estate funds, dividend-paying stocks. Every bit of money you invest starts earning returns that don't depend on your working hours.
The finish line
According to the book's idea, you leave the race when the income from your assets covers your monthly expenses. From then on, working becomes a choice, not an obligation. It sounds far away, and for most people it really is a project of many years. But there's a valuable halfway point: every slice of your expenses covered by investment income makes you less dependent on your next paycheck.
To turn this into a concrete goal, decide how much you want to build up and use the financial goal calculator to see how long it takes at your current contribution rate. And if you want to know how much you need invested to live off the returns, check out the post on passive income.
The wheel won't stop on its own. But every raise you invest instead of spending is one step off it.
This content is educational and does not replace personalized financial advice.