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Overview

Most of us know what the phrase “rat race” refers to, but if asked how we would define it, most people would say something like: “It’s working for others while they take all the credit.”

Most people talk about the rat race as something they’re all a part of and hate. However, most people are afraid to stop racing because they don’t want to be ostracized by society.

For example, consider the mantra “Go to school, study hard, get a good job.” We still teach this even though it’s outdated advice because of what our parents learned when they were kids. Back then you were likely to land a job right out of college and work for the same company until you retired with a pension. Today that is no longer true.

The truth is that you can get into a good school and graduate with a high-paying job without ever seeing financial growth because your bosses are getting rich off all the hard work you do. Nevertheless, we still believe in and follow this advice out of fear of violating expectations drilled into us since birth. The result? We may avoid poverty, but we’re certainly not growing any wealthier.

People are afraid of being judged by society for leaving the rat race and becoming wealthy.

Big Idea #1: Fear and greed can drive financially ignorant people to make irrational decisions.

When it comes to money, everyone experiences two basic emotions: greed and fear. If you have a lot of money, you might focus on all the things that it can buy for you (greed). If you don’t have much money and are worried about not having enough in the future, then your mind is likely filled with thoughts of anxiety over how to get more (fear).

People who are ignorant about how to manage their finances often make bad financial decisions. For example, let’s say you just got a raise at work and have more money than usual. You could invest your extra cash in stocks or bonds that would give you returns over time, but instead of doing that, you spend it on a car or house because the fear of losing money is so powerful.

Because people are greedy, they spend their money on a better lifestyle. For example, they buy a bigger house with the money that was supposed to be invested in stocks. This makes them poorer because of higher mortgage payments and utility bills. The key is to overcome greed and fear so that you can become wealthy over time.

By developing a financial knowledge base about investments, risk and debt, you’ll be in a better position to make rational decisions.

When people are fearful and greedy, they make irrational decisions.

Big Idea #2: Despite being vital for both personal and societal prosperity, we receive no training in financial intelligence.

Most people think that to become rich, all you need is talent and the ability to do something. But in fact, there are many talented and capable people who aren’t successful because they don’t have financial intelligence—an aptitude for money management that includes accounting, investing, etc.

Unfortunately, schools don’t teach us how to manage money. They focus on other subjects that are useful in the workforce and society at large.

Children are not taught about saving and investing in school, which is why they don’t know much about compound interest. This is evidenced by the fact that many high school students max out their credit cards.

The lack of financial training is a problem for both young and old people.

Politicians are generally considered the smartest people in a society, but they often end up being responsible for staggering national debt. Ordinary people can be bad with their money too. For example, 50% of the workforce have no pensions and 75-80% of those who do have ineffective ones. Clearly, we need to educate ourselves about finance because of all these changes happening today.