What is the Rat Race?

Earning more and feeling less room to breathe. Changing jobs for a better salary and discovering that your savings are still the same. Receiving a bonus and watching it disappear before the end of the month. That pattern, so common that it often goes unnoticed, is what Robert Kiyosaki called “the rat race”. Popularised in his book Rich Dad Poor Dad (1997), the expression describes a dynamic that today, with accumulated inflation and the rising cost of housing, is more visible than ever.

What is the rat race?

The rat race is the financial cycle in which income and expenses grow in parallel, so that a pay rise never translates into greater financial freedom. The term appeared in the United States in the 1930s to describe the repetitive work routine of the working class, and Kiyosaki popularised it in a personal finance context to describe the pattern that traps most salaried workers.

The mechanism is always the same. A person starts earning more, improves their standard of living (a better car, a bigger home, more leisure, more subscriptions), takes on new debt linked to that lifestyle (a larger mortgage, personal loans, credit cards) and becomes anchored to their salary because they need that specific income to maintain the commitments they have taken on. The salary increase that was supposed to bring freedom ends up reinforcing dependence on the job.

In economic terms, this is known as “lifestyle inflation”. It is the variable Kiyosaki identifies as the main barrier to financial freedom, more than the absolute level of income.

How to identify the cycle in practice

The signs are quite specific. Someone caught in the rat race tends to:

Work out of the need to maintain a lifestyle, not by choice or vocation. The job becomes the only possible source of income, and losing it would immediately create a financial problem.

See expenses grow every time income rises, without savings increasing in proportion. The financial cushion does not grow, even if the salary does.

Finance their lifestyle with debt: a mortgage stretched to the maximum, a car loan, revolving credit cards, deferred purchases. Income goes towards paying debt before building wealth.

Feel that the end of the month arrives with less and less margin, even while earning more. The feeling of “I work a lot but still do not make it” persists even with high salaries.

Postpone important decisions (training, changing sector, starting a business, travelling for a longer period) because there is neither time nor money available. The job absorbs almost all the hours and almost all the income.

Kiyosaki describes the typical path in four stages: standard education, salaried employment, pay rises offset by more consumption, and late retirement with limited resources. Financial freedom never arrives because the cycle is never broken.

The current factors reinforcing the cycle

In 2026, three factors have made the rat race harder to avoid than it was twenty years ago.

The first is the cost of housing. In major European cities, rental prices have risen steadily since 2015, and mortgages were taken out at high interest rates between 2022 and 2024. Many households spend more than 35% to 45% of their net income on housing alone, with peaks in cities such as Amsterdam, Paris, Berlin, Milan, Madrid or Dublin. Financial stress is concentrated in a fixed expense that cannot be reduced without moving home.

The second is accumulated inflation. Between 2021 and 2024, the HICP in the euro area rose by more than 18%, with year-on-year peaks above 10% in 2022. Wages did not keep up in most sectors, so real purchasing power fell even for those who saw nominal increases in their payslip. The cycle becomes harder to break when the baseline rises faster than income.

The third is the effect of social media and aspirational consumption. Constant exposure to idealised lifestyles amplifies the pressure to consume beyond real means, especially among younger generations. Digital impulse buying is easier and faster than ever, and revolving credit cards or deferred payment options make it easier to keep up the pace even when income does not follow.

How to start escaping the rat race

There is no single formula, but the starting point is always the same: separate income from expenses with enough margin to build savings and then assets that generate income by themselves.

The specific steps that Kiyosaki and other personal finance authors usually recommend are:

1. Audit current expenses. Before changing anything, measure where the money goes each month, category by category. The surprise is often in subscriptions, meals out and impulse purchases online. Without this first step, any attempt to adjust is blind.
2. Set a fixed saving amount before spending. The usual rule is to put aside between 10% and 20% of income at the beginning of each month, not at the end. If saving depends on what is left over, it never appears.
3. Learn personal finance. Understanding basic concepts (compound interest, diversification, the real cost of a loan, taxation on savings) completely changes decision-making. According to the European Central Bank report on financial literacy, only around 18% of the European adult population reaches a high level of financial knowledge, with major differences between northern and southern European countries.
4. Start building assets that generate income. This may be a portfolio of index funds, Treasury bills, bonds, real estate through property crowdfunding or your own business. The range of low-risk investments is the most common entry point for beginners.
5. Explore alternative income sources. Diversifying the main source of income reduces dependence on one job and creates a cushion. The new professions that have emerged online are one example of today’s range of options, although each one has its own pace and risks.
6. Watch lifestyle inflation. Every pay rise is a decision: allocate the increase to more consumption or to more saving and investment. In the rat race, everything goes to consumption. Escaping it begins by assigning at least half of each increase to savings.

Practical tools to organise your finances

Theory is of little use if the day-to-day money management system does not change. This is where practical tools come in, because they help separate money by objective and limit impulse spending.

One of the most effective strategies is to have several accounts or cards with different purposes. The main account receives the salary and pays fixed expenses. A savings account (ideally interest-bearing) automatically receives the monthly saving percentage. A prepaid card receives the monthly budget for variable spending (leisure, restaurants, discretionary purchases). And an investment account receives the amount allocated to building medium and long-term wealth.

This structure isolates impulse spending from the rest of the money. By loading only the monthly budget for leisure and discretionary purchases onto the prepaid card, any purchase above the limit requires a conscious decision. The Bitsa card works for this use because it combines prepaid functionality, an associated IBAN and up to eight independent cards that can be named by category (travel, subscriptions, discretionary spending) directly from the app.

Once a savings cushion already exists and investment starts to enter the picture, the key is to assign each block of money to the right risk profile. High-risk alternative investments may occupy a small part of the assets allocated to long-term growth, always after having built the base with more stable instruments such as low-risk options.

The rat race is not a literary myth or an outdated concept. It is an accurate description of an economic pattern that traps most salaried workers in developed countries, and the economic conditions of the last decade have made it harder to avoid, not easier. The good news is that the cycle can be broken through specific decisions: saving before spending, learning personal finance, building assets that generate income and separating money by objective. None of this is quick or easy, but all of it is within reach of anyone willing to change the system.

Frequently asked questions

Who invented the concept of the “rat race”?

The expression appeared in the United States in the 1930s to describe the repetitive work routine of the working class. Robert Kiyosaki popularised it in personal finance through his book Rich Dad Poor Dad (1997), applying it to the cycle in which earning more never translates into greater financial freedom.

Does it only apply to people with low incomes?

No. The rat race can affect any income level if expenses grow at the same pace or faster. It is common to find professionals with high salaries who remain trapped in the cycle because of debts linked to an expensive lifestyle.

How much should I save each month to start breaking the cycle?

The usual reference is between 10% and 20% of net income, set aside at the beginning of the month before covering discretionary expenses. Starting with a smaller percentage and increasing it with each pay rise is a realistic strategy for anyone who has never saved before.

Is escaping the rat race the same as achieving financial freedom?

Not exactly. Escaping the rat race means stopping dependence on the monthly salary to cover expenses, thanks to savings and alternative income. Full financial freedom also means having enough assets to live without needing to work. The first is a step towards the second.

Is it realistic to escape the rat race in Europe with current salaries?

It is harder than it was twenty years ago because of the weight of housing and accumulated inflation, but it is not impossible. It requires adjusting lifestyle to real income (not aspirational income), saving systematically from the first salary and avoiding consumption-related debt. In cities with very high rents, it may require structural decisions such as changing area or lifestyle model.