ACCOUNTANT EXPLAINS: Middle Class Habits Keeping You in the Rat Race

Nischa2023-04-16

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2M views|1 years ago

💫 Short Summary

In this video, Aja Dang discusses the middle class habits that keep people in the rat race and provides insights on how to break free from these habits. She emphasizes the importance of avoiding common pitfalls such as working for less than your worth, buying more than you can afford, and relying on a single source of income. Dang also encourages viewers to focus on financial literacy and to make strategic changes to their habits in order to achieve greater financial freedom.

✨ Highlights

📊 Transcript

✦

The middle class habits that keep people tied to a job they don't like are working for less than your worth, buying more than you can afford, and relying on one source of income.

00:00

Employees are often paid less than they deserve, and many people accept minimal pay increases or insulting raises.

Leaving for a new job elsewhere could be the best decision for getting out of the rat race.

Upgrading to a more expensive car or home without considering affordability is a common middle class habit.

✦

The video discusses the habit of working for less than you're worth and how to avoid it by finding out what the market is paying for your role.

01:38

Many people accept minimal pay increases or insulting raises, but it's okay to leave for a better opportunity.

Moving to a new company can result in a typical pay increase of 10 to 20, which is higher than staying in the same company.

Leaving for a better-paying job and investing the extra money can be a more worthwhile decision.

✦

To break free from the rat race, it's important to diversify income streams and not rely solely on a day job.

03:08

Getting a second job, starting an online business, or investing in the stock market or real estate are ways to diversify income.

Ignoring the importance of saving for old age and not investing can keep someone in a position where they have to keep working for money.

✦

The video emphasizes the significance of owning equity to achieve financial freedom and suggests starting with index funds and a Target date fund for investing.

04:55

Ownership of a piece of a business is essential to gain financial freedom.

Index funds and Target date funds are recommended options for investment.

The sooner one starts investing for retirement, the better the financial outcome will be.

✦

Financial literacy and the impact on one's life, especially in the 30s and 40s, is discussed, with a focus on understanding tax rules, income, expenses, and getting the most value out of money.

06:15

Financial literacy is crucial for one's financial well-being.

Understanding tax rules, income, expenses, and how to get the most value out of money is an important part of financial literacy.

Ignoring financial literacy can make it harder to undo the consequences in the future.

00:00 having spent nine years of my life

00:01 working in Investment Banking and three

00:03 years studying accounting I have seen

00:05 first hand the middle class habits that

00:07 keep people in the rat race that keeps

00:09 them tied to a job they don't like to

00:11 sustain their lifestyle whilst their

00:13 greater life goals and Ambitions are

00:15 placed in the background so in this

00:17 video I'll walk you through what these

00:18 habits are and how you can avoid them

00:20 number one working for less than your

00:23 worth this is one of the biggest

00:24 mistakes people make it's common

00:26 practice for employers to pay their

00:28 employees less than what they deserve

00:30 and so they will pay their employees the

00:31 least amount possible and just enough so

00:33 they don't quit how many people do you

00:35 know whose employers haven't given them

00:37 a raise at all or if they have is

00:39 something insulting like three or four

00:41 percent Which is less than the rate of

00:42 inflation so essentially despite you

00:44 having another year of experience you're

00:45 getting paid less than you did the year

00:47 before and then when you leave the

00:49 organization they try to hire someone

00:50 else they realize they need to increase

00:52 the salary in order to get anyone else

00:53 to take the job a middle class habit is

00:55 just accepting this the way it is

00:56 because it's comfortable you know you're

00:58 getting paid x amount on X day no matter

01:00 what but this habit will keep you in a

01:02 cycle and finding a new job elsewhere

01:04 could actually be the best decision you

01:06 can make when it comes to getting out of

01:07 the Rat Race a more typical pay increase

01:09 when you move between organizations is

01:11 10 to 20 far higher than the three to

01:14 four percent you would have got if you

01:15 stayed in the company and if you're

01:16 working hard and you're putting your

01:17 soul into something and you feel like

01:19 you're getting underpaid it is okay to

01:21 leave and go to a competitor so Network

01:22 learn about other Industries go find out

01:24 what the market is paying for your role

01:26 and have that conversation you may think

01:28 that moving and starting from scratch is

01:30 inconvenient but if you're getting paid

01:32 30 more which you can then put into your

01:34 Investments to give you another source

01:36 of income it may well be worth it number

01:38 two buying more than you can afford when

01:40 people get their first full-time job

01:42 they get a promotion or a bonus they

01:44 tend to upgrade two things the first is

01:46 their car because even if you don't have

01:47 the money to buy a full you can still

01:49 afford the lease payments and of course

01:51 this is structured in a way to make you

01:52 buy a more expensive car than you can

01:55 afford and it's also the number one

01:56 wealth killer it will keep you working

01:58 to pay off the loan as long as you let

02:00 her what you want to do is either buy a

02:02 car outright if you have the money for

02:04 it or make sure your car finance payment

02:06 is within the recommended guidelines the

02:08 rule of thumb is to spend no more than

02:10 15 of your annual income towards your

02:12 car so if your annual income is at 60

02:15 000 you should aim to spend no more than

02:16 9 000 per year on a car and that amount

02:19 should include the car payment insurance

02:21 maintenance and any other Associated

02:24 expenses the second thing people will

02:26 look to upgrade is their home because

02:27 again banks will lend you four or five

02:29 times your salary to purchase your house

02:31 so even with a marginal increase in your

02:33 salary you can afford a lot more home

02:35 but you don't want to buy more home than

02:37 you can afford the rule of thumb here

02:39 and the general guideline is that you

02:40 don't want to be spending more than 28

02:43 of your income on your mortgage payments

02:45 that's 28 of your gross income income

02:47 before tax if you want to learn more

02:49 about the different ways you should be

02:50 managing your money and where you should

02:52 be allocating it I have a money MBA

02:54 five-day email course it's completely

02:56 free and every day I email you with how

02:58 you can make the most out of your money

02:59 and one of those emails goes over the

03:01 recommended percentage of where your

03:03 money should be going this will be

03:04 linked in my description if you want to

03:06 check it out number three relying on one

03:08 source of income if we have learned

03:10 anything from the last few years is that

03:12 relying on one source of income is

03:14 extremely risky the pandemic calls

03:16 millions of people to lose their jobs

03:18 and we're seeing the same happening

03:19 again with more and more layoffs being

03:22 announced by having one source of income

03:24 you are one incident away from not

03:25 having any incoming cash flow and a

03:27 middle class habit is to just rely on

03:30 one source of income being their day job

03:32 by doing this you're putting your whole

03:34 livelihood and financial responsibility

03:36 in the hands of your employer and this

03:38 is a super risky position to be in so to

03:41 break free from the rat race you need to

03:43 diversify your income streams get a

03:45 second job whether it's babysitting

03:47 being an Uber driver starting an online

03:49 business or investing in other cash

03:51 generating assets like the stock market

03:53 or real estate giving all your financial

03:55 power to your employer is a slippery

03:58 slope that you really want to avoid next

04:00 we have ignoring the importance of

04:02 saving for old age imagine if you were

04:05 walking on the streets and you dropped

04:07 fifty dollars because you had a hole in

04:08 your purse and then the same thing

04:10 happened the next day and the next day

04:11 you wouldn't let that keep happening you

04:13 would either fix your purse or you'd get

04:15 a new one and the same thing applies

04:16 when it comes to investing yet very few

04:18 of us act on it even though we are aware

04:21 that by holding back on investing every

04:23 day we're essentially losing out on the

04:25 ability to let that money compound we

04:27 still don't do anything about it and a

04:29 lot of that is because of the lack of

04:30 tools and resources to help you get

04:32 there knowing what to invest in or

04:34 knowing what's right for you and as

04:35 Naval ravikant States in his book The

04:37 Almanac you're not going to get rich

04:39 renting out your time you must own

04:40 Equity a piece of a business to gain

04:43 your Financial Freedom if you don't know

04:44 where to begin then two that you can

04:46 start with are index funds and a Target

04:48 date fund that builds a portfolio based

04:51 on the retirement year you choose the

04:52 sooner you put your money down for

04:53 retirement the better off you'll be next

04:55 up we have consumption versus production

04:58 money will come into your life and then

05:00 I'll leave this is a relationship that

05:02 is often looked at in terms of income

05:04 and expenses and another way to express

05:06 this is by looking at in terms of

05:07 production and consumption money will

05:10 come into your life because you have

05:11 produced some sort of value and for the

05:12 majority of us this value will come in

05:14 the form of Labor a job money will leave

05:17 when you have consumed something and you

05:18 house a car Netflix subscription in one

05:21 way we can look at the financial

05:22 position of an individual by determining

05:25 their relationship between consumption

05:27 and production and for a lot of people

05:28 that equation is negative in fact the

05:31 average American holds a debt balance of

05:33 ninety six thousand dollars and the

05:35 average personal debt in the UK is over

05:37 33 000 pounds the money is leaving

05:39 quicker than it's coming in you want to

05:42 recognize how this is impacting your

05:43 financial position and both reduce the

05:45 consumption part of the equation whilst

05:47 putting as much money as you can into

05:49 the production value the sources where

05:51 the money is coming into your life next

05:53 we have ignoring financial literacy

05:55 Financial Mastery has a huge impact on

05:57 our lives whether we like to admit it or

05:59 not we put so much importance on our

06:01 well-being our mental well-being our

06:03 physical well-being but so little

06:05 actually on our financial well-being

06:07 when really this plays an equally

06:09 important role in our enjoyment in life

06:11 it might just be excusable not to invest

06:13 in our financial literacy in our early

06:15 20s we're busy living life dating seeing

06:17 new places having expensive items and

06:20 because we don't have much money to

06:21 begin with the consequences of our lack

06:23 of financial literacy are actually

06:25 limited however if we carry that mindset

06:27 through with us to our 30s and to our

06:29 40s and don't bother developing our

06:31 knowledge base of financial literacy

06:33 it'll become harder and harder to undo

06:35 and this will echo through to the rest

06:37 of our lives there are basic things you

06:39 should understand understanding tax

06:40 rules understanding what your income and

06:42 expenses are knowing how to get the most

06:43 value out of your money this isn't

06:45 taught at school so it's up to us to

06:47 learn about it and if you want to know

06:48 more about any of these topics then let

06:50 me know and I'll make that for you but

06:52 just by ignoring this and not wanting to

06:53 learn about it you'll stay in a place

06:55 where you keep working for money number

06:57 seven doing what everyone else is doing

06:59 in today's society we are really Under

07:02 Pressure to spend and we have to do it

07:04 to fit in this applies to everyone

07:06 whatever your income level is I have

07:08 worked with people who are making a lot

07:09 of money way into the six figures but

07:11 they are still living paycheck to

07:13 paycheck because they are spending to

07:15 impress and to lick rich and to show

07:16 everyone how rich they are instead of

07:18 actually being rich and Building Wealth

07:20 if you're spending on clothes and bags

07:21 because you enjoy it and because it

07:23 brings you happiness then that's one

07:24 thing and I'm all for spending on things

07:26 that brings you happiness and joy but

07:27 spending on it to keep up with what

07:29 everyone else around you is wearing and

07:30 to post on your social media to show

07:32 everyone else what you're wearing rather

07:34 than for your own happiness that's

07:36 another thing altogether and this is

07:37 what keeps the middle class in a

07:38 never-ending cycle it is a status driven

07:41 Society but you need to find why you're

07:43 making money and working hard what do

07:45 you want to achieve and how do you want

07:46 your life to look like whether it's to

07:48 travel business class everywhere or to

07:49 quit your job and never see your boss

07:51 again as long as it's in line with what

07:53 your value is and it's not dictated by

07:56 anyone else's that is what will get you

07:58 out of the Rat Race the rat race isn't

08:00 about working a nine-to-five job it's

08:01 about a living life on such an edge

08:03 where you are always chasing the next

08:04 thing whether it's a paycheck or a

08:06 material possession in a way that your

08:08 greater life goals and your Ambitions

08:10 are placed in the background in order to

08:12 keep continuing this race hopefully this

08:14 video gave you some ideas or triggered

08:16 some thoughts into habits that you do

08:18 not want to go down thank you for

08:20 watching if you enjoyed this video you

08:21 may also enjoy another video that I have

08:22 on habits that made me six figures by 24

08:24 and I'll link that over here hope to see

08:26 you there

💫 FAQs about This YouTube Video

1. What are the habits that keep people in the middle class and how can they be avoided?

Some habits that keep people in the middle class include working for less than their worth, buying more than they can afford, and relying on a single source of income. These habits can be avoided by seeking better-paying opportunities, being mindful of expenses, and diversifying income streams through investments or additional jobs.

2. How can working for less than your worth keep you in the rat race?

Working for less than your worth can keep you in the rat race by perpetuating a cycle of undervalued compensation, making it difficult to achieve financial goals and independence. By accepting low pay increases and not seeking better opportunities, individuals remain trapped in a cycle of working just to sustain their undervalued lifestyle.

3. What is the financial impact of buying more than you can afford?

Buying more than you can afford has a significant financial impact, leading to a cycle of debt and wealth depreciation. When people overspend on cars, homes, and other expenses without considering their long-term financial capabilities, they become trapped in a cycle that hinders their ability to build wealth and achieve financial freedom.

4. Why is it important to have multiple sources of income to break free from the rat race?

Having multiple sources of income is crucial to break free from the rat race because it provides financial security and the opportunity to build wealth. Relying solely on a job can be risky, as seen in the recent job losses due to the pandemic. Diversifying income through investments, side hustles, or a small business is essential for long-term financial success.

5. What is the impact of ignoring the importance of saving for old age?

Ignoring the importance of saving for old age can have a detrimental effect on one's financial future. Without adequate retirement savings, individuals may find themselves unable to maintain their desired lifestyle or cover essential expenses in their later years. It is crucial to start saving for retirement early to enjoy the benefits of compounding and financial security in old age.

6. How does financial literacy play a role in breaking free from the rat race?

Financial literacy is a critical factor in breaking free from the rat race as it empowers individuals to make informed financial decisions, invest wisely, and manage their money effectively. By acquiring the necessary knowledge and skills to navigate the complex world of personal finance, individuals can avoid common pitfalls and work towards achieving their financial goals.

7. What is the key to breaking free from the rat race?

The key to breaking free from the rat race is to avoid common middle class habits that hinder financial growth, such as working for less than your worth, buying more than you can afford, and relying on a single source of income. By actively seeking better opportunities, exercising financial prudence, and diversifying income streams, individuals can escape the cycle of financial struggle and achieve greater financial freedom.

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