WHAT IS YOUR “RAT RACE” NUMBER?

The Rate Race Number is the amount of passive income you need to cover your fixed monthly expenses. Once you’ve achieved that, you are financially free.

What are the way to achieve your Rat Race number?

1. decrease your expenses
2. Increase your passive income

How do you Calculate your Rat Race Number?

Figure out what you are currently spending. This is great, but for me I also wanted to calculate the number I want to be at (maybe your current spending doesn’t provide your goal lifestyle). So i like to figure out my ‘Rat Race Number” the minimum and my “Goal Number” the number to achieve my goal lifestyle.

Step 1: Determine How Much You Are spending.

This is something you need to be doing if you are not already. You need to know where your money is going if you want to reach your financial freedom. There all kinds of apps to help you with this (Mint.com, etc.) or you can you an excel spreadsheet. As long as you are doing it it doesn’t matter how. Once you know how much you are spending and where it is going you can move onto step 2.

Step 2: Where Can You Spend Less?

Now that you know how much you are spending on things take a look and see what you can cut back on or go without. I know this can be hard, but can you go without starbucks and instead brew your own coffee? Do you need the highest package of cable or can you go with the base package or go without all together and just use netflix and hulu?

Step 3: What’s Your Number?

Let’s assume you recorded your ACTUAL spending and made a few changes to reduce your monthly expenses by 10 percent each month. After all that you have determined that you can live off $5,000 per month. That’s $60,000 a year, but we can’t forget taxes. Lets assume you are paying 30% in taxes, then divide your net “Rat Race Number” by 70 percent and that will give you your gross “Rat Race Number”.

$60,000/0.70= $85,714 = $7,142 per month

That means you need to make $7,000 a month to meet that “Rat Race Number”.

Step 4: How Will You Get There?

There are lots of ways to help you get there, but for me and my strategy has been real estate. So you need to make $7,000 a month. How many house will you need to get that $7,000 and lets say you are make $250 a month in cash flow (after expenses) from your single family houses. That means you need to have to have 28 house to achieve that goal. That is a lot of houses, but can be done (using portfolio lending , private money, or paying cash), How long would this take you? Do you want 28 house?

The other option is multifamily properties instead of single family houses.

Pros:

• You can acquire multiple units in one transaction. With in in just one, two, or three transactions you could have 28 units. Instead of doing 28 transactions to get 28 units.
• Multifamily properties are easier to finance since you can use the rental income to qualify.
• By improving operations and expenses you can increase the value of the property.

So now you need to ask yourself what route will I take to achieve my “Rat Race Number” ? Is it going to be real estate or something else? What route in real estate am I going to take (Houses, Multifamily, Vacation Rentals, etc.). I hope this article helps you determine a route or at least get the wheels turning on how you can achieve your “Rat Race Number”. All I can say is take action in whatever path you take, the longer you wait the longer it will be until you quit the “Rat Race”.