“Keep your focus. You are planning your financial independence. You are in a different game. Don’t be jealous of their fancy stuff.”

If you’ve been with me for a bit, you know I love to read and get various perspectives on the Financial Independence movement. So when Eric reached out to review his book, I accepted as I wanted to see how others are pursuing their own version of FI. To be honest, I was expecting a book very similar to Millennial Money (see that review here). I’m not sure why, but I figured it probably had the same advice, just synthesized differently. I continue to be intrigued by books that offer the same financial advice, just delivered differently because each one of us has a unique way of processing information and certain topics may not resonate with us until we’ve read it a few times, which helps instill it further in our minds.

This post contains affiliate links. See Disclosures for details.

This book was provided free to me in exchange for a review. All opinions are my own.

About the Author

Eric Duneau is a 50 years old French citizen, married with two children at University. He moved from France to UK in 2000. He has spent most of his professional life working in CxO positions for Technology companies (start-ups) serving global companies around the world. In “Out of the Rat Race”, which is available on Amazon, his first published book, he shares his journey to reach financial independence, so that you can benefit from his hindsight.

Book Breakdown

It’s always helpful to know the contents of the book so I love when a Table of Contents is setup. The book is categorized into the following areas with steps under each one.

• Understanding what money really is and how it works

• Clarifying the power of your attitude and making it bulletproof to adversity

• Simplifying the concepts behind sound and rock solid finances

• Unveiling what really lies behind employment, human capital, and the many facets of money

• Establishing a credible plan towards financial independence via real estate investment

• Reviewing a real case of nearly two decades of investments leading to financial freedom

• Discussing the benefits and questions arising after financial freedom is acquired

• Reviewing a selection of other games at your disposal to exit the Rat Race financially free

I was surprised that the book started with a discussion on the concept of Money. It goes into detail the history of money and how it works. The key takeaway though in this discussion on money is that money is just a medium of exchange, but it does bear attributes that allow it to be taxed, inflated, deflated, grown through interest and can be created. I don’t think many people really understand that money is made up, but if you know some of the rules, you can take advantage of its benefits. The average person thinks money is the $1 in their pocket and that’s it, but if you really want to gain financial independence, you have to start thinking about that $1 differently. How much does that $1 cost to borrow? How much does that $1 cost to lend? How much is that $1 worth today vs. tomorrow? So while I was surprised that the book covered (in great depth) a conversation on the history of money, its a good primer on understanding how money truly works.

Good Debt vs. Bad Debt

I’ve been struggling with assigning debt to be good or bad. I like how Duneau describes good debt: “one you contract to secure control of an appreciating asset which, as far as your due diligence can demonstrate, can and hopefully will produce post-tax profit much in excess of the interest you pay on the debt.” While bad debt is “debt that you contract to acquire a depreciating asset (a car, a computer, or anything that know has already lost its value the minute you bought it new and shiny), or credit that you take to finance day-to-day spending.” Personally, debt to me is an unfulfilled promise which has its own risks.

Being in the FI/RE community, there’s a emphasis on being debt free, but Duneau brings up a good point:

“We are often tempted to associate paying back the capital (truly owning the house) with freedom. But as we saw earlier, financial freedom is less about capital and more about income. It comes with a regular net passive income in excess of your financial needs. Nothing more. Owning your home outright will only be a side effect of you coming closer to financial independence, but should not be the goal, or you will miss many other opportunities. The real end goal is to generate enough net passive income to live the life you want to live.”

He also posits to look at education as a business investor would. In the US, we’ve come to believe that student loan debt is good debt, but unfortunately, this is rarely the case because it’s return in the long-term can sometimes be negligible. When it comes to education debt, look at it the way Venture Capital firms look at their business investments. Make sure it pays for itself within 5-7 years.

If you need help reducing student loan debt, take a look at this article.

Real Estate Investment

The book goes on to cover how investment in real-estate paved the day for Duneau’s foray into financial independence. Majority of the book goes on to show his own case study and experience of how he continuously leveraged each home purchase to get to this next level. There is strong emphasis in the importance of income vs. capital. A steady passive income is what matters. Passive income from investments to pay for current expenses means financial freedom.

This of course reminds me of that chart from Rich Dad, Poor Dad if you’ve not read that, I highly recommend reading that as well.

Out of the Rat Race provides lots of analysis comparing real-estate along with other investments and it goes into specific buys that the author completed to get his financial independence journey started. I won’t hash those here because a part of the allure of the book is actually the graphs, charts and calculations he provides to make his case. There’s also an interesting discussion about upgrading your lifestyle. Inevitably, once we hit a certain income threshold, we will start asking ourselves the question, “should I upgrade?” This can be a slippery slope if we are not careful as lifestyle inflation is very real.

Human Capital for Financial Independence

In the book, Duneau doesn’t necessarily denounce being employed by someone else. He feels being employed can be useful as it provides a steady stream of income, but he doesn’t necessarily believe that being employed for years is enough to reach financial independence given the traditional routes of saving and salary increases. He has a simulator for how much you can save and accumulate with just a traditional salary over on this site. The key with being employed is to simultaneously leverage employment as a means to obtain bank loans and capital, but also as a means of figuring out how to build a separate steady stream of income.

There’s also a key takeaway he mentions in this discussion of human capital and one that I’ve been pondering. “…avoid putting yourself in competition against low-skill local people. Instead, compete against high-skill global ones.” I’ve been delving separately into this concept after listening to Naval Ravikant and reading the book, Deep Work, by Cal Newton. It’s a separate topic all together that I will cover a bit more in a separate post (lots to digest regarding the subject), but one that relates to financial independence in my opinion. I feel like everything now relates to financial independence if we just sit down and think about it.

In the end though, the game is to grow financial capital as the human capital gets depleted. That way you won’t have to work your life away. Of course, the earlier you build that cushion, the better as your money begins to work for you that much faster. The journey to financial independence is not without it’s sacrifices, but it’s up to each of us to determine if it’s worth it. It may not be a sacrifice in the end, but just a change in values and mindset.

It’s also equally important to always keep the money = time equation in mind. Many of us work until we are 65 in the hopes of being able to enjoy life afterwards, but there is never a guarantee that we will live that long and if the life we have in that old age is worth enjoying. We are all running against the aging clock and sometimes it’s best to enjoy quality time today.

Out of the Rat Race Simulators

There’s a significant amount of calculations and math in the book. It’s not for the faint of heart, especially if numbers scare you, but I urge you to read through the numbers carefully. You may not need to understand how everything is derived, but a general overview will give you an idea of how to compare deals for the long-term view. Eric has created a companion website intheratrace.com with the book that includes a few simulators you can try out for yourself.

Conclusion

So interestingly, the book’s content came in a timely manner for me as I am now in the process of researching how to leverage real-estate for our own financial independence journey. I feared investing in real-estate because I didn’t know much about it, but the only way to beat fear is with knowledge so this book has provided some eye-opening questions and potential avenues for me to look at. One of the challenges I have is how to be on the same boat with my husband when it comes to real-estate investing. We have different ideas and we just need to meet in the middle.

Sometimes, you have to chalk it up to the universe to know exactly what you need. So even though I had my own ideas of what this book was all about, when the student is ready, the teacher appears.

Thanks to Eric for sending me a copy of the book. Find it here on Amazon. With books like these, I prefer the hard copy because the graphs and tables look so much better and easier to read than on the Kindle.