Is It True That “You Won’t Become Rich Working For Somebody Else”?

In my opinion, Yes. If what you are looking for is salary, then getting a high salary ( lets say over $190,000 a year and that you’re in the top 5% income earner ) would definitely put you as rich working for somebody. Also if you consider careers like medicine, engineering, management consulting or financial analysis, you probably work there for 10 – 20 years and easily draw a fairly high income working for that somebody else.

But if you are looking for a successful lifestyle that you can dictate your own terms and what you crave for is nothing but high net worth and wealth position, then my answer is a definite No.

It is very difficult to become rich working for somebody else. Much of the income of the wealthiest come from dividends on their accumulated assets like stocks, bonds, and mutual funds. Alot of these are also reinvested into other businesses. Even if you are an employee and getting a slice of equity / share of the company, unless that company goes public or acquired that becomes a phantom stock and you’ll probably be asset rich and cash poor ultimately.

I like to think of being wealthy in terms of how much work I put in to achieve a positive net cashflow on a daily basis. If I cannot quit my day job and continue living without having to go bankrupt, then I am not yet wealthy. But if I have assets that help subsidize my daily expenses and use my wages or salaries to reinvest my current assets, then I think I can consider myself to be wealthy.

The reason why the rich becomes richer is because they cleverly understood the power of leverage and maximize their profits.

When you work for people, there are basically 3 people involved.
1) Your Employer
2) Your Bank
3) The Government.

These are parties which you have to be held accountable and all transactions be fully documented for a period of 5 years.

Let’s get real… Most wealthy people I know aren’t like Mark Zuckerburg or Bill Gates. Mostly these are people who own their own construction company and can still quit today and have a positive net cash flow. But a Doctor earning $200,000 a year cannot quit. Some yearn to be just a janitor as they do not have to pay high interest loan and taxes.

Thus in a nutshell, here are the true facts :

1) Know what you mean by rich. Do you mean pulling a big salary or you mean a high net worth? Jeff Bezos earns less than $100 K a year but have a high net worth of $ 46 bn.

2) Understand where your cash flow is coming from. If you bring in salary you still can invest some of the hard earn money into assets you acquire.

3) Know who you work with. If you work for yourself, you still have to pay taxes or mortgage. But these things are secondary compared to the freedom which obviously is priceless !!

Best Regards Always !
Paul

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