It’s been the mantra of entrepreneurs for generations: “You can’t get rich on a salary.” Is it true? With scant exceptions, even top-paid execs, doctors, and lawyers make less than $1 million a year. And you can certainly grow rich earning six figures a year if you play your cards right. But what about the rest of us? If we aren’t interested in following one of a handful of professional tracks that lead to big paychecks, there are two options: Accept our income level and spend and invest wisely to protect the little money we earn or become an entrepreneur. The way I see it, we can become financially comfortable on a salary, but not rich.
What is “Rich”?
These days, I think far too many people mistake being “rich” with being financially secure. Certainly, to somebody who is broke, somebody with a $1,000 in their pocket will seem rich. And, as other bloggers and financial magazines sometimes document, ordinary Americans become millionaires everyday. These ordinary millionaires don’t earn seven figures (or even six figures) a year, they don’t inherit their money, nor are they business owners—they just play by the right personal finance rules. They’re millionaires, but are they “rich”? I don’t think so.
In fact, I’ll bet if you ask people who reach a net worth of over $1 million, many will tell you that they aren’t going to stop until they reach a net worth of $4 or $5 million. Even then, they won’t be “rich”. Financially secure? Sure. Upper-middle class? Yes. But “rich”? No.
Rich is having tens of millions, or billions. Like Bill Gates, Warren Buffet, or Sir Richard Branson. Rich is having your own island and a private jet. Rich is giving away more in charity every year than most people will ever have in the bank.
And the fact is, you can’t get that rich on a salary.
What Can You Do on a Salary?
Just because you work for a paycheck doesn’t mean you can’t take control of your financial future. In fact, if every salaried employee’s financial destiny were predetermined, there would be scant use for financial advice!
Working for a paycheck, you can control how that paycheck grows by:
- Proving value to your employer,
- negotiating your compensation,
- investing in yourself (via training and education), and
- managing your career track.
You can also maximize how much of your paycheck you keep by:
- Living well below your means,
- Getting out of and avoiding debt, and
- Saving and investing regularly.
At the end of the day, however, you can only squeeze so much out of your chosen career field. Will it be enough to make you comfortable? Probably. Will it be enough to make you content? Hopefully. Will it ever make you “rich”? Unlikely.
Why Does it Matter?
Most of us don’t care if we ever get that rich. Most of us, myself included, will be just fine being comfortable and building a modest level of financial security. Still, it pays to steal a few tactics from the playbooks of the truly rich. A few of those tactics include:
- Taking calculated risks,
- Working for yourself,
- Seeking opportunities, and
- Understanding the value of time.
Incorporating some of these tactics of entrepreneurs and business leaders can only help us maximize our paychecks, but also may lead us to new earning opportunities outside work that will supplement our incomes and either increase our overall wealth or propel us to financial goals faster (such as early retirement).
In the coming weeks I’ll be writing more about how to pursue entrepreneurial activities on a part-time basis and how to supplement full-time entrepreneurship with a “day job” as well as the importance of risk in building wealth. In the meantime, do you agree that it’s impossible to grow rich on a salary? Please share your thoughts in a comment!