Go on social media and it seems like everyone is an entrepreneur. Content creators would have you believe that the only way to get ahead is by starting a business and making it big fast. It’s not necessarily a lie, but you’re not hearing the whole story. I’m here to tell you that you can get wealthy as an employee, and there are actually advantages to doing it that way.
My Background
As I write about in my book Cash Uncomplicated, I was a financial mess for many years. I went years and years financially illiterate, and paid the price for it. It wasn’t until I began to start understanding money that I turned around my money situation.
I’ve also been a full time W2 employee for many years. My blog and book have all been in addition to my nine to five, and occurred after I reached a certain level of wealth. The W2 job has been my bread and butter and the business side of things never would have happened if not for being successful in my job.
I continue to work today and write on the side. It’s a good combination for me and I expect to continue building long-term wealth this way.
The Truth: There are Many Ways to Get Wealthy
Despite what you might see on social media, there are lots of ways to get wealthy. The young entrepreneur who busts her butt for five years starting a business has a great chance to get wealthy very quickly. So does the guy who obtains a high paying corporate job after college, and saves over 50 percent of his income over a 10-year period.
Taking speed out of the equation, a middle-income earner who invests 15 percent of their income over 35 years also has a great chance to become very wealthy. Same with the person who has a government job with a pension and small 401k balance.
Point being there are lots of ways to get wealthy, and it can happen to all different types of people at varying speeds.
Getting Wealthy Slowly
Lots of emphasis is placed on speed. Retire before 35, 10X a business in one year, leverage debt on dozens of rental properties by age 30, etc. Speed creates momentum and moves things along much faster but there’s also getting wealthy slowly.
Related: Leveraged Debt: The Good, The Bad, & The Ugly
There’s no rule that says you have to go fast to get wealthy. Although not for everyone, you can get wealthy slowly. Like over 30 to 40 years.
Let’s use a hypothetical scenario of a 22 year-old fresh out of college who begins investing $300 per month into an index fund with a 10 percent average return. If this person worked for the next 40 years and retired at age 62, they’d have about $1,752,667 in retirement.
That’s slow wealth accumulation, but it’s also a very robust portfolio. Almost two million dollars at retirement is a lot of money, even adjusted for inflation.
Advantages to Getting Wealthy as an Employee
There are lots of advantages to getting wealthy as an employee. It’s not as sexy as entrepreneurship, but there are many advantages to it. Although not an exhaustive list, here are six of them.
Number 1: Less Risk (Especially in the Beginning)
Starting a business is risky, especially for someone doing it for the first time. For the entrepreneur just starting out, all the responsibility is on them. They are the lead sales person, designer, customer service rep, and much more. Something goes wrong and it’s on them. Out of town for a week and they still need to make sure things are going fine with the business.
Once the business begins to grow and employees or contractors are onboarded, that risk starts to mitigate, but it’s still there. This is as opposed to an employee who is joining an existing business/organization.
Many of the systems are already in place and there is plenty of support around you. You don’t have to do it all and can pick a solid, stable company that is unlikely to have massive layoffs.
Even if there are rough times down the line, there’s a reasonably good chance that you’ll have several years of runway where you can build up your savings and investments, as well as job skills with an employer.
Number 2: Consistent Paycheck
As an employee, you’ll get a consistent paycheck. Most employers pay once every two weeks or monthly. Some pay weekly or even daily. Whatever the time frame, it’s a consistent paycheck.
Even if you had a bad day or bad week, you’ll still get paid. Of course on the other side, even if you had an exceptional day, week, or month, you’ll still get paid the same unless you’re commission based.
With a consistent paycheck, you know where the floor is. You can’t fall too far down because the floor, or safety net of a paycheck, will catch you. The scheduled paycheck is a really good form of security because it’s consistent and predictable.
If you’re wanting to start your own business, having a job while you work part time in the new business can be a really powerful combination. You’ve got the risk with your side hustle, but the security of your job with a consistent paycheck.
Number 3: On the Job Training
Suppose you want to eventually start a company in a specialized business. Going out and immediately starting your own company is difficult without real world experience.
Being an employee for a company in that industry though is a whole different story. It’s paid on-the-job training. Think of it as a paid internship. You get to learn the ins and outs of the business without the big risk. All while getting a paycheck that will allow you to live comfortably, save, invest, etc.
Then if you decide you want to go out on your own, you can always do that at a later time. But when you do, you’ll already have a lot of the training and knowledge you need, giving you a better chance of success. Or if you choose to stay at the job, you’ll continue to reap the benefits of all you’ve learned.
Number 4: Employee Benefits
One of the greatest things being an employee can bring you is the benefits. Healthcare, dental, company retirement match, paid time off, etc.
Think about these two people making $120,000 per year. Erik the employee has been contributing to his 401k and getting a company match of around $10,000 per year for multiple years. He’s built up a decent sized retirement portfolio with his contributions and employee match. He also pays $250/month for full medical benefits for him and his family of four. In addition, he has several weeks of paid time off.
Erin the entrepreneur also makes $120,000 per year running her own business. She doesn’t get the company match though and she’s been paying between $1,500-$2,000 per month in medical benefits for her family of four. Nor does she get any paid time off as she’s always working on the business.
Erin has the greater upside running her own business but in the present time, she’s making significantly less than Erik after benefits are calculated, including insurance, paid time off, and a company match.
Number 5: Doesn’t All Fall on You
If you own your own business, it all falls on you. You’re the CEO, boss, head person in charge–whatever you want to call it. As an employee, even if you’re in a high role, you will have support. You usually can get people to cover for you when on vacation, taking some time off, or not feeling well.
A business owner can of course hire for all this but the ultimate responsibility is on them (often a good thing depending on your personality type).
In short, if you’re an employee, it doesn’t all fall on you. You’re part of a company with an infrastructure and support already built in. If you start your own company, you can certainly build that type of system and infrastructure, but it’s not already done for you like an employee.
Number 6: Less of a Learning Curve
Those starting a business or buying an existing one have a huge learning curve to start. There’s so much to learn and do. For every task completed, it seems like two or three more are created. It can seem never-ending.
An employee can get really good at one or two specialized things and focus on those things 90% or more of the time. For example, a truck driver needs to be really good at driving and everything that goes into driving. Including safety items like backing up, merging onto the interstate, avoiding bad drivers, etc. It all falls within the scope of driving.
A driver doesn’t have to worry about the legal structure of his job, paying employees, working with legal, customer service, etc. Same goes for other jobs like a surgeon, plumber, electrician, teacher, etc. They are all able to focus on a few important elements and not have to worry about the whole, entire business or company.
While all these jobs listed come with big challenges, they are more specific and the employee isn’t running the entire thing.
Conclusion: Lots of Ways to Win
The point of this post isn’t to discourage you from starting your own company or being an entrepreneur. There are a lot of great things about being your own boss and starting something from scratch. It’s to dispel the myth that you can’t get wealthy as an employee. Because you can, and millions of people have done it for years and years.
There are so many ways to win with money, including starting a business, getting wealthy as an employee, doing a mix of the two, etc. Be very wary of people online telling you there’s only one way (usually the way they are selling you), because it’s not true.
Find what works for you, and if getting wealthy as an employee is what you want to do, go for it.
