I hate when I hear people say that you can’t get rich working for someone else. It is such a blanket statement that isn’t even in the realm of truth. First of all, there are jobs, and there are careers. Obviously, you’re not going to get rich working at McDonald’s as a burger flipper. But are you still working your high school minimum wage job, GYFG reader? I think not.
First, I’m going to frame this discussion with the following statements:
- Most of my readers are college-educated (in my opinion, this is the highest probability path – but obviously not the only possible path – to a six-figure income).
- The average starting salary for a college graduate is $50,000 per year.
- You, GYFG reader, are among a very ambitious bunch of peers here, and will likely progressively increase your annual income over the life of your career. As my grandfather always said, “Birds of a feather flock together.” Yes, we are a bunch of flockers.
Now, I want to change the lens through which you view your career:
Your career is an ASSET.
In fact, it is likely the most valuable asset you have. It is also the asset over which you have the most control. I preach the value of focusing a lot of energy on increasing the income side of the equation and today I’m going to show you why that’s important in your career, and how powerful it can be in the pursuit of FI. I also want to put to bed this idea that you can’t get rich working for someone else because that is absolutely not true! First, not everyone is built to be an entrepreneur. Secondly, you can definitely make millions as an intrapreneur.
Intrapreneurship is the act of behaving like an entrepreneur while working within a large organization. Intrapreneurship is known as the practice of a corporate management style that integrates risk-taking and innovation approaches, as well as the reward and motivational techniques, that are more traditionally thought of as being the province of entrepreneurship. – Wikipedia
Can you smell the HUSTLE in the air, Freedom Fighter???
Sidebar: I did the math and my own career has already generated $1,400,000 in its first 11 years. I estimate that it will be worth north of $12,000,000 by year 30. That’s a pretty tasty asset produced via working for someone else, wouldn’t you agree?
Don’t Underestimate The Value Of Your Career
Let’s assume for a minute that you start your career making $50,000 per year as a recent college graduate, and in the very unlikely scenario that you earn that same income over a 30-year career, your total career is worth $1,500,000. Unlikely and undesirable, but nonetheless, that is still a serious chunk of change.
Another Sidebar: The income you earn from your career is based on the skills you have and the value you can deliver to the organization that employs you with those skills. If you want to make more money, it’s a simple formula: Add. More. Value. You can do this one of three ways:
(1) Obtain new skills that allow you to add more value.
(2) Improve your current skills to a point that they allow you to add more value.
(3) A combination of the two above.
Do you think you will be earning the same income for 30 years? Do you want to earn the same static income for 30 years? I didn’t think so. You can, you should, and you must maximize your career to reach Financial Freedom – get your hustle on and be the most valuable player in your arena!
So, if we can agree that it’s much more probable that you will increase your income most years and that the best way to do that is to add more value via the big HUSTLE then we can move on.
Great! I knew you would agree! (I’m not having a conversation with myself, am I?)
To help me demonstrate how valuable your career could be, I built a calculator that produced the table you see below. (Because I like to share with all of you flockers, of course you will be able to download this FREE calculator for yourself at the end of this post!) My starting assumption is based on the unlikely scenario we discussed above of a 0% annual increase in salary. I used assumptions ranging from the pitiful annual increase of 0% to the stellar 15% over a 30 year career to account for various potentialities.
Keep in mind that this is just to show you a ballpark value of your career and that your actual year-over-year increases will probably be much lumpier than what is shown below. Also, keep in mind that the examples that we will go through below don’t include your spouse’s income, gains from investments, inheritance, side hustles, stock options, or any other x-factor you can think of, so our computations may very well be conservative for some of you.
Lastly, please note the separate table in the screenshot below showing contribution to net worth based on different gross savings rates – the other side of the earn/spend equation. Bigger income + higher savings/investing = higher net worth (I recommend a 50% savings rate). Think of every dollar of your income as a seed that sprouts into your growing FI fund.
If you study the table above you can see that your career is likely your most valuable asset. This is especially true if you manage it aggressively to earn robust annual increases.
DON’T MISS IT: The second table shows what the potential contribution to Net Worth could be in each scenario. In this post, we are focused on the value of the career itself, but you can see that the story doesn’t end there. Converting the income you generate from your career into savings, then into investments, exponentially compounds the value of your career, and shows how powerfully synergistic each annual increase in earnings can be.
These things don’t typically happen in such a linear fashion, with an infinite number of possible permutations, but the tool is useful nonetheless to show you the potential of maximizing your career earnings. The six rates I decided to include cover a large enough spectrum to represent the opportunity most of us will ever experience in our lifetime. I would categorize the results as follows:
MEDIOCRE CAREER: If you only manage to earn 3% raises (typical cost of living increases) over the life of your career it will still be worth $2.4M. I consider this to be the TRUE worst case scenario for my super smart, ambitious and talented GYFG readers.
SUPERIOR CAREER: At 5% you are looking at a career worth $3.3M. Earning 5% is in the realm of high probability for a large percentage of the readers of this blog.
REMARKABLE CAREER: It’s the 10-15% annual increases that start to churn the waters. 10-15% increases are not out of the realm of possibility if you make it to the C-Suite or other high-level executive position. If we assume you can average increases in this range for 30 years, the value of your career will land somewhere between $8.2M and $21.7M.
Note: When you are strategizing how to maximize your career and expand your value, keep your eye out for huge steps that transcend a typical increase. See my Year 7, and Year 9, for example (in the table below). For details on those steps, read this. Then, even with smaller increases in following years, you are obviously working off a drastically increased base, netting a higher dollar figure even with a smaller % in all subsequent years. Similarly, negotiate your starting salary aggressively for the same reason. Even $10,000 more to start will make a huge difference over time, as you build the increases off of it. This is exactly what I was able to do because I had added a valuable skill set, to the tune of $15,000 dollars more starting salary than my peers (in my first job out of college).
I’m personally aiming to keep myself on the Remarkable Career path. By the end of 2018 my career will be eleven years old and thus far I have managed to grow my income by a compounded 21% (see below). I have had a very good run these past five years! “Actual income” is what I actually earned in those years and is not necessarily what my salary + bonus was, due to the fact that in some jobs my bonus was paid out in the following year. I did it this way because I wanted the compound rate to be reflective of what I had actually earned.
You can plug your own numbers into the FREE calculator download below. The calculator also allows you to play some “what if” scenarios, like I have done in trying to forecast where I will be year by year from Year 12 through Year 30 of my career. Play with that to prove to yourself what the power is of even a 1% increase differential.
Take note of how the compound annual growth rate of 10% I achieved results in a lifetime career value of ~$12.5M, which is significantly higher than the example in the first table, which only accumulates to $8.2M. For me, this is possible due to much larger increases early in my career followed by much lower increases (projected) later in my career. To restate, the earlier you get the big increases the larger base you have to compound from.
***Time is once again the ultimate most valuable resource, and is the secret sauce to pour onto all your main dishes.***
Concluding Thoughts & Download
See? It is more than feasible to get rich working for someone else. Not as a passive cog in the wheel but as a hustling GYFG-reader intrapreneur! Even with just your college degree and a mediocre career, you are almost guaranteed an asset worth a few million dollars. But I challenge you to step up your game by increasing the value you add to the organizations that employ you so that you can have a superior or – better yet – a remarkable career.
Plus, as you can see above, the value of your career doesn’t stop here. Beyond what you earn, it is the dollar-soldiers you keep and put to work for you that really matters. I don’t know about you, but my mind ramps up when I start extrapolating the millions more I can generate by investing the increased income I produce from my career. Gains from investments compound the value of your career which provides the seeds that eventually grow into money trees. It’s a perpetually upward-cycling equation.
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Your turn! Do you see the potential? How valuable an asset is your career? Did this post motivate you to start managing your career more aggressively? Tell me how you will! Also, I would like to hear from boots-on-the-ground: what are the most powerful ways you are seeing that add value in your organization – what skills are being compensated most highly?
– Gen Y Finance Guy
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