Can You Build Wealth Working For Someone Else?
BY BRANDON VAGNER, CPA, Ph.D., & WALLET WIT FOUNDER
I recently read an article that featured an entrepreneurial influencer that said “you won’t get rich working for someone else.” So, the big question is whether that statement is true or not? Some of you might be surprised to learn that it’s not true and comments like that are pretty irresponsible in my opinion, because people shouldn’t be told entrepreneurship is the ONLY way to build wealth. You can absolutely build wealth working for someone else.
Let me preface this article with the fact that I am a HUGE fan of entrepreneurship, but people need all the facts to help them make a well informed decision on whether to be an entrepreneur or work for someone else. The fact is that entrepreneurship requires a certain risk tolerance and many other factors, and not all people are hard wired to be great entrepreneurs to facilitate wealth accumulation.
Let’s start by defining “rich,” which is a term I’ve never liked and you’ll rarely ever hear me use that term. Rich, in its raw form, is having abundance. You’ll hear mainstream media commonly discuss “rich” framed around wealth, but that’s just one principle component of being “rich.” You can also be “rich” from perspectives of time, family, friends, health, etc. So, it’s not all about building wealth, but let’s focus on that first, because wealth is what this influencer was talking about.
Per the Pew Research Center, the bottom median threshold of upper class household income for a family of four sits right around $156,000. If it’s just two of you in the household, then you are upper class if you both collectively earn at least $110,000. That said, your purchasing power certainly might be much different depending on where you live. Conversely, your ability to accumulate abundance is dependent on your cost of living. Regardless, this gives you a good ballpark of what’s considered upper class.
The list of families I personally know that work for someone else and earn greater than $156,000 annually is EXTREMELY long, and I should also say that the vast majority of them are first generation wealthy and under the age of 35. I could go on and on about friends of mine who are salaried employees and make more than $156,000/year. Some of them even earn over $300,000/year working for someone else. So, the argument that you HAVE to be an entrepreneur to become wealthy just doesn’t hold any water.
For example, I have a really good friend who is a sales guy for a mid-level company. For the last few years, in his early 30’s, he has earned $300,000+ per year consistently with his base salary + commissions. That is a salary employee building wealth quickly. I also know a couple that used to work where I did who now earn a collective $550,000+ per year as executive level accountants. Those are just a couple quick examples. I could literally go on and on about people I personally know building incredible wealth as employees. There is even one guy that went to my alma mater that crushed it in the accounting world and is now worth in excess of $25,000,000. Yes, that’s $25 million. His first big windfall was $20 million in stock options that came right around his late 30’s / early 40’s. All that said, I fully understand these are all outliers when you look at salaried employees as a whole, but I’m trying to help people see that they shouldn’t feel like entrepreneurship is the only option for building wealth. You can accumulate wealth working for someone else.
Can you build wealth faster as an entrepreneur versus working for someone else?
The question then becomes, do you have a higher chance at “hitting it big” faster as an entrepreneur? I think this is probably what that influencer was referring to, but it’s not what was said. So, let’s look a little closer at this time factor from BOTH sides.
Per SmartAssets, the average earnings for people with a bachelor’s degree is $59,124 and the median earnings for people with a master’s degree is $69,732. In general, the average United States worker earns right around $47,000 per year, per the Bureau of Labor Statistics.
Many different sources cite the average income of an entrepreneur to be right around $70,000. So, unless you’re a high performing entrepreneur or you just get lucky, there is no data to support you’ll accumulate wealth faster as an entrepreneur, but the same can be said for salaried employees too. Just as there are the top 1% entrepreneurs who realize massive earnings quickly, there are the 1% of salaried employees who hit it big within the organization they work, and some do it very quickly. I know of a lady who retired right around the age of 40 after being a Chief Financial Officer at multiple companies. She’s a perfect example of someone who built wealth extremely fast, but she did it working for someone else. There will always be outliers no matter if you’re analyzing entrepreneurs or salaried employees.
Salaried employees who do very well for themselves typically earn a college education; start working at the bottom of an organization; and over years become trusted employees and earn their promotions into the high paying executive level positions. You can see there is a massive time investment there, but it’s also extremely important to understand that these salaried employees didn’t have to take on near as much risk in the beginning that entrepreneurs often times do. That’s the trade off.
Let’s now take a closer look at the flip side and talk about the entrepreneurial track. Again, I’m a HUGE fan of entrepreneurship. I think if you want to do it, you certainly should, but there are things you need to know beyond the amazing picture the top influencers showcase.
Are there entrepreneurs who have built incredible amounts of wealth in a few years time? Yes, there absolutely are, BUT that is far from guaranteed or the norm. One of the many reasons I like Gary Vaynerchuk, an entrepreneur superstar, is that he frequently talks about the dark side of entrepreneurship that nobody seems to be discussing. He’s very open about the fact that entrepreneurship is hard and many people really struggle with depression and other issues. This is due to the fact that they don’t see the quick growth within their own business like they see plastered all over social media. For most entrepreneurs, it takes an incredible amount of hard work, and sometimes 5 – 15 years, before their businesses really start to flourish like they dream of. All that said, don’t let the fact that it’s hard work get you down, but you need to understand that entrepreneurship is hard work and it does’t always work out like you see on social media.
Yes, the internet has made it possible to build wealth very quickly, but it takes hard work, it’s not the norm, and it’s not the only way to build wealth.
Working for someone else can be an entrepreneurial launching pad
As highlighted by Inc. and backed by scientific data, “the average entrepreneur is actually 40 years old when launching his or her first startup–and the average age of leaders of high-growth startups is 45 years old.” For most people in their early 20’s, they don’t have resources (e.g. money) and/or experience. Where do you get both of those? You get them by working for someone else. Yes, you can also borrow massive amounts of money to fund your business, but I don’t recommend that and neither does billionaire Mark Cuban. Just check out what Mark says around 1 minute into this short video I’ve embedded for you.
Once you have experience, you can then use your experience and professional network to your advantage if you decide to give entrepreneurship a shot. If you want to be a business owner, I think it’s incredibly important to understand that many people don’t start this journey until a little bit later in life. However, it can be done.
Here is a perfect example for you. I have a family member who is very talented and has always wanted to be an entrepreneur. At an early age she understood the power of an education and actually got her bachelor degree in entrepreneurship. When she graduated, she took a great paying job so she could start building some savings, and then she quickly took a different job as an event coordinator at a very popular place in the city she lives. That was a strategic move on her part, because, at the time, her ultimate goal was to have her own event coordinating business one day. Fast forward a couple years, and she’s now running her own event coordinating business. She educated herself, got experience, built up savings, and then took the plunge into entrepreneurship. She was realistic with her experience and financial position, and made some very wise decisions before pursuing her entrepreneurial dream.
Time, family, friends, health, etc.
If you think entrepreneurship is easy, go talk to any successful entrepreneur. They will tell you the exact opposite. It’s extremely hard work and comes with sacrifices just like the corporate world does. Actually, the similarities between entrepreneurs and top level executives is striking. If you talk to either of them, you’ll likely hear that they work very long days, which can sometimes impact other areas of life such as family, friends, and health. Some entrepreneurs and executives certainly take control of their work/life balance and ensure there is a good balance, but many struggle to get it right.
I can tell you that I’m EXTREMELY happy with my work/life balance and absolutely love my job as an Accounting Professor. I couldn’t imagine doing anything different. It’s a job that gives me great satisfaction and allows me time to focus on all pillars of life. It also allows me to stretch my creative needs through research and class design. I have complete control over the projects I decide to take on, and that’s something many people love about the idea of being an entrepreneur. I get that through a job in addition to being able to build wealth for my family and having spare time in the evenings and on the weekends to have fun with this personal finance blog.
The overlooked wealth building powerhouse
One thing most don’t learn until a little later in life is just how powerful two spouses EACH earning something like $75,000 annually can be. Assuming the couple lives in an affordable area, $150,000 goes a LONG way. Especially, if the couple begins earning those numbers in their mid to late 20’s, which many professional couples do. Disposable income invested properly and compounding interest is extremely powerful. So, don’t think you have to earn some crazy amount annually to build wealth. You can absolutely build wealth earning an average salary.
If you want to learn more about personal finance, small business accounting, or data analytic tips for a profitable side hustle, then make sure to bookmark my website, walletwit.com. I blog about exactly what my wife and I are doing. I have a huge passion for this, and absolutely love helping people get on track.
Brandon Vagner, Ph.D., CPA