When most people think about self-made millionaires they imagine some entrepreneur working around the clock, passionately toiling away in the pursuit of greatness. Yet, 39% of the self-made millionaires in my Rich Habits Study became rich working for someone else.
How did they do it?
I discovered three ways employees were able to strike it rich:
#1 Saver-Investors – Save and Invest 20-30% of Income
Saving your way to wealth is the safest, easiest way to accumulate wealth. It doesn’t require any unique skills, virtuoso knowledge or working long hours.
It is also the longest way.
It took the average self-made, employee-millionaire in my study 32 years to accumulate their wealth. By assiduously saving 20-30% of their income every year and then investing it diligently/prudently, they were able to accumulate an average of $3.26 million. Most of their investments were in stocks, mutual funds and real estate.
#2 Big Company Climber – Work for a Big Publicly-Held Company in a Good Industry
Other employees in my study worked for big, publicly-held companies in an industry where profit margins were very good or in an industry that was growing. Due, in large part to prodigious profits, these employees were beneficiaries of generous stock compensation packages. Because the stock of the companies they worked for continuously appreciated, the stock they received provided the lion’s share of their compensation (approximately 70%). This inflated compensation enabled them to accumulate an average of $3.375 million.
#3 Sales – Sales Commissions
The salesforce is the engine of growth for most companies. Big companies rely on their sales people to grow their revenue. Salespeople often receive commissions, in addition to their base wage. The best salespeople get the biggest commissions and can become extremely wealthy selling products or services for their employer, while remaining in a sales position. Also, the top sales salespeople are often beneficiaries of generous stock compensation packages, which helps them build significant wealth.
Working for someone else takes most of the risk out of the pursuit of wealth. You don’t have to worry about working capital needs, profitability, meeting payroll or expenses like business owners do. You can focus on one thing – whatever it is you do for your employer.
From my research, the key to building wealth as an employee is finding a company to work for in an industry that is prosperous and growing. These companies pay their employees generously and are often publicly-held companies whose stock is listed on some stock exchange.
There’s more than one way to become wealthy – not every self-made millionaire got their by running their own business.