The Wealthy Employee: how to get rich while in a job
There is a perception among many people that in order to become rich you need to be a stock market fundi, a brain surgeon, a CEO – or you need to win the lotto, inherit old money, own your own business, marry a wealthy person. They believe that an ordinary individual, earning an ordinary salary, does not have – nor will ever have – the capacity to become wealthy.
Nothing could be further from the truth.
And the truth is so simple it should be hammered into your head during your last year of school. Begin to invest with your first paycheck and remain consistent and steadfast with increasing contributions throughout your working life. Note the word ‘invest’ not ‘save’.
Couldn’t be simpler. And yet…there is so much ignorance about the beauty of compound interest that it is astonishing to find working people in their forties who have shored up almost no funds and are complaining about the cost of living and low salaries and how they are unable to cope. Invariably, when these scenarios are investigated by a professional, there are usually many ways to improve the situation – and even find a way to begin a savings programme.
The word ‘simple’ however should never translate to easy. The reality is that many people find themselves living beyond their means and in debt to possess what they want now rather than sacrificing for tomorrow.
Difficulties and Possibilities
- Commitments, if top heavy in relation to your earnings, can wind up a monthly salary too tightly to allow room to manoeuvere around savings options – so buy a smaller house, a second-hand car and learn to bargain-shop.
- Spending and then trying to save what’s left is the worst way to try and grow money.
- Thinking that a company retirement plan will be ‘enough’.
- Being unable to distinguish between needs and wants.
- Lack of self-discipline.
- Thinking that higher purchase or renting somehow ‘saves’ you money.
- Getting into debt on the never-never mindset.
Then, to add to difficulties, life can throw a curved ball: accidents, fires, deaths, unwanted pregnancies, trusting the wrong people – all happen to a fair percentage at one time or another. Even if you have a plan in place, you can be left devastated by the unexpected: losing your job, a serious illness, robbery, a child that needs special care. The list goes on. And yes, under many of these circumstances, the dream of becoming a millionaire may appear rather distant.
The Tenacious Plan
But despite unfortunate possibility, if you are earning a regular salary, you should have a plan in place that won’t derail when things don’t go according to expectation. It should look something like this:
- Save first – before commitments and daily needs.
- This saving should be a consistent amount, consistently contributed, consistently increased against inflation.
- And by saving, you will mean investing – because just putting money away in a savings account (while admirable in itself) will not make you rich.
- Never touching your retirement funding, even if you change jobs, until retirement.
- Always paying (from day one) the highest retirement contribution your company allows.
- Ensuring you have a personal pension fund as well as a solid investment plan.
- Understanding that policies are useful but not necessarily the tools for wealth creation.
- Learning about financial leverage and wealth-building strategies. You don’t have to have formal education to do this. Information is freely available.
What the ambitious employee can do
Whilst the above advice is not unfamiliar to most people, it is still a difficult path for many to follow. Money is a powerful influence and many succumb to the desires of the present, wanting to get rich quick. For the average employee, building wealth to millionaire status, would encompass your full working life of approximately 35 – 45 years. This isn’t easy. People struggle with the time issue and the application of rigorous saving – especially younger people for whom the future seems impossibly far away.
So apart from setting up your disciplined investment strategy, what else can you do?
Become a valuable employee:
Increase your earnings by working your way up the corporate ladder; do valuable work for your business and ensure critical contribution to the bottom line. Businesses need and value those employees that stimulate sales, increase customer retention, and bring in profits. So design a career path around those areas where your input will count. Driving your monthly earnings upwards on hard work and loyalty is your personal key to improving your investment profile. Changing jobs to ensure upward mobility if your company is slow to recognize your contribution, is another.
Become a canny employee:
Work for a company that not only pays market-related salaries, but also pays attention to the wealth-building capacity of employees, offering access to company stock and options to buy that stock; employee ownership in the business works as an effective tool in aligning employee and employer interests, and has proven over time to improve both productivity and profits. You might even think of starting a small business on the side. But whatever you do, always keep in mind that the unit trust investment vehicle invariably out-performs the usual savings account at your local bank.
The card up your sleeve
Finding and working with a top-level financial advisor from day one.
At Foster Wealth we understand the elegant equation between time, patience and persistence in the face of a volatile, yet ever-upwardly mobile stock market. For the past 27 years we have developed our highly professional and personalised approach to preserving capital and beating inflation, and meeting our clients’ individual needs – from cautious to adventurous – in the entirely possible world of wealth.
Find us at: www.fosterwealth.co.za