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Here's Why Most Salary Earners Never Become Wealthy

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Written by Ryan Scribner
Updated on February 12, 2020

Why Salary Earners Rarely Become Wealthy

Most of us grew up watching our parents work hard. They went to their jobs in the morning and came home at night tired and sometimes cranky.

As we progressed through school, it was reinforced thousands of times that we had to work our hardest, that it wasn’t easy to succeed, and that we would need an excellent job to support a decent lifestyle.

We were molded into workers that would become a hub in a primary wheel, a little fish in a big pond, a worker bee (you get the picture). For all our hard efforts, we would be rewarded with a modest salary and live a perfectly ordinary, uninspired middle-class life.

It all boils down to this: You work for a salary that rises in small increments annually, thereby ensuring a lifestyle that perpetuates throughout your existence.

How paltry is that raise? Projections for 2020 show the average salaried employee will see a 3.3 percent raise over their current pay. You must be thinking; there must be other ways to increase my pay and live a better lifestyle.

We are here to tell you there is!

What You Didn't Learn In School

I don’t know about you, but at no time do I remember parents and teachers urging me to follow my passion, to find a niche and fill it, to listen to my gut, and truly believe success will follow. What I am talking about here is becoming an entrepreneur.

The core definition of an entrepreneur is “a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.”

The keyword here is “risk,” and that’s not something a person in a day-to-day salaried job comes to understand. It’s simply not risky to punch your time card every day and get the same hourly wage/salary as you have for years and years.

But maybe it’s time to think differently and challenge yourself by launching your own business and joining the ranks of successful entrepreneurs.

Employees vs. Entrepreneurs

As great as it may sound, entrepreneurship isn't for everyone. Here are some of the biggest differences between being an employee and an entrepreneur:

  • Employees are often specialists, while entrepreneurs are generalists. Entrepreneurs need to know a little bit about a lot of things, in part so they can empower the specialist employees who work for them.
  • Entrepreneurs lead by example. There’s an old adage, “never let them see you sweat,” and it applies well here. When you’re running a business that’s completely reliant on you, you need to keep your cool.
  • Employees do, while entrepreneurs listen. It’s the employees who get most of the work done in any organization. But in order for them to do it well, the entrepreneur-boss has to listen to their needs and ensure they maintain a productive and positive work environment for their staff.
  • Employees seek direction while entrepreneurs create a path. Employees tend to seek help when a problem arises at work. Entrepreneurs create solutions that keep the organization moving forward.
  • Employees take fewer risks, while entrepreneurs live for them. While doing things the safest way can actually be good for an organization, it takes a risk-tolerant entrepreneur to believe in and build the organization in the first place.
  • Employees get paid for their role, while entrepreneurs get paid for results. Entrepreneurs are sometimes the last to get paid in a company because their compensation is tied directly to performance and profit. But over time, that return on investment could be huge.
  • Entrepreneurs mono-task, while employees try to multitask. Believe it or not, there’s no such thing as multitasking. Studies show it’s impossible for our brains to focus effectively on more than one thing at a time. Entrepreneurs recognize that multitasking means doing nothing well, so they “mono-task” instead.
  • Entrepreneurs may produce lousy work, while employees are perfectionists. Employees, constantly under the watchful eye of their bosses, strive for perfectionism. After all, nobody wants a black mark on that all-important performance review. Entrepreneurs tend to thrive on lousy work because putting out lousy work means that at least they're producing, and it’s better to create and fail than to not have created at all.
  • Employees are threatened by smarter people, while entrepreneurs hire them. In the corporate jungle, it’s survival of the fittest. If you’re not the smartest, most well-connected or hardest-working person in your department, you’re stuck at that bottom rung of the ladder. Employees, therefore, are threatened by those who are smarter than they. They view the smarter guys as competition. Entrepreneurs want the smartest people around on their team to help the company grow.
  • Employees punch a time card, while entrepreneurs have flexible working hours. Ultimately, the entrepreneur will choose the working hours that suit them. While some entrepreneurs will work 80-hour weeks when they first start out, eventually he or she will have the people and resources in place to sit back and work as little as possible.
  • Employees have set earnings, while entrepreneurs have nearly unlimited ability to earn. The financial growth for an entrepreneur is much greater than that of an employee constrained to a salary or an hourly rate decided and agreed on at the start of their employment. They will own their company outright and often have a large share of the business profits. They have the potential to earn as much as they want to, depending on the demand for their products or services.

Disadvantages Of Being An Employee

The main issue with being an employee is of low income. Just like with the stock market, low-risk yields low returns. Here are the cons of being an employee:

  • They are dependent on their employers. Employees have to follow their employer’s instructions and can become dependent on their monthly income, which will remain static unless they significantly move up the ladder. Employees with families have added pressure and can feel a growing dependency on their job to support their families.
  • They have limited income. The income of an employee is often limited to their agreed salary or hourly rate, meaning that is capped and can’t be expanded without overtime or a pay rise.
  • There are limited career paths. The constraints of employment within a specific industry or role can really minimize a person’s opportunity for development. Employees often have fewer choices for career progression and can only advance within a very specific industry.
  • There is limited job security. In a competitive world, people are disposable. Jobs are not always guaranteed for life, and employers can often give employees the boot without giving a solid reason. Some companies can appear to be doing well and then fold without apparent reason.

Disadvantages Of Entrepreneurship

On the contrary, being an entrepreneur isn't all sunshine and rainbows, either. At the end of the workday, most employees punch out and do not think about work until they return the next day. The same cannot be said about most entrepreneurs. Here are the cons:

  • Stress. With no guaranteed income, no boss for guidance, no colleagues for support, entrepreneurship can be a stressful and lonely place. For all the advantages that it offers, it has its pitfalls. The stress of being your own boss, marketing department, legal department, networker, and accountant can prove too much for some people.
  • Upfront investment. Launching a business can take a lot of money, depending on the type of business you are starting. Some entrepreneurs start out in debt because they have had to borrow money in order to cover their start-up costs. This investment can have a huge impact on their extended performance and can lead to debt.
  • Long working hours. Most entrepreneurs need to work a lot of hours in order to get off the ground and be successful. While the 9 to 5 employee works an 8-hour day, entrepreneurs work by the project, not the clock. If they need to put in an 80-hour workweek, they do it. Chances are their time demands will go down as the business grows.
  • Financial instability. When starting a business and for the first few years after being launched, there may not be much return on investment. This can affect your quality of life and curtail plans for vacations, new cars, or a boat. Are you ready to face this level of financial instability?
  • Risk. Going it alone and deciding to become an entrepreneur carries a lot of risks. For example, the risk of failing, the risk of debt, the risk of fierce competitors, the risk of bankruptcy, and the risk of letting your employees down.

Famous Entrepreneurs

If you decide to go the entrepreneurial route, you’ll be in good company! The following is a list of 7 successful entrepreneurs:

  1. John D. Rockefeller
  2. Thomas Edison
  3. Charles Merrill
  4. Sam Walton
  5. Charles Schwab
  6. Walt Disney
  7. Steve Jobs

Traits Of Entrepreneurs

So, do you have what it takes to become an entrepreneur? Here are some traits of entrepreneurs that were never taught in school:

1. Be resilient.

There are many obstacles on the path to becoming an entrepreneur, but if you really want to become one, you must see them as a blip in the road and not a roadblock. You can expect to make mistakes. That’s all part of the process. Also, many, if not most, entrepreneurs launch several businesses that fail to take off. But being resilient means, you pick yourself up, dry yourself off, and start over. You don’t let your failures define you. Every misstep is a learning experience. Never give up!

2. Make decisions.

From choosing an entrée from a dinner menu to deciding what kind of car to buy, making decisions can be daunting. Smart people building businesses know the value of making decisions even when they’re not completely ready. What does this mean? They don’t procrastinate.

Many people get stuck in the rut of indecision. They want to make the best choice but get paralyzed in the process. Entrepreneurs make a decision and then follow through. Which by the way, is a good life lesson for all of us.

3. Find your confidence.

This is a trait that can be learned! Listen to motivational speakers, read books, pat yourself on the back when you do something exceptional, set some goals, and complete them. The list goes on and on.

Successful entrepreneurs are empowered to move forward even when it’s risky. They try something they recently learned even when they’re not experts. They look at their past wins rather than losses.

So, stand up straight and exude confidence in everything you do. This is a good case of “fake it till you make it.”

4. Hold yourself accountable.

As the founder of the business, you are the boss, so when something goes wrong, it’s up to you how to react. You may not have caused the problem, but it’s always your responsibility to take over and undo the damage. For example, someone on your team orders too many notebooks. You could waste valuable time berating the person, or you could move on and make a decision on how to deal with it. Maybe you will need a good supply of notebooks one day. Maybe you send them back. Who knows?

5. Be humble.

No one likes a show-off. Even if you’ve come up with the best idea in the world for a product or service, if you’re arrogant about it, people will walk away. Career entrepreneurs know they have a lot to learn to stay relevant. They need to expand their knowledge about everything that affects their business constantly. They may be role models, but they are also students that need to learn new skills and set goals for the future.

Can You Become An Entrepreneur?

Yes. Anyone can be an entrepreneur, but remember, there’s no guarantee of success in your first enterprise. Entrepreneurship takes a lot of determination, but we believe you can find this within yourself. Keep in mind, there are no prerequisites to becoming an entrepreneur, and there are successful entrepreneurs from every demographic.

There is no best way to become an entrepreneur. Every entrepreneur has a different experience, has faced different pitfalls, and has risen to the challenge. But once they pick up speed, successful self-launched business revenues will continue to grow, with only the sky as the limit.

All that being said, plenty of entrepreneurs find success and make well above the national median salary of around $60,000 a year. Successful businesses can also grow, and that means more money each year. This can take a year or two, so there is the possibility of losing money over the first few years before a business becomes successful.

So, to summarize, the main reason why most salary earners never become wealthy is that they do not earn very much money. Becoming an employee is a low risk, low reward scenario. There are some salary earners that become wealthy, but they are few and far between. Most are living paycheck to paycheck. In order to become wealthy, you need to increase your income substantially. For most, that comes from taking a risk as an entrepreneur. While it isn't for everyone... maybe it is for you?


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