Home » Careers, Online Income

A Lesson To Learn In Your 20s: A Salary Will Not Make You Rich

19 July 2008 5 Comments

Many of the recent books I have been reading talk about ways to build wealth. Just about all of them have similar views on salaries: it is near impossible to become rich on a salary. While most people do not learn this lesson until years of determined effort to do just that, it is my hope that myself and other 20-somethings learn this lesson early and shift their focus to other wealth building opportunities.

There is a common perception out there that during your 20s, you should simply work hard and learn because eventually you will be rewarded. Usually this translates to work for not much money in your 20s, and work for more money later. I say that we as 20-somethings need to shift our focus away from this completely. I don’t want my financial goals to be driven by my salary no matter how high or low it is now or will be in the future.

Why A Salary Won’t Make You Rich

For almost all Americans and a good bit of the world, a salary is merely a lifestyle indicator. It is exceedingly rare to find someone who betters their financial position when they get a raise. Instead, their quality of life increases right along with the salary, which means just that they spend more. Because our spending rises with our salaried income, we don’t build wealth with high salaries

A Different Focus

There is nothing wrong with a rise in quality of life with a rise in salary. After all, it is nice to have nice things and buy a bigger house down the road. So instead of saying you should keep your standard of living the same while your salary goes up so that you can save more, I say let your lifestyle rise with your salary and use other methods to build your wealth.

I believe many people fall into the trap of having a nice salary. The reality is when you get to a certain income level ($100,000 for example), it is nice and it is easy to settle. Unfortunately, many 100k earners are not wealthy people. They may drive BMWs and have a nice house, but what is their net worth?

Your goal should be to not lose focus of wealth building while your salary increases. Enjoy the higher income from your career, but do not think that this salary is your way to financial freedom. Unless, you plan to live in a one bedroom apartment while making 100k for 20 years, you will need more to reach your goals.

Stay focused on learning skills to generate additional income streams.  Most people generate great wealth by either having multiple income streams or by going into business for themselves.  Push towards both of these goals while reaping the rewards of a nice salary.  Again, learn this lesson while you’re young.  Many people learn the lesson too late, and then they are stuck with their nice salary and their nice possessions, but then it hits them: how will I be able to retire? or what am I really worth?

Questions To Ask Yourself

What roles in your company will help you learn to run your own business some day?

Are you being exposed to enough variety in your job to grow a broad skill set?

Is there an online business you could start related to your field that can provide a second income stream?

Would I be willing to forego upgrades in various parts of my lifestyle as my income raises to save and invest more money?

What do I desire more: more possessions or financial freedom?  How will a salary help me reach that goal?


  • Alex Fisher said:

    Great post.

    I think many people rely solely on their salary because they don’t know where else to go or what else to do for a secondary income stream. Another issue I’ve seen many times over the years, people realize they need additional income stream(s), but they aren’t able to think big enough or long term enough to put in the effort to making them happen.

  • jimbo said:

    And then there are those of us that have a primary job that is not paid by a salary. By that I speak of the salesman. Earning potential in a sales job is much greater than a salaried job, however to make money you have to make sales. Your income is directly dependent on how hard you work, wether you are indirectly selling advice on a blog (viewers creating income through ads), or a luxury item like private jets or yachts

  • Ali said:

    Great post. I, too, learned the hard way. You will never be rich working in corporate America. Over half of the world’s billionaires own their own business or in some cases – empire. Find a way to earn more money and make sure it is time-efficient. And then find ways to invest that money appropriately so that you can have your money “work” for you.