Increase your wealth in three ways while employed

image from: www.thinkadvisor.com

During my schooldays, I followed the common philosophy of “finish school – get a good job – strive to be rich”. After 5 years in the corporate world, I realized if I wanted to have financial freedom, being an employee might not be the best path for me.

My original goal was to be a good employee hoping that it would bring me financial stability along the way. For about 4 years it seems everything goes smoothly and I am on the optimal track towards stability.

Then came the first major disruption in my financial life.

There was the sudden need to get my own space in the city. I became tired of renting, moving to and from apartments were you have no control of whether the owners are good or bad, the room is decent or intolerable, clean or dirty – let alone with bed bugs (yikes!). Also, I thought that amortizing your own space is better than renting a high amount where only the apartment-owners get happy while you work hard to earn and give them part of your salary.

Suddenly my earnings were barely enough to support my needs. Then in the midst of this challenging stage in my life I began to search and develop ways to solve the situation.

So I started finding ways to increase the amount of money that flows into my pocket.

Establish multiple streams of income: be an entrepreneur

When you are an employee, you have to wait for a certain time of the year for your salary increase, bonuses and other financial benefits. But when you decide to become an entrepreneur in parallel with being an employee, you have the chance to increase your earnings any time of the year depending on how you strategize your business. Have the humility to start with a small business. “He who is faithful in little things is faithful also in much”. The lessons you will learn from that small business will be your foundation in handling things when you get into the big league. Little by little you will feel your burdens become lighter as you no longer have to take away a large part of your active income to support you and your family’s needs. Your businesses take care of them.

The goal is to eventually make your passive income surpass your expenses. This is the second stage of your financial life, when your assets are already paying for all your needs and when you have the choice whether to continue with your active job or let go of it. Now that is financial freedom: Where money is never or a little factor when making life decisions.

Do not remain an employee all your life. You are missing a great many things by staying on a single income mindset.

Increase the wealth of your future self

Invest in stocks, mutual funds and other forms of investment vehicles for your retirement. In the Philippines, investing in stocks just recently became popular with the rise of the economy, the young workforce and financial gurus who launched their respective programs to increase the people’s financial IQ. Some might think that the stock market is a very dangerous place to invest. This is true when you are doing active trading. But when you adopt the passive investing strategy, you minimize risks.

There is a system of investing called the Strategic Averaging Method wherein you buy with a fixed amount for a period of time no matter what happens to the stocks be it up or down. The average of the profit and loss of your money would be your gain. Invest only in giant companies, those you can see that could last long. There are exceptions however: even if a company is relatively new, check who heads this company. If they have a history of running a good well known business and this new venture is in a promising field of the current market, do your research and consider investing in this company.

But let not stocks, mutual funds or bonds become the core part of your wealth, investing in these vehicles is good but the money you put here should be the part of your salary/bonus intended for passive investments and the money that comes from the profit of your businesses. Investing in these vehicles basically provides two benefits, you earn money passively by betting on large reliable companies and your money defeats the annual inflation rate since statistically, annual increase in stock value is higher than the average annual inflation rate. 

In Dr. Thomas Stanley’s book The Millionaire Mind a survey was done to America’s millionaires and in one area, the study found out that these millionaires cited that investing in stocks are important but is not the main source of their wealth. For them, it is still better to invest money in your own business where you have direct control. They invest their profits into the stock market for it to earn more.

Give it all you’ve got at work

For most of us, our active job is the major source of our income, it is our first source of capital in building wealth. Our salary is the one thing readily available when we decide to start a business or an investment in the capital markets. If your goal is to eventually escape being an employee, you can’t just decide to deprioritize your job and focus on your other endeavors. With this, it is wise to be good at what you are already doing and get rewarded for it before you toss away your job while you are still employed. Use your money earned in your active job to buy your freedom. Freedom to choose who you want to be and what you want to do (Of course this involves a strong will and positive action – more on this on other posts).

Think of yourself as a slave of your company. In order to buy your freedom, you should save a sizeable amount of money and start off with the business that you really like to do. Of course it is better to start the business while an employee. The earlier you start the better. For when the time comes, you will be more ready to shift to a career that you like. One that gives you more freedom to do the things that matter for you.

We know life is a paradox. For this case, in order to move away from the very thing you are tired of, you have to become more of that thing. So it is better to work hard as an employee, get promoted or get a good increase and use your savings to buy your freedom (i.e. start your own business). Of course if you enjoy your work, you can still be a part time employee. But strive to significantly grow your business so you will become more financially secure and free.

Yes it is hard with all the challenges at work: demanding clients, difficult bosses, aggressive peers, company processes. But these very things make your reward worth all the effort. After all, your financial independence is at stake.

The best way to escape the “slavery” of employment is to become a good if not the best “slave”. This way, you can buy your freedom in a shorter time.

There is more to life outside the four corners of your day job.