Can One Achieve Financial Success As An Employee?
Most of us are employees our whole lives. However, there seems to be a stigma against employees. Some people call us losers while others label us as lazy sloths that are a drag on innovation and entrepreneurship. Some may even look down on us with condescension.
For the record, I truly respect entrepreneurship. My two closest friends are successful business owners. The truth is, you have to know yourself. Some of us may not have the aptitude or gumption for entrepreneurship. As such, there’s no shame in being an employee. There is no dishonour in taking pride in your job, climbing up the career ladder and being a successful investor at the same time.
I was 25 years old when I met a young and successful business owner named Stan (not his real name) through a mutual friend. I explained my aspirations of doing well in both my career and my investments. To my surprise, he responded almost patronisingly, “Mark, no one ever got rich working as an employee.” (Let’s assume being ‘rich’ here means to be financially independent, where your passive income or net worth more than compensates for your salary.)
I felt great anger and humiliation at that arrogant and dismissive statement. I responded with a simple answer, “Wanna bet?”, and politely excused myself. Some years have passed since that fateful encounter. At the age of 33, I was promoted to a fairly senior position in a foreign bank, and managed to build a property portfolio that I was comfortable with. Today, I work because I want to, not because I have to.
Was it an easy journey? Hell no. Yet, I hope my story can inspire some folks and make them realise that one can achieve their dreams as an employee. I’d like to share some ‘painful truths’ in my journey as an employee. Do forgive me if my views appear offensive or sweeping.
A GREAT CAREER DOESN’T HAPPEN BY CHANCE
For those who have been following my FB posts, I have written about my career lessons at length. In short, you have to dedicate yourself to your chosen craft and invest the time to excel in your job. I spent countless hours seeking mentors and advocates, reading manuals, bugging my seniors with incessant questions and mastering the technical skills of my job.
Many of us spend hours being obsessed with investments. We attend property seminars, buy lots of books, go for networking sessions and look for great property deals. Yet the cruel irony is that we do not spend an iota of effort in improving our careers and earned income. Instead, we complain about how we hate the rat race and wallow in self-pity about how we are constantly a victim of office politics.
YOUR SALARY WON’T OPEN DOORS. IT IS YOUR BONUSES OR STOCK OPTIONS THAT WILL
To be honest, a person earning RM20,000 per month doesn’t really enjoy a tremendous lift in his quality of life versus say a person earning RM10,000 per month. Sure, the one earning RM20,000 can leverage more, drive a nicer car and dine out more often; but he isn’t the next Warren Buffet.
It is that RM200,000 or RM300,000 annual bonus or stock options (numerical example only) that one garners as a high performing employee that sets you apart from the masses. This provides a great avenue for you to put down payments on landed residential units, and the financial buffer for you to replicate more deals.
Is it easy getting that big bonus? Of course not. A dear friend cum property guru always say, “Nothing worth having ever comes easy”. Do your best to position yourself in an organisation and industry that rewards performance based on merit. Get mentors and advocates that reward you for a job well done.
IN GENERAL, IT IS NOT YOUR PROPERTY CASH FLOW THAT WILL SET YOU FREE. IT IS THE EQUITY FROM CAPITAL APPRECIATION THAT WILL
We tend to build our portfolio with residential properties. I have met many new employees cum investors who want to quit their jobs and live off the rentals from their properties. Let’s be pragmatic, folks. I think that 99% of us can safely agree that getting a single RM500 positive cash flow property (rental minus mortgage) is pretty challenging in today’s market.
Now, try getting 10 units like that. Even if you could muster all the Jedi Knights in the property realm to help you, your positive cash flow would only equate to RM5,000 per month (RM500 per unit x 10 units). Yes, RM5,000 may seem decent or modest, but it isn’t exactly screaming financial freedom.
I could be wrong, but most successful investors that I have met achieved financial freedom by building a portfolio of properties that had significant capital growth over time, typically over a 10-year cycle. They let the magic of leverage, compounding and time generate a portfolio which has a high composition of equity and capital appreciation. The direct translation is – you become financially free from a portfolio that increases say, from RM2 million to RM6 million over time, versus building a RM5,000 cash flow per month portfolio.
THE WINNER ISN’T THE ONE WITH THE BIGGEST DEBT, BUT WITH THE HIGHEST NET WORTH
I notice that many of us are enamoured with learning the various ways to leverage. Some of us are keen to learn about multiple submissions. We are impressed with people who ‘game’ the financial system to get >100% Debt to Service Ratio (DSR), and are obsessed with Below Market Value (BMV) or Zero Down Deals (ZDD).
I have no issues with this per se. However, does it make sense to have lots of assets, coupled with tonnes of liabilities as well? In all humility, debt alone doesn’t make you a winner. Rather, it is the person who builds their net worth most efficiently who wins. (Simplistically speaking, Net Worth = Market Value of your Assets less your Liabilities)
Critics say I am foolish for not engaging in ZDD or multiple submissions. They say that I am not building my portfolio efficiently. However, I believe in being prudent in the management of my liabilities. To build my portfolio ‘efficiently’ – I did it the old fashioned way; I worked my ass off to get those great bonuses to fund the down payments of my properties. Today, most people tend to be surprised at my Loan-to-Value Ratio. Using conservative estimates, it is approximately 37%, which augurs well for net worth creation.
So what’s the moral of the story? Success comes to those who do not waste time comparing what they are doing with what others are doing. Know yourself and stay true to your path. There is no shame in being an employee. There is no dishonour in wanting to have a stellar career.
In all humility, most employees do not achieve financial success because they put money ahead of the job. Put the job first, and the money will follow. Then invest well ahead of your peers due to your higher earned income. No one ever got rich working a 9-to-5. Wanna bet?
By Mark Chua.
Mark can be contacted via email at : Phoenix_142@hotmail.com or on Facebook at : MarkChuaMY
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