How Your Coworkers Will End Up Richer Than You
Picture this: You and your best friend land the same job out of college.
15 years later, you discover they’ve amassed nearly twice your net worth - even though you earned the same salary.
Let’s look at how this can play out.
Meet Tom and Jerry - same age, same role, similar lifestyles.
They work together in consulting and have identical earnings for 15 years.
Pretty incredible incomes any way you look at it, but how they use that income is what will lead to different wealth.
Neither of the friends are mega savers. Tom saves 15% of his base pay and Jerry saves 10%.
When it comes to bonuses, Tom increases his saving to 50% while Jerry saves 20% of his.
After Year 1, Tom has saved $17,750. Jerry, $10,500.
The extra $7,000 won’t be life changing initially, especially living in a large city.
But remember: Success with money comes from good habits over a long period of time.
By age 37, Jerry proudly checks his investments to see $626,000 - a massive sum by most standards.
But Tom?
Nearly $1.2 Million.
“How is that possible?” thought Jerry, “we always matched incomes and basically lived the same way”.
And that’s true.
Tom didn’t have to live like a hermit.
He still went on vacations, ate in nice restaurants, and made memories with friends, but he always saved his extra 5%.
When bonus season hit, he got to enjoy some of it, but he knew he would be splurging slightly less than his peers.
Those habits let his wealth snowball quickly.
Early in your career, if you can set the expectation that bonuses are bonuses and not expected income to fund your lifestyle, you will be way less stressed come bonus season.
The next time the economy (and bonuses) dip, Tom can shrug it off - he never counted on that money for fixed expenses.
Jerry on the other hand might have to scramble to keep up his car payment or higher rent.
What would you do with an extra $550k in your mid-30s? Here are a few possibilities:
Career Freedom:
Anyone in a demanding job has the occasional day-dream of leaving. Now you'd have the savings to do it.
You can take a sabbatical or use the cash to supplement a lower paying, less stressful job.
You've got options.
Big Purchase:
You’ve been a good saver. What if you spent some?
Down payment on a house, dream car, dream vacation, helping family - lots of options with your extra cash.
Retirement Windfall:
Want to keep that money growing? If you kept investing just your extra $550k and let it ride, you’d have over $4.5 Million in retirement.
$4.5 Million all from the work you put in early in career.
Tom and Jerry started with identical salaries yet their finances were worlds apart.
The gap wasn’t about who earned more—it was about who kept more.
Your income is just one piece of the wealth-building puzzle; the bigger factor is how much of that income you actually hold onto and invest.
Worried you might be a Jerry? Start tracking your expenses for a month to see where your money is going. Figure out your savings rate and then set a goal for increasing it.
The sooner you start, the more time you have for compounding to grow your money.
Note: The math remains the same at every salary range: Saving just a bit more leads to drastically different outcomes over the long term.
Don't let the high consulting salaries fool you into thinking you can't do it too :)
