“Rich Dad Poor Dad” author Robert Kiyosaki makes no bones about earned income from a W-2 job or freelance gig being the worst way to build wealth. Not only do you pay more tax as an employee than you would as an investor or business owner, you also limit your earnings when you trade your time for money.
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Kiyosaki’s views came up in a recent episode of the YouTube program “Millionaires in Cars Getting Coffee,” when host George Kamel asked “Main Street mogul” Codie Sanchez about her thoughts on how working as a W-2 employee has been villainized in social media culture.
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Working a 9-to-5
Sanchez, author of the bestselling book “Mainstreet Millionaire” and host of “The BigDeal Podcast,” told Kamel that she doesn’t care what your tax code is — whether W-2, 1099 or K1, it doesn’t matter.
“I like Robert Kiyosaki, but I never liked how he said that W-2 was a lesser profession,” Sanchez said. “I do not think that is true. I mean, Sheryl Sandberg became worth hundreds of millions of dollars by being a W-2.”
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Best Way To Build Wealth
So, who’s correct? Technically, both.
It’s true that Sandberg got rich — Forbes’ Real-Time Billionaires list estimates her net worth to be $2.3 billion — while working as a W-2 employee at Facebook, now Meta, where she served as chief operating officer from 2008 until 2022.
But her paycheck “only” amounted to about $1.12 million per year at the end of her stint. She received the rest of her $33.4 million in total compensation as equity in Meta and in pension and other compensation.
Forbes reported that by 2022, Sandberg had sold more than $1.8 billion worth of Meta stock. It was portfolio income, not earned income, that generated the bulk of Sandberg’s wealth.
Portfolio income is what Kiyosaki would consider the second-best type of income, behind passive income from a business. It’s also how most millionaires create their wealth.
How Millionaires Build Wealth
For its National Study of Millionaires report, Ramsey Solutions surveyed more than 10,000 U.S. millionaires to learn about the financial behaviors and attitudes that led to their financial success.
Most of the millionaires were not particularly high earners, but the vast majority (80%) had invested in an employer-sponsored 401(k). Seventy-five percent had also invested independently of their 401(k)s, and that same percentage said that consistent investing over time played a big role in their success.
That report is several years old now, but the truth remains that using some of your earned income to generate investment income is a legitimate way to build wealth.
Why Investing Is Important Either Way
As much as Sanchez disagrees with Kiyosaki about the merits of earned income for its own sake, she shares his views about the importance of investing. In fact, she invests through her own companies, Main Street Holding Co. and Contrarian Thinking Capital, which help people find financial freedom through business ownership.
“We care about doing something that is challenging to us, where we continue to learn, we continue to earn,” she said, “and then we take those earnings and we invest it in things so that if someday … we’re not well enough to work, or we need to take a break, or we want to have a kid, we have the ability to have earned income that is not relying on our time.”
Notably, the Rich Dad blog encourages readers to think of their jobs as blessings that fuel their dreams as they build businesses. As it turns out, not only are Sanchez and Kiyosaki both correct, but they also have very similar philosophies about leveraging earnings from your job to build real wealth by investing in yourself.
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Sources
YouTube, George Kamel, “Codie Sanchez: You’re Being Lied To About Getting Rich | Millionaires In Cars Getting Coffee.”
Forbes, “Sheryl Sandberg.”
Ramsey Solutions, “The National Study of Millionaires.”
Rich Dad, “You Can Have a Job AND Be an Entrepreneur.”
This article originally appeared on GOBankingRates.com: Codie Sanchez Says She Disagrees With Robert Kiyosaki About This 1 Thing: Who’s Right?
