Many wonder about ‘How much does one earn over a lifetime?’ Here is an interesting mathematical analysis. This is a simplistic calculation with many assumptions. Four data points have gone into it: Type of Employment, Starting Salary, duration of Working Life & Average Annual Growth Rate.
Type of Employment: A job is when you work for business started by someone. Self employment means you are that ‘someone’. In simple words starting a business is Self Employment.
Starting Salary: This is the income one makes in the first year of working. Typically in self employment first year income is low.
Working Life: It is assumed that working starts at age 25. Retirement in Jobs happen at 60 & in self employment one works till 70.
Average Growth Rate: This is the growth in salary/income per year averaged for the working life. This rate will not be a same every year; some years it might be very high and some years it might be zero. An average growth is taken here.
Total Earnings: This is sum total of all the money earned in the working life of 35 / 45 years.
This table presents a simple calculation of ‘Earnings over Lifetime’
How much does one earn over a lifetime?
| Type of Employment | Starting Annual Salary | Working Life | Average Growth Rate | Income in Final Year | Total Earnings |
|---|---|---|---|---|---|
| Job | 3.5 Lac | 35 | 7 | 37.4 Lac | 4.84 Crore |
| 5.5 Lac | 35 | 7 | 58.7 Lac | 7.60 Crore | |
| 7.5 Lac | 35 | 7 | 80 Lac | 10.37 Crore | |
| 10 Lac | 38 | 7 | 1.3 Crore | 17.25 Crore | |
| Self Employment | 2.5 Lac | 45 | 7 | 49 Lac | 7.14 Crore |
| 2.5 Lac | 45 | 9 | 1.1 Crore | 13.15 Crore | |
| 2.5 Lac | 45 | 11 | 2.47 Crore | 24.67 Crore | |
| 5 Lac | 45 | 11 | 4.93 Crore | 49.33 Crore |
Interpretation of above Data:
Job Scenario
For Self Employment / Startup Scenario
First to Third Row: A person starts a Business at age 25 with annual profits of 2.5 Lac. Because it is his own business he retires at 70 (Job people retire at 60). If his annual growth of profits is 7%: His last income (at 70 Yrs age) is 49 Lac & lifetime earnings are 7.14 Crore. In Second & Third row cases are presented with higher annual growth rate. It is a startup scene hence we are not increasing the income from First Year.
Fourth Row: This is an exceptional case where business generates higher profits of 5 Lac in year 1 and grows at 11% per year. In this case there is a Substantial Increase in profits and lifetime earnings.
Conclusions:
We earn a lot more in Business. But we start slow & play long. But it comes with its own risks. Not everyone is fit for that.
Total earnings are far higher if we start at a higher salary. So focus a lot on getting to the best College & developing yourself well there.
Higher Growth Rate (Salary Hike) is important to earn more.
SO WHAT DO WE DO?
There are two things you should focus on to increase ‘Earning over Lifetime’: Starting Salary & Growth Rate.
Starting salary depends on your potential when you enter the workforce. To improve that, invest in yourself. Understand the industry you want to work in and develop yourself accordingly. Setting a Goal is surely the first step to start growing in life.
Growth Rate depends not only on your performance in work environment but also on promise you show for future. Hence keep learning even after you enter workforce. Constant learning and stretching your abilities is the surest way to keep the growth rate sky high.
The real life scenario might be very different from above tables. But it strongly highlights the importance of better education, better college, better skills & continuous learning. In real life for many people earnings are derived from other avenues like returns on investments, rentals, royalties, inheritances, etc. But most of these other sources are not directly in your control. Hence, one should focus on increasing his annual income most.
This is a simple representation for the curious souls. I am sure you shall have got a decent idea about ‘How much does one earn over a lifetime?’ by reading this article.
About Author
Anurag is a Certified Career Counselor and Coach. He is an Engineer & MBA with 20+ years experience in Education Industry. All of knowledge that you find here stems from first hand experience of coaching thousands of successful students. He has been passionately working in the field of career counseling since 2019.
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