Achieving an Income of $500K+/year

And creative ways I've seen people get there

At age 22 - I just wanted to make $200K/year because my expenses were around $50K/year and after taxes I would then be able to stash away another $50K in savings.

But at age 30, I’m noticing $500K is now the new $200K. A few reasons why.

• $500K/year is how much rich people make to support their rich lifestyles and still have some money leftover for savings. Imagine the typical wealthy Bay Area family with two kids in daycare, paying a mortgage on a $2 million house, and still trying to save a bit on the side. It’s what puts you in HENRY (high earner not rich yet) status in a HCOL (high cost of living) area and on the way to FatFIRE if sustained for a long period of time.

• It’s also the number that I see a lot of people topping out at in terms of salary in HCOL. Most typical jobs don’t pay more than this without an exponential level of added stress. Granted this can happen to you with a job at any income level, but it does consistently happen once you pass it.

• If you’re the average doctor, lawyer, finance, or tech professional, you won’t make it to $500K without continuous grinding, being creative, or just getting lucky. Many people will hit burnout (by design), so what’s interesting to me is the creative ways that people advance in their careers to cross this threshold and how they distinguish themselves from the norm.

So how do people get here?

Normcore: Tech and Finance

Note everything here is completely subjective.

At this point I know a few people that make $500K to $1 million dollars a year working at big tech and finance companies. Each one of their situations is quite unique.

• Situation A: They worked a normal data scientist job and was my co-worker at a previous company. They made a base salary of $150K before leaving to work at a FAANG company in an analyst role. Grinded there for 4 to 5 years. The stock went up and down and up again. And on the last up cycle, with continuous stock refreshers and promotions, they were suddenly earning $700K+/year. Still grinding though but now more in fear of what they can lose.

• Situation B: The slow career jump. Slowly worked their way up from IC data scientist at one tech company to another - likely making $150K TC to $300K TC to $500K TC over the course of 8 years by constantly switching jobs every few years and specializing in certain industries and then getting recruited to do it again and again. It’s the most common path I see for tech workers, but you still have to be specialized to command such a high salary even with 10 years of experience.

• Situation C: Worked at FAANG company as a new grad. Switched roles to startup after a few years. Startup got acquired for hundreds of millions of dollars very quickly after joining but their equity didn’t vest (nor would be worth very much). Executive team still instead went up to them and said “Hey, it would be embarrassing if you left since you’re very smart, here’s a few million dollars in stock vested over the next 4 years”.

• Situation D: Software engineer role in quantitive finance company. It was a soul sucking enough role that he’s not there anymore, but unlike in big tech when you leave your job you still get paid for sitting around on your ass. This person made $600K+/year at their job and is now getting paid $300K/year in a non-compete for however long the firm needs to I’m guessing change up all their secrets?! It’s a nice gig if you want a paid sabbatical though hard to get in.

• Situation E: Junior Partner at a VC Fund. Paid $400K+ in base and likely going to earn more in carry and bonuses at the end of the year. But typical investor / analyst jobs in venture capital don’t get you there. He started a company that raised lots of money and after leaving, used his connections to leverage this extremely coveted job.

Each situation has their own caveats, plusses and minuses, and overall benefits. But the one common theme that I would argue is that each person is very much involved in their jobs. Their not slacking off and they’re never working less than 30 hours a week and probably never more than 50 to 60. If their company wants them to RTO then they’ll RTO (though it hasn’t come to that yet). The compensation is high but it’s high for a reason. It’s a high paying salary with high expectations. And the higher you go - the more that you have to prove out your value, even with companies in tech.

Startup Exits or Growth Multipliers

Typical startup exits are interesting because they’re so bi-modal in their outcomes. While big tech and finance have more guarantees (at least when you’re working in those jobs), startups go to 0 or the moon. But most of my friends have joined companies that have gone not to zero, but more like…..somewhere flat?

I’m sure this will drastically change over the next 10 years compared to the last 10 years (people make money in their 30s vs their 20s). But realistically when I examine the rolodex, I haven’t met many people that have hit it big through startup exits.

The My First Million podcast back in 2021 tried to predict ten companies that would 5 to 10x in valuation, turning your equity grant of hundreds of thousands into millions. And if you had followed their advice, then 8/10 of them would have put your stock options underwater or around the same as before (which is still bad). They blamed it on macro-economic conditions from ZIRP period but it’s also just hard because late stage venture investing is also difficult. Again if it was easy to choose companies that 5x in three years, then venture capitalists shouldn’t exist.

I know only a few friends that were early employees at unicorn companies and a bunch of founders that have undetermined valuations.

• One of the employees was an early engineer at a company that has diluted his shares so much that the first 0.2% of 0.5% of equity that vested is now worth probably 0.05%. So 1/10th of what he originally thought it was going to be. VPs of product and marketing were coming in being granted 0.3% equity compared to him as an early engineer. So the company had some sort of incentive to lay him off during Covid.

• Another person is an early engineer that also earned 0.5% and company is recently a unicorn. We’ll see how it plays out but they’ve been able to at least exercise secondaries to get some sort of exit.

• One person joined a Sara’s list type company and stayed there for 7 years as they went from a billion dollar valuation to a $10 billion dollar valuation.

• A founder that grinded on one idea for 8+ years. Eventually recently raised a round and sold secondaries ($10 million). Respect!

The old stereotype was that to succeed as a founder, you had to build a billion dollar company or exit for hundreds of millions. But now it seems a lot more common for startup founders to take money off the table and sell secondary shares once the company’s valuation has reached above at least $100 million dollars. And that’s partly because the balance of power is now more equitable between venture capitalists who are already rich and founders that realize they need that “first nut” to make sure they hedge their downside risk. If they don’t want founders to sell companies to net themselves a few million dollars and reach FatFIRE, then realistically the outcome is to sell secondary shares and realign themselves to focus on the mission of the company given the high risk of raising money for venture.

I remember doing an interview with Faire in 2019. I met the co-founder over coffee and somehow we got to the logic of outsourcing non-high value mundane tasks like laundry service and cooking when it cost less than half of your hourly rate. The subtext was clear, “we spend all of our time working and you will too if you join”.

Over-Employment

Over-employment is surprisingly easy to do given how many companies are bloated with staff and are also remote first. When Jobr became a “ghost business” - two people I know at the company managed to work an additional full-time job (one person even worked three jobs) making themselves over $500K+/year. And this was BEFORE remote work was a whole thing.

Of course over-employment is now a phenomenon post-Covid that it has it’s own sub-reddit of 350K+ members. Obviously you have to select the companies you work for quite carefully. The more ethical way to be over-employed is to actually have specific knowledge and charge a lot for what you do (aka consulting / freelancing). But many of the incentives of large company beauracrcies tend to lead to people pretending like they’re working when they’re not. Personally I imagine a ton of overhead stress when you happen to get double booked in meetings.

But it can also get quite creative. I know someone that negotiated a high salary consulting gig through M&A of a startup. They were the one that advised the CEO of the startup through the acquisition and then as the deal was finalizing, added in a tiny little contract to pay themselves $250/hr at retainer of 20+ hours a week. The buyer didn’t really notice, the startup CEO didn’t mind, and and so the consultant managed to travel the world for around two years while this contract lasted and would every now and again show up to the office to co-work.

But the nature of these deals are fickle and alpha is temporary. Eventually a private equity executive saw this bottom line and was like WTF - who is this on the balance sheet, what do they do and why do they report to no one?! The gravy train was cut after two years but it was nice while it lasted.

Running a Lifestyle Business

Successful lifestyle businesses just generally go three different tracks:

• You make some crazy viral APP or you get into some early TikTok e-commerce trend so you lower your companies burn rate while you rake in hundreds of thousands or even millions a year for as long as the trend continues with the understanding that this is a temporary fad and will be saturated in time.

• You try to grow it into an actual business - outsource most of the labor to Latin America or the Philippines, and then make sure your EBITDA margins are healthy while you grow.

• You work on a internet projects as the sole developer / owner making 99% margins until you get bored and then move on to new projects while your old project’s revenue slowly falls.

Pieter Levels falls into the last bucket. He however makes $2 million dollars a year through 5 or 6 projects and earns 80 to 90% profit margins because he doesn’t care about re-investing resources. He markets the projects through his Twitter audience and occasionally tweets about them.

For example - at the height of the pandemic RemoteOk was making somewhere close to $2 million / year on its own. Now it’s making much less. By taking his time away from it and not thinking about linear growth - he’s kind of subjecting himself to the whims of whatever market conditions exist whether that’s competitor saturation or job market conditions.

I had the lifestyle business dream around eight years ago and it really only materialized after side-project hacking for a few years while working at companies that gave me free time. I wanted to make $10K/month after listening to a podcast where Pieter Levels talked about making $40K/month. And yet suddenly when Interview Query started doing fairly well, I learned on a podcast that Pieter Levels was making $2 million a year. So the moral of the story is there’s always going to be new goal posts.

When my co-founder and I started Interview Query - we went through a wild ride ourselves. In the beginning we gave ourselves a margin of safety and just did everything ourselves so whatever we made in revenue minus AWS costs was money in our pocket.