Did you know it’s possible to become a millionaire on a minimum wage? Becoming rich is not about how much you make but how much you are able to save and invest and here are the three steps I believe anyone can use to grow their wealth even if they’re earning minimum wage!
Step #1: Embrace frugality
The first secret to getting rich on a minimum wage is to embrace frugality. Although many people often misinterpret frugality it simply means being intentional about how you manage and spend money. One of the reasons why many people are poor today is not because they don’t make enough money but because they don’t know how to keep it. Frugality helps you differentiate your needs from your wants so that you can avoid spending money on things that are not necessary. Another reason why you need to embrace frugality is that it is one of the fastest ways to achieve financial independence and even retire early.
The first step to embrace frugality is to make up your mind that you want to change your financial status. Once you’ve made up your mind, it becomes easier to adjust your lifestyle to reach your financial goals. Next, you need to have a budget that will help you understand how much you earn and spend. According to a survey, 65% of adults don’t even know how they spend their money and that’s why most people remain poor. However, by creating a budget, you will understand how you are spending your money and you can quickly adjust your spending. A budget will help you realize that you might be spending too much money on a particular thing that you can do without. For example, by saving $3 every day from buying coffee, you will have an extra $1,000 at the end of the year to do whatever you want.
Another way to embrace frugality is by planning your meals and cooking in bulk. Food is one of the three major expenses and finding a way to reduce its cost can help you save a significant amount of money. By planning your meals, you can save money by buying only what you need. If you fail to plan however, you may go to the grocery and get food items that you don’t need which would later waste. Also, buying in bulk will save you time and money!
Furthermore, you can embrace frugality by always watching out for ways to save money. One of the ways to save money is by using coupons and shopping for discounts. Saving a few dollars on every item purchased can become significant at the end of the day if you do it right. You can also save some money by avoiding brand names when you go shopping. Also, you can save money by buying used items. There are several used items that you can buy such as clothing, textbooks, and even a car! And finally, you can save money by comparing the prices of items before making a purchase. With the internet, it has become easy to do a quick search of an item that you want to buy to get an estimate of how much it costs at different retailers.
Again, one other place that you can save some money by being frugal is to cancel your subscriptions. Likely, there are many subscriptions that you don’t use that are taking money away from you every month. One of the subscriptions that many people are guilty of is a gym membership. Many people spend money on a gym pass they hardly ever use and in fact you don’t need to use the facilities in a gym to enjoy a good workout anyways! Remember, being frugal isn’t about not spending any money. Being frugal is about spending money on the right things and spending on services you don’t use definitely doesn’t meet the essence of frugality.
Lastly, you can save more money by avoiding debts. One of the reasons why most people are struggling financially today is that they have many debts. It is often difficult for people to save money when they have debts that they are battling with. Debts today can come with hefty interest fees so avoid high-interest debts at all costs if you currently make minimum wage yet have aspirations to become a millionaire!
Step #2: Leverage free education
If you’re earning a minimum wage right now, one of the possible reasons is that you do not have enough qualifications to be employed in a well-paying job. Going back to school is usually expensive and most people graduate with student loans that take years to pay. However, there are opportunities for you to learn almost any skill even if you don’t have money. Therefore, the second step to getting rich on a minimum wage is to leverage free education.
The easiest place to get free education is in a public library. One of the habits of the richest people in the world is that they devote most of their time to reading and learning new things. Billionaires like Oprah Winfrey, Mark Cuban, and Warren Buffett have all attributed their greatest success to what they learned from books. For instance, Warren Buffett goes through 100s of pages of the books he’s reading every day including the newspapers to know what’s going on in the world. Another billionaire that spends a lot of time reading is Bill Gates. It is said that he makes sure that he finishes a book per week or an average of 52 books every year.
The next place to get free education is on YouTube. There is virtually nothing you’re searching for that you won’t find on YouTube. It is currently the second largest search engine in the world with millions of videos on different topics. Every day, people watch a total of 1 billion hours of video on YouTube alone! You’re going to find channels dedicated to various things such as personal finance, technology, freelancing, copywriting, fashion, food processing, and many more. All you need to learn from YouTube is a device connected to the internet and you have that already. So what are you waiting for? Start learning a skill immediately today.
Another place where you can get free education is by using Google or any search engine. If you have any question that you don’t have an answer to, you can simply ask the search engine and it would return several pages of answers to you. Because of the numerous search pages, there are some information that may not be accurate so you need to do your due diligence before using them. Also, there are several authority sites where you can always confirm the accuracy of any result you find on the internet.
Also, you can take advantage of free online platforms such as Alison and Coursera. There are different courses available on these platforms such as business management, programming, design classes and many more. And if you are looking for platforms that focus mainly on programming, you can checkout W3School and Codecademy. Another place to get free education is on Udemy. This platform features experts from various fields across the world teaching different skills. Although most of the courses require you to pay a certain amount, there are always free ones.
Finally, you can get free education from mentors. Mentors are people who have achieved the level of success that you desire. Therefore, by following a mentor, you can learn from their mistakes and successes. A mentor also helps you to stay focused and accountable. Another benefit of having mentors is that they can help you identify your goals and create an actionable plan for you to achieve them.
Step #3: Invest for the long-term
The last step to get rich on a minimum wage is to invest for the long term. I understand that investing is easier said than done especially when you’re on a minimum wage. With just a minimum wage income, you still have to pay to transportation, food, housing, clothing, and several other bills. However, by embracing frugality, you will be able to have enough money to start investing.
Again, many people believe that they must have a lot of money before they can invest but this is not true. Investing is a way to grow money so you can start with any amount. The $1 that you invest today has the potential of becoming hundreds or thousands of dollars in a few years. For instance, a $5,000 invested in Amazon during the initial public offering in 1997 would be worth more than $6 million as of May 2020 when the stock price was at its all-time high.
Now, let me show you why the only way to become rich on a minimum wage is by investing. The federal minimum wage is currently $7.25 per hour. Let’s assume that you were able to work for 40 hours every week and work for 50 weeks in a year. If you calculate this, you will have a total of $14,500 before taxes are being deducted. However, for the purpose of this example, let’s assume that you don’t have to pay tax and see how much you can save that way. Let’s also assume that you don’t have to pay for accommodation, feeding, transportation, and any other payment from your minimum wage. How long do you think it would take you to save $1 million this way? It would take you 69 years of working to be able to save $1 million on a minimum wage.
So let’s consider the best way to get rich on minimum wage which is through investing. For this example, I’ll be considering investing in index funds for the long term as a way to get rich. An index fund is a type of investment that tracks the performance of a particular market index such as the S&P 500. Historically, the average annual returns on an S&P 500 index is 10%. According to the billionaire investor, Warren Buffett, “A low-cost index fund is the most sensible equity investment for the great majority of investors.”
Now, let’s see how much you need to invest at different ages to become a millionaire if you are on a minimum wage. For all these examples, I assume that the yearly minimum wage is $14,500. So if you started working at the age of 18, you would only need to invest 3.9% of your income or $47.24 monthly to become a millionaire at the age of 70. However, if you waited until you were 40, you’d need to invest 36.6% of your income or $442.38 monthly to have $1 million at age 70.
If you’re still skeptical, let me briefly share with you the story of a janitor who turned a minimum wage salary into millions. Ronald Read was a one-time Vermont-based janitor and gas station attendant. At his death in 2014, many people were surprised that he has amassed over $8 million most of which he donated to charity. He worked hard and embraced a frugal lifestyle. His friends said that he never spent money unless he had to. He spent a lot of his time in the library getting free education where he learned about investing. At the time of his death, he had invested in at least 95 stocks and held on to most of them for the long term which ultimately clinched his financial success.
Therefore, if you’re not cashing those big checks yet, don’t let that stop you from building true wealth by using the three steps I just went over!