Become a Millionaire on a Minimum-Wage Salary

Who wants to be a millionaire? Who wouldn't want to be? But for those on the lower end of the pay scale, striving to achieve a seven-figure net worth probably seems futile. But it can be done.

With the U.S. minimum wage paying $7.25 an hour -- that amounts to $14,500 over the course of a full-time 2,000 work-hour year -- becoming a millionaire on a minimum-wage salary wouldn't be easy to accomplish by any stretch of the imagination.

Even in the cheapest parts of the country, housing, health, food, utilities, clothing, and transportation costs need to be covered before investing makes sense. And even with an aggressive investment plan, reaching a $1 million target will take multiple decades to accomplish for someone earning minimum wage.

But if you can live cheaply enough on it, and if you had long enough to go before retiring, it could be enough to let you retire a millionaire.

How It's Possible

Let's say you had that audacious goal of becoming a minimum-wage millionaire by the time you retired at age 70. What do you really need to accomplish that?

The table below shows how much you'd have to invest every month to reach that target, both as a dollar amount and as a percentage of a full time minimum-wage salary:

Starting Age
10% Annual Returns
8% Annual Returns
6% Annual Returns
4% Annual Returns
18
$47.24 (3.9%)
$107.19 (8.9%)
$232.87 (19.3%)
$477.77 (39.5%)
21
$63.81 (5.3%)
$136.75 (11.3%)
$281.25 (23.3%)
$548.59 (45.4%)
25
$95.40 (7.9%)
$189.59 (15.7%)
$362.85 (30%)
$662.48 (54.8%)
30
$158.13 (13.1%)
$286.45 (23.7%)
$502.14 (41.6%)
$846.05 (70%)
35
$263.39 (21.8%)
$435.94 (36.1%)
$701.90 (58.1%)
$1,094.41 (90.6%)
40
$442.38 (36.6%)
$670.98 (55.5%)
$995.51 (82.4%)
$1,440.82 (119.2%)
Source: Author calculations.

Three things should quickly jump out at you from that table:

  • You need to start investing while you are young. If you wait much past age 30, the percentage of that minimum wage job you'll have to come up with for your investments becomes impossibly large.
  • You need decent long-term returns. The stock market has historically provided long term returns in that 8% to 10% range. Anything less than that, and once again, you'd be looking at impossibly high portions of your salary dedicated to your investments.
  • You need a really low-cost strategy. With these small invested amounts, even a $4 or $5 commission would eat through far too much of your available cash.

No, it's not easy, but if Grace Groner -- a secretary for 43 years -- could pull off the even more amazing feat of amassing a $7 million fortune, then it is within the realm of possibility.

The Most Promising Path

In fact, Groner's strategy -- buy cheaply, hold for the long haul, and reinvest dividends -- is about the only one with a legitimate shot at success. The easiest way to follow that strategy is through the use of a program commonly known as a "DRIP," for Dividend Reinvestment Plan.

Companies that offer DRIPs set their own terms for things like fees and minimums, and as a result, not all DRIPs are created equally. There are a handful with the right combination of no fees to invest new cash or reinvest dividends and low minimum investment amounts to give you that legitimate chance at success. There may be some start-up costs or minimums, but once those are covered, low-cost DRIPs can be an efficient way to get long-run stock-like returns.

The list below shows the details on some of the more small-investor friendly DRIPs out there, along with links to more company and plan specific information:

Company
Initial Enrollment
Minimum Optional Investment*
More Information
3M (MMM)
1 share of stock
$10
Abbott Labs (ABT)
1 share of stock
$10
Duke Energy (DUK)
$250 or 1 share of stock
$50 "whenever" or
$25 per month automatic draft
Duke Realty (DRE)
$250 or 1 share of stock
$50 "whenever" or
$25 per month automatic draft
ExxonMobil (XOM)
$250 or 1 share of stock
$50
Hasbro (HAS)
1 share of stock
$25
Xerox (XRX)
1 share of stock
$10
Source: Company investor relations departments. *After initial investment.

As it turns out, Abbott Labs is the exact company whose stock made Groner a multimillionaire from an initial $180 investment and decades of dividend reinvestment. Of course, Abbott's stock's future returns will not likely be as rosy as what Groner received, but that's not necessary if your goal is "merely" to become a minimum-wage millionaire.

All you really need is a little bit of money, a whole lot of time, the discipline to keep at it for decades, and long-run future returns that are in line with long-run historic averages. No returns are guaranteed, of course, but if you never start, you'll certainly never get there.

At the time of publication, Motley Fool contributor Chuck Saletta did not directly own shares of any company mentioned in this article, but his wife owned shares of Duke Energy. The Motley Fool owns shares of Abbott Laboratories. Motley Fool newsletter services have recommended buying shares of Abbott Laboratories, 3M, and Hasbro.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum

182 Comments

Filter by:
dijeqarawy

I have been poor in the past and made below minimum wage (working at a restaurant)
While doing that, I essentially cut my living expenses to almost nothing. Here's some tips from me:
1) Buy food in bulk and don't eat anything else until you've eaten it all. You can buy big backs of frozen veggies, rice, chicken breasts, cereal, etc. at Costco or Walmart for cheap. Go grocery shopping once every 3-4 weeks and don't eat anything else except what you buy there.
2) Cut transit costs - Use Gasbuddy for gas (fill up for $20), Insurance Panda for insurance (I pay $30/month for full coverage), and Waze to avoid unnecessary driving in traffic jams.
3) Ask for rent discounts.. say you are going to leave unless they lower your rent. I saved $200/month on rent this way.
4) When you go out... leave your credit card at home and only bring a small amount of cash. (Even better - cut up your credit card!) You can't spend it if you don't have it!
That's all I can think of now.

March 21 2014 at 4:48 PM Report abuse rate up rate down Reply
lizzie.silva

Investing has always been hard for me. Knowing where to invest or how much to invest stresses me out. I believe this article is steering me towards the right direction. I also recently read an article on what might be a good investment: http://www.newswire.net/newsroom/financial/74281-how-to-become-a-millionaire.html I won't invest all my money into silver, but at least I know there are options our there.

July 12 2013 at 10:38 AM Report abuse rate up rate down Reply
starters

For internet marketing tricks and starters visit:
http://www.emillionaire.weebly.com

December 01 2012 at 11:15 AM Report abuse rate up rate down Reply
no1palok

Your article was most informative and I really appreciated the example of Ms. Grace Groner -- a secretary for 43 years, share amazing she amassed investment returns in excess of $7.million! I am constantly on the lookout for quality information on How to become a millionaire products and strategies and often post on my website for those looking to get started straight away on a low budget: http://howtobecomeamillionaires.org/ Also found the info about; 'DRIP' most enlightening Thanks.

July 26 2012 at 7:02 AM Report abuse rate up rate down Reply
Reb

You bet. Toss your money in the stock market and watch it......disappear. They don't call them "brokers" for nothing. The more you invest, the broker you end up. My "broker" told me to "hold on...we are in it for the long haul and it will bounce back. Then I got to watch the value go from 120K to about 85K. I also pulled some out and invested in land (it NEVER goes down) Another mistake. the Real estate values have also taken a nosedive. What little I still have invested is doing so little, it's almost not worth it. WIth the economy the way it is, with no salvation in sight, I think the only thing I want to invest in now is ammunition.

January 11 2012 at 10:31 AM Report abuse rate up rate down Reply
davblue1818

i,ll have to until i die go to work one day and plant me in a pine box the next if you think prices are high now 30 -35 years from now bread will be 5.00 dollars gas will be 12-00 a gal ho ho ho merry christmas

December 27 2011 at 8:23 PM Report abuse rate up rate down Reply
rlk62098

Of course, there are several assumptions made here, not the least of which is that the stock market will remain stable for the investing, and then, there are the practical realities in today's world -- not the one of 43 years ago -- that make this a mostly theoretical exercise at best. The biggest assumption is that someone could actually hold on to a job -- minimum wage or otherwise -- for 43 years -- in order to match Ms. Groner's feat -- in an era where downsizing, mergers, and layoffs are common place. Then, there are today's prices against those of 5, 10, even 20 years ago, and then I have to ask how Ms. Groner was possibility affording housing, insurance, medical expenses or anything else while investing on a minimum wage.

December 21 2011 at 1:01 AM Report abuse rate up rate down Reply
Dane Miller

wow!I was reading the article about S.S.Man I"m gonna strave to death at about 68 if not before.

December 20 2011 at 4:15 PM Report abuse rate up rate down Reply
white41990

Any employer willing to offer me minimum wage can stick it up there ass, and I wouldn't be afraid to tell them to do it too at 7.25/hour, working for that is a joke I don't care what the occupation is I rather be unemployed than accept 7.25 an hour, screw that.

October 13 2011 at 8:13 PM Report abuse -1 rate up rate down Reply
John

All you have to do is be willing to live in a sewer pipe for 50 years and this will work just fine.

August 23 2011 at 5:21 AM Report abuse rate up rate down Reply