Why You Don’t Need a High Salary To Be a Millionaire

Many of us dream of becoming a millionaire, but did you realize that in America, that dream is much closer than most of us think?

The U.S. has more millionaires than any other country. According to the UBS 2024 Global Wealth Report, there are 22 million people in the U.S. who are millionaires, accounting for 6.6% of the population and 38% of all millionaires worldwide (per Fourtune.com).

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Contrary to popular beliefs about becoming a millionaire:

You don’t need to inherit a million or more dollars.
You don’t need to have found a seven or eight-figure company and sell it.
You don’t need to earn a six-figure salary.

According to a Ramsay Solutions study of 10,000 millionaires, most respondents (79%) did not receive an inheritance and one-third never earned a six-figure salary in any single year throughout their career. It’s true, not only is the American Dream alive and well, but it’s also closer and more accessible than many people think.

Let’s look at how you can increase your wealth and net worth with the goal of reaching millionaire status.

Naturally, the more you save and the higher rates of interest you earn, the easier it will be to increase your net worth.

At 23, if you put $100 per month, less than the cost of a coffee every day and around the same amount you put into subscription services (according to CNET), each month into a Roth IRA, earning a 12% average annual return (as suggested by Ramsey Solutions), that would give you an incredible $1.04 million by the time you’re 62. If you continue for another 5 years, that sum will turn into nearly $2 million, which is a hefty retirement fund.

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That’s the power of compounding interest and that is by far one of the best ways to save money and become a millionaire, even if you don’t earn six-figures or inherit a fortune.

As we mentioned above, a 12% average annual return, when compounded over decades, makes a huge difference. Even if you start saving later, if you put a lump sum in, the compound effect from investments will accumulate over time. Whereas, if you expect to make millions from savings and salary increases, you might be disappointed.

Wages have increased far more slowly and less than any other way to earn income. According to the Social Security Administration (SSA), Average Wage Index, the average U.S. salary in 2019, before the pandemic, was $50,040. Now it’s $63,932 (as of 2023, the last year with verifiable data). According to Salary.com data, the average increase last year was 3% to 3.9%.

In other words, you’re going to make more money in the long haul by consistently investing in an IRA and other investment accounts, provided the interest rate is compounding and consistently higher than savings accounts and salary inflation (neither is hard to achieve or find).

The big challenge that many of us face is not letting lifestyle creep impact how much we invest and save. Plus, there are always unexpected costs and emergencies, so it’s useful to have something set aside that’s separate from your wealth-generating investment accounts.

The best way to save, whether individually or as a couple — and this goes whether you’ve got a business, self-employed or are on a salary — is to calculate what you can afford and then have it automatically transferred to the accounts you are investing money in.

Make it disappear, quickly. Out of sight, out of mind — do this automatically. That way, the money you just sent to your savings or investment account(s) isn’t part of your spending money. It isn’t in your checking account. It’s already gone. Accepting that it will take time and consistent effort, while also acknowledging that once you’ve got into a good habit, it becomes easier to stick with it will help you save money every month.

Renting is expensive. In big cities, the average cost of renting is a lot more than 30% of the average median salary, making renting unaffordable for many, according to The New York Times. Buying a home is also expensive, but what you’ll get is an appreciating asset. An asset that will increase in value and crucially, the equity you have in your home will increase the quicker the mortgage is paid off.

You could be living in what could become your retirement fund and that in itself could make you a millionaire. And remember, the equity in your home depends on three things:

The value of the property increases over time: U.S. real estate values have almost consistently increased every year since the 1960s. Based on Federal Reserve data, the average U.S. property was worth $196,000 in 2000; 25 years later, that figure is $415,000.
Any changes and improvements you make to your home. That will increase its value.
The amount you pay off your mortgage. The quicker it’s paid off, the sooner you’ll own a larger chunk of the equity, until it’s paid off in full, thereby giving you the whole value of the property. Even $100 extra paid per month is $1200 in a year and $12,000 in 10 years.

Becoming a millionaire isn’t out of reach. You don’t need a rich inheritance or to build and sell a business or a high-stress six-figure career in a bustling big city.

You can earn a regular wage, put money aside, invest in a home and invest in the market, until the magic of compound interest and continued rising property prices combine to build a seven-figure pot of gold at the end of the rainbow.

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This article originally appeared on GOBankingRates.com: The Wealth Myth: Why You Don’t Need a High Salary To Be a Millionaire