Become a Millionaire on a Minimum-Wage Salary

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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.

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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.

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