Become a millionaire even on a low salary: Ramit Sethi believes a simple 3-lever process can make anyone wealthy — so we tested his assumptions

1. Time in market

Sethi’s thesis seems to hinge on the most important (and perhaps most equal) factor: time. The power of compound interest works exceptionally well on longer time scales. And the number of hours in a day or days in a year are the same for billionaire investors and servers at fast food restaurants.

A disciplined investment strategy deployed over several decades should help anyone generate wealth. Ramit calculates that a person earning $50,000 and investing $7,500 a year at an annual growth rate of 7% and paying a 0.1% fee should have $743,849 within 30 years. He says sustaining this strategy for just four more years could boost this to $1,006,939.

Put simply, the longer you can stay invested, the better.

“Time and compounding are on your side,” Sethi said.

Unfortunately, most Americans start investing far too late. In fact, only 1 in 10 low-income workers between the ages of 51 and 64 had a retirement account balance in 2019, according to a July 2023 report from the Government Accountability Office.

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2. How much you invest

The amount of money deployed into investments every year is also essential. In previous videos, Sethi has recommended a 10% investment rate, which means you must set aside $1 for every $10 in income to have a shot at becoming wealthy within a reasonable time frame.

However, many Americans miss this goal. The personal savings rate in January 2024, according to the Federal Reserve, was just 3.8%. Even those who manage to meet or exceed this savings target may not invest in the right places to maximize returns.

3. Investment returns

The third lever on Sethi’s list is investment returns. Sethis admits that this is probably the toughest lever to maximize.

“You have less control over this,” he said. “So this really shouldn’t be your top priority.”

Instead of chasing fancy tech stocks or cryptocurrencies, Sethi recommends deploying funds into a simple, low-cost index fund that he estimates could deliver 7% to 8% in annual growth. He arrives at this estimate by assuming 2% to 3% inflation and the S&P 500’s historical average return of 10.26% since 1957.

Fortunately, this is something the average American seems to understand. Research from Gallup finds that roughly 61% of Americans have some exposure to the stock market, which means at least some of their investments may be growing at the market rate.

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The math

For someone on a low-income, the only way to maximize wealth is to use all three levers as much as possible.

Based on the assumption that a fast-food worker earns $30,000 a year, saves 10% of it every month ($250) and deploys it in an index fund that delivers 8% growth annually, they could reach $1 million within 44 years.

In other words, a 25 year-old has a reasonable shot at becoming a millionaire by age 69, just in time for retirement. This timeline can also be accelerated if you factor in a little income growth and possibly dual-income savings after marriage. A family with a household income closer to the median has a better chance of achieving this goal.