How to Become a Millionaire Making $19 Per Hour
I recently read many social media posts arguing that the reason many of our current jobs are going unfilled, is because these jobs are not paying people enough to want to work. After reading a recent article written by Tyler Jett of the Des Moines Register about John Deere’s trouble finding enough workers for two of their manufacturing plants in Iowa, I wanted to put the numbers to test to see if it is possible to become a millionaire earning less than $20 per hour. My figures assume that you are single, with no kids, starting out at $19 per hour, which is the wage highlighted in the article. My cost estimates are taken from the average living expenses in the two towns mentioned in the John Deere article (Waterloo and Dubuque). I am also considering that you would qualify for an employer sponsored health care plan.
Before we get started, I wanted to make clear that am not a certified financial advisor and what I describe below is only what I have learned in my years of searching for financial freedom. This is a guide to help get you on your journey to financial freedom with minimal effort.
First, we will look at your income that you can expect to earn based on your $19 per hour wage.
Before Tax Annual Earnings: $39520 ($19/hour @ 40 hours/week)
Income Taxes (Federal/State): $7633
SS Security Deduction: $2450
Your estimated income after Taxes and other payroll deductions (not including other elected benefits): $29437
This will leave you an after-tax income of approximately $2453 per month for your living expenses and investments.
Now we are going to break down our estimated monthly expenses (keep in mind we are making every effort to keep our expenses to a minimum to achieve our maximum investment potential).
Rent: $350 with a roommate (according to Zumper.com, the average 2-bedroom apartment rent is $700 per month.)
Food: $250 (per 24/7wallst.com, the average adult in Iowa spends $3000 a year on food expenses.)
Transportation (Car): $250 (Based on an $8000 used vehicle with a 3-year loan at an 8% interest rate which is a higher rate)
Insurance (Car/Renter’s): $150 (valuepenguin.com shows median full coverage car insurance rates are $140 per month. The average renter’s insurance as found on numerous sites is $10 per month)
Clothing Expenses: $150 (remember, you are becoming a millionaire, you are not one yet.)
Utilities (gas/electric/garbage/water): $69 with a roommate (according to numbeo.com, the average monthly utility cost for a 915 sq. ft. apartment in Iowa is approximately $137.)
Other transportation expenses: $250 (This assumes a 15-gallon gas tank filled once a week at $3 per gallon, and an additional $55 per month allowance for other maintenance/repairs)
Entertainment: $100 (You need to have a little fun.)
This brings your total estimated monthly expenses to $1569. If you take your after-tax income of $2453 and subtract your monthly expenses of $1569 per month, we have a remaining investable amount of approximately $884 (see chart below).
Now you may be asking yourself, how is this $884 going to make me a millionaire. Here is where you are going to let the wealthy do all the work for you. We are going to use their system of wealth to make you wealthy, the stock market. You are going to need to open an individual brokerage account so you can buy a total stock market ETF fund. There are several brokerage options out there, so do your research to find the best on for you. I personally use TD Ameritrade for all my brokerage accounts. You can also set up an account with a robo-advisor that will make it even easier and will automatically invest for you. There are many to choose from. I personally have an account with Betterment.com, and I also have several friends and colleagues that use Acorns. You will want to set it up to automatically take out the $884 every month from your bank account just in case you forget to do it yourself (preferably $442 every two weeks to capitalize on any drops in the market). This will sting a bit those first few months, but once you see your account start to grow, this goes away quickly. Now you may still be asking yourself, “How will this make me a millionaire”? Compound interest is the answer. Look at the chart below of the last 30 years for the S&P stock index from macrotrends.net:
As you can see in the chart, over the last 30 years the S&P has risen from $767 to $3961. This is an average of 10.24% per year. This includes the Dot Com crash in the early 2000’s, the Housing Market Bubble of 2008, and the Covid19 crash in March of 2020. If your funds are invested over a long period of time any sudden gyrations in the market have shown they will rebound. You are also using dollar cost averaging, so you are contributing to your investments in these down markets, which means those investments will see much larger gains offsetting losses from some earlier investments. Now, lets see how long it will take you to become a millionaire making $19 per hour.
Below is a compound interest calculator found at investor.gov. We are going to start with our first month’s deposit of $884 and continue to contribute $884 per month. We are going to use a conservative figure of an 8% return per year. As you saw in the chart above, over the last 30 years the S&P return was over 10% (not including dividends), but for the sake of this article, we want to be conservative. Below shows that you could expect to become a millionaire in approximately 28 years.
This is a very powerful chart. It proves that with time, anyone can become financially independent with a little discipline. If you were to start investing these funds when you are 22 years old, you will become a millionaire around the time you are 50. At this point, your investments are earning more per year than you ever did when you were making $19 per hour. The earlier you start, the sooner you will join the ranks of the millionaires. It takes sacrifice and hard work when you are first starting out, but as your mindset starts to change from earner to investor, and your income grows as you grow, you will be able to contribute more to your investments to reach millionaire status sooner.
I understand that everyone‘s circumstances are different. Some may have student loan debt, and other necessary expenses I have not accounted for. You may need to cut into the budget set up above or put in some overtime hours to increase your income. Other suitable options would be to find side hustle for more income. Go to investor.gov and try different scenarios in the compound interest calculator to see how long it will take you to become a millionaire based on what you can invest per month.
One thing to also keep in mind, if you are not contributing to an IRA which penalizes you for early withdrawal, the money invested in an individual investment account is available to you at any time. Although you are not going to want to touch it once you see how it can grow for you, it will serve as an emergency fund for any unforeseen expenses that may come up. Do not be afraid to invest as much as possible. You can always pull back or access the funds when needed. Often, people feel that if they put their money into investments, they will no longer have access to it. This causes them to not invest as much money as they are capable of due to holding back for emergencies. Don’t let this thought discourage you from contributing your maximum amount each month. Just know that with market fluctuations, you will sometimes see your value drop, so make your best effort to leave it there to grow.
