Backstory:
So back in 2018 I started getting into this concept of managing money better. For those of you who have followed some of my journey, you will be familiar with the concept of “it’s not how much you earn”, because money makes you more of what you are now. This means more income won’t fix your problems. Back in those days I would work at the local Cinema on Friday nights and all of Saturday. It pretty much took up half my weekend, but it allowed me to train into uni and eat food!
One day while I was rolling ice creams out the back, gloves on with the hair net on my head, I had Rich Dad Poor Dad propped up in front of me, wrapped in a plastic bag so that it wouldn’t get damaged by the ice cream. Most of the time all we would do is listen to music while rolling ice creams, but I realised that it’s a mindless task which meant it was an opportunity for me to get mental value out of it. Since I wasn’t rolling ice creams like everyone else, meaning there was no music being played and I had a book in front of me, some other staff members noticed and later on asked what I was reading. I remember struggling to put my thoughts into clear sentences and I found it difficult to explain just how valuable financial literacy could be. I would go on about how so much can change if you change your mindset about money, but I could tell it wasn’t really connecting with them. So suddenly I had a thought that I quickly processed, and then boldly stated to my co-workers.
“ I think I can become a millionaire even if I was stuck on minimum wage”
Now I had their attention, as I probably have yours too. Of course I had nothing to back up this statement other than a few (considerably powerful though!) underlying concepts on how to manage money better. The chat eventually died down, but my brain kept on analyzing this concept. It would be the perfect way to test how effective money management is rather than just working a high paying job and everyone thinking, “oh yeah he’s well off because of his job”. Every working person would be able to connect more since it’s very relatable, and it would prove that it’s not just about how much you make. At this very moment, I still haven’t tested this concept with numbers. I am aware that there will be some big assumptions, like renting rates, average cost of food, living alone or as a couple, etc. Thankfully, my goal doesn’t change depending on the scenarios, and naturally I will take the most difficult scenarios to truly prove to myself (and hopefully many others in the future) that through managing your money better, you really can become a millionaire off the minimum wage.
The ‘Present’:
The time is currently 9:03am on the 3rd June 2020, and I am quickly capturing my thoughts before diving back into work. Yes it has been a long time since I first had the idea of pulling off this stunt. Luckily I am genuinely passionate about managing money well, so these concepts never leave me and I am just as driven to pursue this journey as I was back in the cinema in front of all my workmates. The first issue is that I don’t work a minimum wage job anymore. In fact I have been very very blessed and currently earn more than the minimum wage when it comes to the hourly rate, but that does not mean that I am going to drop this one because I know there are thousands out there that will hover around minimum wage their entire life. Regardless, these are the key points that I believe I can still prove by going through this exercise:
- It doesn’t matter how much you make.
- Everyone has the power to shape their own world to some degree.
- Managing money better starts right now, not when you earn more.
- Bring hope and empower people of every age and background to do better.
- Break the cycles of living paycheck to paycheck.
- Break the mentality that the only difference between wealthy and poor is money. (Spoiler alert, I believe a lot of it is the brain).
If that’s all a bit overwhelming, the key point I am trying to drive in this moment is that it is still possible to become wealthy off a small income. In this case it’s technically the smallest legal income possible!
Building Reality:
I now want to set up the core assumptions I will run with, and I want to share these on purpose to make this all as transparent as possible. I personally would not read, or follow, or pay any attention to someone who claims to have done something when in reality they just cheated. At the same time, please be realistic on your end too as I’m not an economist and this is just my way of processing it. If you’re going to intentionally pick out all the ‘faulty’ assumptions just to say to yourself “well, that rental payment is too low, it’s unrealistic and so this won’t actually work for me”, then you’re correct in one thing – this won’t work for you! Like the saying goes, whether you believe you can or can’t, you’re right. Personally, I am starting this journey from believing I can, and my goal is to help you plug into my mindset and concepts to pick up lessons that will help you believe there is a better reality available to you.
Without further ado, let me open up excel and begin building this idea through these assumptions I have used:
| Assumptions | |
| Minimum Wage per hour | $18.90 (as at June 2020) |
| Hours worked per week | 40 |
| Return on investment | 11.5% p.a. (each year) |
| Weekly Expenses: | |
|
$150 |
|
$250 |
|
$20 |
|
$50 |
|
$20 |
|
$20 |
Summarizing this, each month we end up making $3,285 and spending $2,216, meaning you could save and invest $1,069 each month. The return on investment of 11.5% comes from the average return over 15 years within the NZ TOP 50 ETF. This means if I simply opened my Sharesies app every payday and put my money into one of the most basic ETF funds 15 years ago, on average I would have earnt 11.5% returns each year. We could spend time arguing whether or not 11.5% is still obtainable, in fact I believe I can beat that each year, but to stay unbiased I am running with what 15 years of history says. Expanding this as if I was to start today, investing and accumulating monthly, here is what happens:
| Age | 20 | 25 | 30 | 35 | 40 |
| Minimum Wage Income | $39,420 | $39,420 | $39,420 | $39,420 | $39,420 |
| Expenses | $26,593 | $26,593 | $26,593 | $26,593 | $26,593 |
| Investment Income | $1,689 | $9,667 | $26,063 | $54,410 | $103,421 |
| Investment Balance | $22,076 | $98,297 | $254,946 | $525,780 | $994,028 |
Even though the amount you earn does not increase, the passive income increases as you accumulate more investments. By the age of 30, my passive income would match my job and I could technically quit my job and continue living the same lifestyle without having to work. By the age of 35, it’s twice my minimum wage job… you get the point!
For those of you who are visual learners, here is the result in graph format:
Now, that may look like a long time, but when I think about it I know a lot of 40 year old’s that are not millionaires and if they were, I would think they were very successful even if they reached it at that age. One key thing that amazes me is how simple it is, yet not many people reach it. Over 20 years, a basic formula of managing your minimum wage finances better can make you a millionaire. Yes, there are a lot of thoughts or comments we could make to try and disprove the validity of these numbers, but let’s not let that blind us from the powerful lessons in front of us. Here are some of the thoughts that tried to steal this lesson from me (on the left) and the rationale I had to combat them in order to keep the lesson (on the right).
| “Nathan, life isn’t a straight line like that, life costs more as you grow up” | The simplicity of this lesson would be ruined if we forecasted the increase of expenses and income, but if we are being real then I know for a fact that income can easily increase just as much as expenses. (2021 input – minimum wage has already increased to $20) |
| “This lifestyle doesn’t look sustainable” | I have personally lived on a lot less than these assumptions for over a year now. Yes it requires effort, but I am still going on breaks, hanging out with friends and family, and enjoying life to the full! |
| “Some of these expenses are unrealistic for me. For example, my rent is a lot more than $250.” | If you truly prioritize your financial goals and put them into action, then you will realise that spending less is achievable. In this case for example, you could humble yourself to move into a cheaper place to lower rent. |
| “This doesn’t take into account random big expenses that you can’t forecast.” | Similar to the first point above, we need to keep it simple to understand the power of this lesson. But if we were to worry about the probabilities of bad things happening, then why not take into account the probability of earning a lot more? For example if I come across a 20% return on my investments instead of 11.5% when I am 30 years old, then that’s $25,000 extra that we haven’t taken into account. |
In conclusion, I had free mental space at my minimum wage job and I took time to increase my financial literacy and then started tossing up the idea of becoming a millionaire even if I was to stay there my whole life. The funny thing is that being a millionaire isn’t really the goal itself and I am more aiming towards building a lifestyle where I don’t have to work, and the millionaire portion is just a metric to help me aim towards. In doing this I realised the power of long term consistent money management and investments which showed me a straight line to becoming a millionaire off minimum wage by the age of 40. This doesn’t take into account a lot of things, both good and bad but the lesson I have proven to myself and hopefully shown you is that we are not restricted by income and we have hope to break out of the cycles because we have power to shape our own world from today onwards!
Key Points:
- Do not blame your income for your financial position
- Consistent long term money management can take you wherever you want!
