Ramit Sethi: How To Become a Millionaire on Low Salary

Rawpixel / iStock.com

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

Despite common misconceptions that millionaires inherit their wealth or earn exorbitant salaries, renowned financial expert Ramit Sethi challenges this notion in a recent video. Sethi emphasizes that anyone, regardless of their background or income level, can achieve millionaire status through strategic financial planning and disciplined investing. In this article, we’ll explore Sethi’s insights and actionable steps for building wealth, even on a modest salary.

Lever 1: Time is The Most Powerful Asset

Sethi underscores the significance of time in wealth accumulation, highlighting the compounding effect of investments over extended periods. Using the example of investing 15% of a $50,000 annual salary for 30 years, Sethi illustrates how consistent contributions can grow significantly over time. By extending the investment horizon by just four years, individuals can surpass the million-dollar mark due to the exponential growth facilitated by compounding interest. Sethi’s message is clear: start investing early and harness the power of time to maximize wealth accumulation.

Lever 2: How Much You Invest Matters

In addition to time, Sethi emphasizes the importance of the amount invested, debunking the misconception that substantial sums are required to achieve millionaire status. He presents a compelling scenario where investing as little as $14 a day from the age of 25 can lead to a seven-figure portfolio by retirement age. Sethi encourages individuals to adopt a gradual approach, incrementally increasing investment contributions over time. By automating these contributions and prioritizing financial discipline, individuals can steadily build wealth, regardless of their initial financial circumstances.

Lever 3: Investment Returns and Understanding Realistic Expectations

While investment returns play a role in wealth accumulation, Sethi advises against fixating on achieving extraordinary returns. Instead, he advocates for a conservative approach, citing historical market averages of around 7% to 8% per year. Sethi cautions against chasing high-yield investments or day trading, emphasizing the importance of low management fees and expense ratios. By focusing on long-term, low-cost investment strategies, individuals can mitigate risk and optimize their wealth-building journey.

Overcoming Emotional Barriers to Wealth

Beyond the technical aspects of investing, Sethi acknowledges the emotional hurdles that often deter individuals from pursuing financial independence. He addresses common fears and misconceptions surrounding money, emphasizing the need to challenge inherited beliefs and attitudes toward wealth. Sethi encourages a shift in mindset from scarcity to abundance, empowering individuals to prioritize financial well-being and cultivate a positive relationship with money. By recognizing and addressing emotional barriers, individuals can embark on a path toward financial freedom with confidence and clarity.

Ramit Sethi’s approach to wealth-building transcends conventional wisdom, offering practical guidance for individuals seeking financial independence. Through the strategic deployment of time, disciplined investing, and a realistic understanding of investment returns, Sethi demonstrates that anyone can achieve millionaire status, irrespective of income level. By addressing emotional barriers and embracing a proactive approach to wealth management, individuals can unlock the door to financial freedom and create a future of abundance and prosperity.

Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.

Share This Article: