How To Be a Millionaire on a Modest Salary, According To Money Expert Rachel Cruze

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Many people believe that to become a millionaire, you need a very high-paying job, rich parents or a lucky lottery ticket. It may seem out of reach, but there are ways to become a millionaire on a regular salary. 

Rachel Cruze, personal finance expert and frequent guest host of “The Ramsey Show,” dropped a video on her YouTube channel detailing just what you need to do to become a millionaire with a modest salary.

Build Good Habits

Accumulating wealth is a process that usually takes a long time. It’s not about making just one good money move. It’s about consistently making good financial decisions. 

Cruze noted that 79% of millionaires don’t inherit any money and instead build good habits to grow their wealth. She also cited a study that found that the five most common jobs for millionaires are quite average: teacher, accountant, engineer, lawyer and manager. 

Tracking your spending is one of the best financial habits you can have. Those who track their spending can see exactly where their money is going. Once you know where your money is going, you can make well-informed decisions to save and invest more of your salary. After tracking your spending for a month or two, you might be surprised to find out how much you’re spending on subscriptions, coffee and going out to eat. You’ll be able to create a more effective budget when you know which areas you can cut your spending in.

As you become a more efficient budgeter, you’ll be able to build other good habits. For example, Cruze noted how important it is to get out of debt and build an emergency fund. 

With interest rates reaching up to 36%, getting rid of any credit card debt you may have should be particularly high on your list if you want to become a millionaire. Having an emergency fund that can last you from three to six months is equally essential. If you don’t have an emergency fund and get hit with a big medical or car repair bill, you might end up going into debt to deal with it.

Watch Out for Lifestyle Creep

When you start to make more money, it’s easy to start spending more. This phenomenon is often referred to as lifestyle creep. This can happen for a number of reasons, like wanting to keep up with the Joneses, not planning your finances well enough and having more access to higher credit limits. Lifestyle creep is the enemy of saving, and even though you’re making more money, in the end, you usually have less to show for it. 

Cruze understands how people get sucked into lifestyle creep, especially when they’ve worked hard to earn more money. However, to become a millionaire, you need to be intentional with your finances. Cruze acknowledged that you can enjoy a little bit more than you normally would, but you need to develop a smart financial plan to save more as well.

Invest Consistently Over Time

By far, the most important thing you’ll need to do to become a millionaire on a low salary is invest. Cruze recommended investing 15% of your income into your retirement fund once you’ve gotten out of debt and built up an emergency fund. When you invest, you create a passive income stream that can help you earn even more money while you sleep.

Cruze stated that compound growth makes investing the best way to build wealth over a long period of time. 

Compound interest is when your principal balance earns interest, and then that interest becomes part of the new principal that earns interest in the next cycle. For example, investing $1,000 in an account that makes 10% annually will yield $100 over the first year. In the second year, you’ll make 10% on $1,100, because your interest has been reinvested. So in your second year, you’ll make $110, which means you’ll make 10% on $1,210 in your third year. As this amount compounds over time, you’ll end up making exponentially more money the longer you keep your money invested.

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