How to Become a Millionaire on an Average Salary — The Proven Formula for Long-Term Wealth

Becoming a millionaire on an average salary isn’t luck. If you start young enough and you have the right plan in mind, you will almost always get there.

The math shows you that if you’re able to save and invest $500 a month, that hitting a million dollars invested is inevitable given enough time.

So, why is it then that many people don’t get there?

Quote, according to the most recent figures from the Federal Reserve’s survey of consumer finances, only about 2.5% of all Americans actually have a million dollars or more saved in their retirement accounts.

In my opinion, there are several factors as to why people don’t get there, but it rarely has to do with the size of your paycheck.

The two factors that make you a millionaire is:

No.1: What you do with your money.

No.2: How much time you have.

Those are the ultimate determining factors in how much of a millionaire you actually become.

We’re going to focus on the four pillars that will turn an average salary into a seven-figure net worth.

And to make this a little bit more concrete, we’re going to use an example person the whole way through our article today.

We’re going to call this person Alex the electrician. He lives in Columbus, Ohio, and he makes $62,000 a year as an electrician.

He’s a normal everyday man, and he never will break six figures in his career, but you’ll see precisely how an ordinary income will become a million dollars or even more.

Now, before we get into the actual strategies today, we’re going to have to define the starting zone of where we’re at because average salary is one of the most misunderstood numbers in personal finance.

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Average Salary

If you were to Google what the average salary equates to in America, you’re going to see figures ranging from $66K per year or even up to $70K per year.

The thing is, that’s the mean, so in math terms, that’s adding up everyone’s income and dividing it by the number of people.

But the problem with that is that a small number of extremely high earners are going to drag that average number way up.

It’s going to include the people that make like 10 million bucks a year, and if those outliers are included, the average income that you see on Google is much higher.

The number that actually represents a normal worker is going to be the median. That’s the person that’s right smack-dab in the middle where half the workers earn more and half of workers earn less.

As of 2026, the median full-time salary in the United States is right around $62,000 per year, and that’s Alex, the electrician from Ohio.

Now, a funny coincidence here is that the median electrician in America also earns about $62,000 a year. It’s just a coincidence.

Maybe I chose it on purpose, maybe I didn’t. You’ll never know. Now that we know the income we’re looking at, let’s actually build Alex into a millionaire starting with pillars.

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Pillar #1: Protect The Gap

This sounds really easy, yet so many people have a really hard time with this fundamental. The gap is the difference between what you earn and what you actually keep.

If Alex makes $62,000 a year and he spends $62K per year, his gap is going to be literally zero.

And the uncomfortable truth about money here is that many people won’t have this gap between what they make and what they spend because of their behavior around money.

It’s usually not going to be one big unnecessary purchase that destroys the gap. It’s usually the small nickel-and-dime transactions that add up over time.

• You might DoorDash three or four times a week.
• Maybe there’s a credit card balance accruing interest at 22%.
• Maybe you just opt for a slightly nicer apartment that was an extra $150 a month in the beginning that you thought you could afford.

These are all little decisions that add up to a lot of extra dollars that leak out of your bank account and therefore leak out of your investments.

The one idea that matters the most in this entire pillar is that your savings rate is going to matter much more than your salary, especially in the cases where you have an average salary.

This is especially true. I have a friend who’s a VP at a tech company right now, and as of 2025, he was making $700,000 per year.

Now, at a party, he actually shared with me that he was having a hard time making ends meet. I know that sounds a little bit weird because of how much money he was making, but it really adds up when you add up all of his expenses.

He has two kids going to private school, he has a mortgage that’s slightly out of his budget, and he has three cars that he’s making payments on.

The thing with him is that he let his lifestyle get a little bit too out of control, and he even told me that once he got to his current lifestyle, he could not go back.

He didn’t want to downsize his home or move his kids out of private school, so now he’s kind of in this hard place where he can either earn more money and then save more of that, or he needs to reduce his expenses in order to save more, but behaviorally he’s just having a really hard time.

So, here’s the point I’m trying to make. My friend makes about the same amount of money in a single month that Alex, our electrician, makes all year.

Yet, it’s Alex who saves 10% to 15% of his $62,000 per year who actually keeps more dollars at the end of the day. And so, savings rate is the more important factor here.

So, some action items for you in this pillar.

1. Write down how much you are spending versus how much you are making and see what your gap is.
2. Not to ignore the small stuff.

So, there are always going to be a little bit of extra ways to save money across the board consistently, and that’s actually going to increase your gap and protect your gap.

For example, grocery stores often have mobile apps and digital coupons, and sometimes you can save a lot of money if you just download their mobile app and use it when you’re shopping in store.

Another example is to call service providers like your phone bill or your internet and try to negotiate them downward.

And lastly, you can always track your expenses, which will help you increase your gap as well because it’s bringing awareness to your finances.

So, that’s pillar number one. It’s not about being cheap with your money or anything like that. It’s just being about intentional about where the money is going and knowing that your savings rate matters.

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Pillar #2: Investing Aggressively & Consistently

Which actually matters much more than what you actually invest in.

Let’s run Alex the electrician’s actual numbers here. Let’s say he saves 10% of his income. That means he’s going to probably save around $500 a month or $6,000 a year.

Here’s what $500 a month becomes by the age of 65 depending on what age he starts.

Now, as you can see, if he starts at the age of 25, Alex the electrician, who never earns more than six figures in his life, he’ll actually cross over $1.5 million by retirement if he can invest in an S&P 500 index fund at $500 a month.

So, what I want you to realize about becoming a millionaire on an average salary is that it’s the baseline outcome if you’re able to start early.

Now, you can see that if Alex starts at the age of 35, by the time he’s 65, his balance is only $680,000.

The 10-year delay essentially cost him over $870K, so you have to start early when it comes to this.

Now, if you’re 40 and older, I don’t want you to think that it’s too late here. While time is Alex’s superpower because he might be really young, at age 40 and up, you can still pull the savings rate lever.

First, if you’re 45, you’re probably not starting from zero because the median 45-year-old has around $87,000 saved in America, and that amount should be compounding on its own.

Say you’re starting at the age of 45 with around $87K saved, you would need to get aggressive, sure, so you might have to save $1,000 a month, but if you’re able to do that by 67, you can still reach $1.2 million.

Even if you start from literally zero at the age of 45, if you save $1,000 a month, by the time you’re 67, you can have $665K, and by the time you’re 70, it’s closer to $80K.

So, the genuine action item for pillar number two is the following.

#1. Open a retirement account.

Ideally, it’s a Roth IRA, that’s a great starting point for a lot of people.

#2. Pick a low-cost, broad-based index fund and set up automatic monthly transfers.

You want to automate this so that your portfolio doesn’t depend on you remembering it or feeling motivated that day because if it depends on those things, chances are you might not do it.

The highest ROI thing you can do after this is done is to ensure that your automatic transfer is set up and that you have that retirement account going.

Now, the challenge for you is that if you’re watching this and you’re like, “Okay, I already save 10% of my income.”

Well, the challenge for you then is to save more than 10%. Maybe go to 15% or 20%.

If Alex were to save 15% or 20% instead of 10%, let’s see his numbers. So, at 15%, by the time he reaches 65, he’ll have about $2.4 million, and at 20%, that becomes $3.2 million.

Therefore, his biggest enemy in life is going to be lifestyle inflation. Every time Alex gets a raise in the future, he’s going to face the choice between choosing to increase his lifestyle or save that extra income.

Most people like my friend who makes $700k per year and saves very little of it, people choose to inflate their life.

The trap here is that it’s very easy to upgrade your life, but it’s very hard to come back down. So, if you are someone that makes around the average salary, you have to understand that your superpower is your savings rate.

Every time you get a raise, you want to keep your life roughly the same and you want to allocate that extra money towards your investments.

Now, that way you don’t just become a millionaire, you actually become a multi-millionaire.

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Pillar #3: Time

Now, we cannot make more time, unfortunately, and it’s the one thing nobody can buy more of, unless maybe you have one of these DeLorean time machines. So, in that way time is our most precious resource.

In terms of investing, it also works in your favor because the longer you stay invested, the more money you make and towards the end of any compound interest graph is when exponential gains start to happen.

Let’s take a look at Alex again. Say he invests $6,000 a year and earns a return of 8% in the market. You can see that the graph looks like the following.

In years 1 through 20, it looks pretty modest. His money is growing, but it hasn’t quite hit that escape velocity yet.

But, in year 20, his total balance is around $283,000. But, now look, look at year 30. His balance has hit $718k and after four more years, so 34 years total, he’d have about 1.015 million dollars.

And that’s pretty crazy because that means in the four years from year 30 to 34, he made more money in those four years than the first 20 years of him contributing to his retirement account.

This should illustrate to you that compounding really hits the inflection point really late in the curve, which means late in your time horizon.

This is such a hard concept to grasp because it’s also one that takes a lot of faith and trust knowing that the math is going to work.

What’s even crazier though is I did this so if Alex stays invested and invests for 54 years total, which is a little unrealistic, but let’s just say he stays alive for a really long time and for the sake of this example, he does it for 54 years.

His total balance will grow to roughly $5.9 million. The only thing that we changed here was the time.

The greatest example of this in modern times is Warren Buffett. He was worth around $3 billion during his 60th birthday, but today he’s worth over $146 billion.

And the fact that nobody brings up is that more than 99% of his fortune has been built after the age of 50.

Now, he was already a successful investor at the ages of 26, 30, 33, 37. Basically, any age before the age of 50, he was considered quite successful.

But, my favorite thing about him is that like any classic compound interest graph, all of his gains are at the end.

Now, the one thing about time and investing is that the compounding only really works if you don’t interrupt it at all.

One of the ways that people interrupt their gains is by withdrawing or selling their investments when the market drops.

People are going to do this for a multitude of reasons. Perhaps they need to withdraw some money to buy a house, pay for a wedding, or they just simply sell because they’re panicked about how the market is going.

Your portfolio growth is influenced heavily by being invested on the best performing days of the market. You really can’t afford to lose those best days.

You can see that with this graph or table that if you miss just the best 10 days in the market, that your gains are 56% less, and missing 20 or 30 of the best days will lead to 74% and 84% less gains respectively as well.

Now, hopefully this puts it into perspective. Just 10 days out of 20 years, and you will destroy more than half of your returns.

So, when do the best days actually happen? Well, the data shows that good days usually happen during bad markets.

So, roughly half the time a good day will show up during a bear market. 28% of the time it’s going to happen in the first 2 months of a bull market, and 22% of the time it’s going to happen in the rest of the bull market period.

So, the person who panic sells to feel safe is almost mathematically guaranteed to be sitting in cash on the exact days that would have rebuilt their portfolio.

So, my biggest action item for pillar number three is that If the market is going through a turbulent time, it’s to do nothing.

If you can just make sure to not panic sell and stay invested even during tough market times, it’s probably the most attractive play long-term for your portfolio.

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Pillar #4: Ensure You Aren’t Leaking Returns

So first, we want to avoid fees and second, we want to take advantage of free money.

In terms of avoiding fees, pay attention to expense ratios when you are purchasing ETFs or index funds and the expense ratio will just tell you what the yearly fee of that fund is when you’re invested in it.

A typical index fund from Vanguard, for example, is going to charge you around 0.05% per year.

Now, there are some ETFs and managed mutual funds out there with higher expense ratios of 0.5% and even up to 1%.

A 1% fee on a $10,000 investment is now $100 per year and to show you how that can really affect your overall balance, take a look at this graph from the SEC of a portfolio size of $100k.

You can see here that in 20 years, a 1% annual fee reduces your portfolio value by nearly $30,000 compared to a portfolio with a 0.25% annual fee.

So Alex, our electrician, if he’s investing $6,000 a year and earning 8%, remember he will end up with $1.55 million.

But let’s say he encounters a 1% fee over his 40-year timeline, he doesn’t end up with $1.55 million anymore, he ends up with $350,000 less or about 1.2 million.

Another area where you might leak fees is by hiring an asset under management based financial advisor.

These advisors will typically charge around 1% of your entire portfolio worth every single year.

That means if you have $500k invested, that’s $5,000 a year every year whether or not they make you money.

And the part that stings is that 1% isn’t just $5,000 this year, it’s $5,000 that’s no longer compounding for you for the rest of your life and that’s the opportunity cost.

Now, I’m not saying every financial advisor is a rip-off, a good one can actually be very worth their money especially for complex situations like tax planning, estate planning, and more.

But, if all you need is a financial advisor to buy you a low-cost index fund and hold it, then you might not need to hand over a 1% fee just to do that.

The second strategy of not leaking returns is to make sure you take advantage of free money. You can get free money many ways, but the truest forms are going to be your employer 401k match, any high-yield account interest, a health savings account since it’s triple tax advantaged, and I would even argue a cashback credit card is a form of free money so long as you can stay disciplined with paying it off.

According to a Vanguard report, 63% of retirement plans out there have some sort of matching mechanism.

So, if Alex, our electrician, has access to one, he definitely should be taking advantage.

If his company offers to match 100% of up to 6% of his salary, he will add about $3,720 worth of free money to his total contributions every year, which is worth about 7 months of his normal contributions of $500 per month.

Since Alex is already contributing about 10% of his salary, he easily clears the 6% threshold and grabs the entire match.

So, in his case, if he were offered it, he should take advantage. So, let’s bring this all together now.

The four pillars all have one thing in common, and I want you guys to play along here and try to guess what it is as we recap each one.

The first pillar was to protect the gap, making sure that you have a good spread between what you earn and what you spend.

The second pillar had to do with investing aggressively and consistently. That didn’t mean buying penny stocks, it just meant investing in a low-cost index fund over a long period of time.

The third pillar was using that time to your advantage. Now, if you don’t have enough time, you can always increase your savings rate.

And the last pillar is all about not losing money to fees and taking advantage of free money. Now, did you notice the one thing that wasn’t present in all of these pillars? I never told you that you have to go out and make more money.

Our electrician, Alex from Columbus, Ohio, he never breaks six figures, but he crosses seven figures anyways because of his behavior and his patience.

Now, I do want to be honest here because I’m not going to pretend like it’s completely effortless.

If you live in a higher cost of living area making $62k per year, it’s going to be a lot more difficult to have a gap between what you make and what you spend.

So, if that is you and you can’t even start pillar one just yet, your first battle isn’t the investing part, it’s just simply finding the gap itself.

That means you might have to track every expense and cut some of the biggest ones or you might have to find a cheaper living situations or in this specific case only, you might have to find some extra income on the side.

In order to execute today, you actually need this gap, but once it exists, I don’t think the question is whether or not you will become a millionaire, it’s whether or not you want one, two, or even three million or more.

Thanks For Reading 🙂