The Mcdonalds Millionaire Challenge

[Singuy]

So I have having a back and forth with a co-worker on social safety net and inequality. His argument was, we need a more robust social safety net because Americans just can't afford the platinum ACA when they are 50yo. Most can't even make their ends meet. My argument was..the person can't afford to live because of a spending problem..if the person plays their card right, anyone can retire with comfort/money/and health insurance.

I thought up the MCD challenge.

Say two typical people who didn't decide to go to college and just wants to work at walmart/MCDs for the rest of their lives.


Based on an annual salary of 17k/year/person(15.6k after tax), can these two hard working couple become a millionaire by the time they retire at 55 with 1 child? So we are talking about a million dollar of net worth AND retire 10 years early!

Lets assume there's an annual rate of return of 2.5%(all investments will be done with bank CDs..so no over inflated 11% rate of return from Dave Ramsey).

Budget/month for 2 adults, 1 child, car paid for via cash for 1500:

Income: 2608k after tax
400 housing (Sample apt in Orlando FL http://orlando.craigslist.org/apa/4951019341.html 3br/2bath for 700-roommates required for the 400 dollar budget).
100 utilities
80 car insurance
50 Gas (you walk to work because there's a place you can find a min wage job anywhere)
300 food ($10/day for 3)
100/year tracfone
50 internet
150 misc (clothes, wash cloths, etc.)
Child's health insurance via government assistance.
Adult's health insurance via ACA copper plan subsidized by the government

1380 income saved.

Deposit money at 2.5% interest

At 55 yo, the household will have $1,006,481.48 in the bank.
You can also deposit 1380 into a 401k account and ends up with even more money at 55, but it's not very liquid..so half and half would be ideal.

This does not account for raises and inflation(should cancel each other out). Also this doesn't account for promotions(if you worked 37 years at MCD, you should at least be a manager right?).

The millionaire min wage worker..NO EXCUSES

*Update*

A lot of people thinks this budget is a fantasy. It is ONLY a fantasy if you can't get over the addiction of spending!

You can take care of your needs and then some with this budget IF you are willing to make certain sacrifices. My first bicycle was a free one found near a dumpster..most of my toys were from garage sales bought with a quarter. I actually don't remember receiving anything brand new for a good 5 years after we immigrated. A lot of our furniture were also free(this was BEFORE craigslist..now people are giving away free stuff posted ONLINE! We used to drive around to spot the free stuff). With this budget, you will have to get used to garage sales, goodwills, dollar trees, and flea markets. There's nothing in the world a little bit of bleach and soap couldn't fix.

Some people may argue "well having your child looking like an orphan is child abuse!". I say it makes them a better person in the future! They will learn the value of hard earned money and live a frugal life, instead of keeping up with the joneses, creating massive amount of debt in the process.

[bjl584]

I think your housing estimate is low. At least in this area you can't rent anything for less than half that. Unless you want to dodge gunfire on a daily basis, you're going to need to come up with more than $400 a month.

What about car payments? Or are you assuming paying cash for cars?

I don't disagree that there is often a spending problem as opposed to an income problem. I just think that your numbers are a bit too optimistic.

[rennigade]

So when the 2 adults are at work the 1 year old can take care of themselves right. No need for daycare expenses. Or I guess we can assume a family member can put their life on hold and watch the kid all day.

$10/day for food...3 people...good luck with that. Spaghetti and paste every single day. Maybe the adults an bring home some healthy french fries as a side dish. No one in that family will make it to 55 years old...they'll be dead of a heart attack before that...or maybe die of diabetes. Their medical expenses will be out of control.

$400 for housing. Even in poor areas $400 is a stretch.

But you're right...becoming a millionaire making minimum wage is within everyones reach. Seems very straight forward and simple to achieve.

[Singuy]

- Housing is low but you can have roommates, especially if you live near a university(get a grad student to live with you and your family).

-As for the child, you can alternate shifts..this is min wage territory (which is a crazy supply of jobs)..you can have a job with any schedule you want. 6am-2pm, 3pm-11pm...easy.

-10 dollars/day is easy. I just bought some drumsticks for 0.79/lb yesterday. Plenty of meat at around $2/lb. Go to aldi for some cheap veggies and you are at your $10

-There are no car payments, you drive a 1500 honda civic you paid cash for. Plus you are walking to work so you can take out the car entirely if needed and just take the local bus.

[phantom]

You might enjoy listening to this podcast about one theoretical way to become a millionaire working at Walmart. The podcaster suggests not staying in a minimum wage position for long, so it's different than your proposal. Personally, if I found myself in a minimum wage job, I'd focus on getting my income up so I could have a bit more wiggle room in my budget.

[Singuy]

You might enjoy listening to this podcast about one theoretical way to become a millionaire working at Walmart. The podcaster suggests not staying in a minimum wage position for long, so it's different than your proposal. Personally, if I found myself in a minimum wage job, I'd focus on getting my income up so I could have a bit more wiggle room in my budget.

My budget plan is a NO excuse plan. I took as much "what ifs" out of it I can. It is pretty much for the lowest common denominator. You are not expected to make investments, you are not expected to improve your wages or get a promotion. The only people who doesn't qualify for what I proposed above are handicaped people with medical conditions impeding them from working.

[tripods68]

My budget plan is a NO excuse plan. I took as much "what ifs" out of it I can. It is pretty much for the lowest common denominator. You are not expected to make investments, you are not expected to improve your wages or get a promotion. The only people who doesn't qualify for what I proposed above are handicaped people with medical conditions impeding them from working.

The budget you presented isn't reality. There is no way you will achieve millionaire status without significant pay increase during the next 5, or 10 years. Inflation alone eats the value of dollar. The cost of food will go up every year. You have not listed how do you pay for car breakdown, or emergency, or pay for a house. Do you have health insurance? Its a rosy budget but it got holes.

[Joan.of.the.Arch]

Your no-investment plan includes deposit accounts at 2.5%. Are those interest rates available in reality? I thought most deposit accounts in the US were still earning around 0.1% which is definitely less than inflation.

By the way, the minimum wage you use appears to be $8.17/ hour. Here it is $7.65. That alone brings pre-tax income down to $15,912 if the person works 40 hours a week, 52 weeks a year.

I see other problems with your budget, but will let others speak.

[CashUp Sammy]

I see the overall point for this post.

But yeah, nobody is taking a vacation, having surgery, getting sick, buying birthday presents, or having a beer.

Kids are a suckhole of $.

The mindset it takes to live this life is ludicrous. But yes, those of us on decent salaries have a spending problem.

Thanks for taking the time with the calculations.

[Singuy]

The budget you presented isn't reality. There is no way you will achieve millionaire status without significant pay increase during the next 5, or 10 years. Inflation alone eats the value of dollar. The cost of food will go up every year. You have not listed how do you pay for car breakdown, or emergency, or pay for a house. Do you have health insurance? Its a rosy budget but it got holes.

Inflation generally is cancelled out by raises..assuming the two are stuck at min wage for the rest of their lives (extremely unlikely). You have 1 car as stated above. 1500 honda civic..you pay for it with cash. Why one car? because you can walk to work given that there's a MCD or any fast food restaurant within walking distance of apartments.

You can buy a house if it doesn't hurt your net worth(as in the value of the house increases more than property tax cost). There's no interest because you are buying this house with cash after you save up enough.

And if 2.5% rate of return isn't a possibility, then pretty must nothing is a possibility. This cannot be more conservative when it comes to a rate of return number. Dave Ramsey says 12% and most people on this forum will spit out numbers like 8%, I'm just picking a CD rate of 2.5% which exists today. I am not selling anyone with crazy rate of return..this is the worst possible scenario someone can succeed on.


I know my budget is crazy but it works. My parents had a very similar budget for 10 years raising me.

[hamchan]

$400 in rent? The last time I paid that little in rent I was living in a one room cabin with no running water, and there was nothing within walking distance except other cabins. And that was 15 years ago. Nice try though.

[Singuy]

$400 in rent? The last time I paid that little in rent I was living in a one room cabin with no running water, and there was nothing within walking distance except other cabins. And that was 15 years ago. Nice try though.

??

http://orlando.craigslist.org/apa/4951019341.html

3 br apt, 700/month. Get yourself a roommate and you are at 400 territory.

My budget is for people who doesn't live in ultra expensive cities..you don't need to because you work at mcdonalds. I picked Orlando because this is where I live. Orlando FL is not exactly in the middle of nowhere either.

[greenskeeper]

minimum wage was never meant to be a living wage. It's for young people and others just starting out in the job market.

I think a lot of people would be shocked at just how little of the workforce makes minimum wage (especially if you listen to the talking heads on the left)

http://www.pewresearch.org/fact-tank/2014/09/08/who-makes-minimum-wage/

[feh]

The mindset it takes to live this life is ludicrous. But yes, those of us on decent salaries have a spending problem.

+1

The proposed budget is not realistic.

[DeniseNTexas]

I definitely get the gist of the OP but, like the others, feel the numbers are unrealistic.

Minimum wage where I live is $7.25 and working full time in a minimum wage position here isn't common, even at McDonald's. Sure, one can work two, three, or four minimum wage jobs to get 40 hours or more. I pay almost $600 a month for a one bedroom apartment and it's one of the less expensive complexes. I can't find any kind of deposit account giving the return the OP mentions. I'm not saying they're not out there but if they are, they're kept fairly quiet. I think most of the other numbers are off, also, but I do see your point, OP.

Even those who don't earn a pretty good wage have a tendency to overspend and could do better. I don't know that all can reach millionaire status but do believe most can do better.