Dave Ramsey Said This Financial Myth Is 'About as Real as a $3 Bill'

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  • Dave Ramsey warns that many people believe you need a high income to build wealth.
  • The reality is, savings habits matter more than net worth.
  • If you keep your fixed costs low and avoid debt, you can build wealth even on a lower salary.

There are many pervasive money myths in U.S. culture that can affect how you manage money. Finance expert Dave Ramsey has called out one of the most damaging of those myths.

"There's a myth in our culture that says you have to earn a large income to build wealth," Ramsey said. "That myth is about as real as a three-dollar bill." Ramsey explained that while earning a larger salary can help you, "it won't lead to a high net worth if you're not doing the right things with your money."

But, is Ramsey really right that you don't need a generous salary to become wealthy? Is this really a myth?

Can you actually build wealth without a high income?

The good news is, Ramsey is absolutely right that you do not need to earn a fortune to end up with a fortune. If you can save money consistently over your lifetime -- especially if you start young -- you can end up with a high net worth and the money you need in your savings account to be comfortable.

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Say, for example, your goal is to become a millionaire by the time you reach the age of 65 -- a common age to retire. If you start saving at age 35, which is actually pretty late in the game and at a time when most people are "proper adults" with jobs and the ability to invest -- you would only need to save about $308 a month to reach millionaire status assuming a 10% average annual return (which is very doable with an S&P 500 index fund, even if you aren't an investing guru).

Since the annual mean wage was $61,900 as of May 2022, it's easily doable for most people to save $308 a month as that's only about 5% of monthly income. In fact, most people should be able to save well above that, as the recommendation is about 15% of monthly income.

If you start at a younger age, you can get by with saving even less per month to become a millionaire. So, Ramsey is absolutely right you don't need to earn hundreds of thousands per year to grow your net worth. In fact, someone who makes $150,000 but who doesn't save diligently and who spends all they earn could easily end up with a far lower net worth than someone who makes $30,000 but who also makes the right money moves.

How can you build wealth, regardless of what you earn

So, what if you want to end up with a huge net worth and you don't make six figures? Here are a few steps you can take to help make that happen:

  • Keep your fixed costs to below 50% of income. This includes trying to keep housing costs to 25% or less, and then filling in the rest of your 50% with other essentials.
  • Avoid high-interest debt. Carrying a credit card balance is a recipe for disaster if you're trying to build wealth, with the St. Louis Federal Reserve indicating the average APR on cards was 20.09% as of April 2023.
  • Set up automated transfers to savings. Aim to save about 20% of your income and set up automatic transfers to your savings accounts and brokerage accounts so you never miss a transfer.

If you follow these steps, you can help dispel the common myth that you need to earn a lot to be rich -- and, of course, can end up with the financial security you need to live a comfortable life.

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