A caller who is entering the military reached out to Dave Ramsey recently to ask if an enlisted service member could become a millionaire. Ramsey was clear in his answer and had good news for the caller. He explained that it is absolutely possible to end up with a seven-figure nest egg. In fact, he gave an example of how someone earning $30K could become a millionaire without a whole lot of struggle. 

Here’s how Ramsey said you can reach millionaire status even if you don’t make big bucks. 

Becoming a millionaire doesn’t take a lot of money if you have the power of time

Becoming a millionaire actually takes a lot less money than you’d think if you take advantage of one powerful tool: Compounding. 

Compounding happens when you invest money and it earns returns. The returns your money earns get to be reinvested. Then, in turn, those returns can earn you more money. With compounding, you don’t have to make every dollar of your $1 million — or even most of those dollars. Your money makes money for you.

Thanks to the power of compounding, Ramsey said if you invest just $160 a month for 40 years, you can achieve millionaire status, assuming a 10% average rate of return.  While the Investor.gov calculators suggest this actually gets you around $870K, Ramsey is pretty close to right on this number. Upping it a little to $190 a month will put you at just over $1 million by 65 if you start saving at 25. 

Investing $190 a month for 40 years means you’ve personally put just $91,200 of your own money into your investment accounts over your working life. Compounding did the rest. You don’t need to make a lot to save that much — you just need to start saving young. 

What if you haven’t started saving yet?

This advice is all well and good if you are 25 years old and you have 40 years to save until you are 65, but what if you are older? You can’t go back and invent a time machine to start investing earlier.

What you can do, though, is not waste any more time. You should start investing today so you can begin making the power of compound interest work to help you build wealth. Fortunately, this doesn’t have to be complicated.

If you have access to a retirement investing plan at work, like a 401(k) or the Federal Savings Thrift Plan if you are in the military like Ramsey’s caller, you should sign up for it and have money deposited directly into it from your paychecks when possible. If you don’t have a workplace plan, then open an IRA with a brokerage firm. 

Retirement investing plans typically allow you to invest with pre-tax money, which makes contributions cheaper. Your employer may match funds in some circumstances as well. For example, many 401(k) plans match 50% or 100% of contributions up to a certain percentage of your salary. Between the tax breaks and the employer match, your take-home pay goes down by even less for each contribution you make. 

Ramsey suggests putting 15% of your income into your retirement plan, and that’s a good rule of thumb if you can swing it. If you can’t, though, start investing whatever money you have available today. As Ramsey’s example shows, even if you don’t have a lot, it can grow into an impressive sum if you just make compounding work for you. 

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