Can you achieve modest financial goals with a modest salary? Financial expert Dave Ramsey certainly thinks so.
The host of The Ramsey Show recently spoke with Rachel, a 35-year-old woman from Cleveland, Ohio, who's worried her $42,000 salary isn't enough to secure homeownership and a comfortable retirement.
After digging into the numbers, both Ramsey and his co-host, Jade Warshaw, were convinced Rachel's targets were achievable. Here's why.
According to the Bureau of Labor Statistics, the median annual wage for all U.S. workers in 2023 was $48,060. Rachel's salary is slightly lower than that, but her financial situation and cost of living are much better than many Americans.
Rachel told Ramsey and Warshaw that in 2024 she paid off $12,000 in debt and was on track to clear the remaining $7,000 as well. "According to my figures I'll probably be debt-free by June or July [2025]," she says.
Meanwhile, she's single, has no children and lives outside the city where she says homes on her wishlist cost between $80,000 to $120,000. "That's very doable on your income," says Ramsey.
After paying off her debt, Warshaw encouraged Rachel to secure an emergency fund with three-to-six months worth of expenses. Warshaw also suggested Rachel try the home affordability calculator on the Ramsey Solutions website to work towards her goal of homeownership.
Based on the Bank of America's home affordability calculator, Rachel's purchasing power could be as high as $140,000, which easily meets her requirements.
As for retirement, both hosts believe that's achievable as well. Although Rachel's current income is modest, there's scope for growth in the future.
"Here's the thing: the probability that 15 years from today you're 50 years old and you're doing this exact same thing making this exact same income is zero," says Ramsey.
With some growth in her income, eliminating debt and a disciplined saving plan, Rachel could certainly achieve her goals of homeownership and a comfortable retirement. Her situation highlights the benefits of a low-cost, low-debt approach to achieving financial goals.