Is it possible to become financially independent on a McDonalds’ worker wage?

We’ve all read stories of waiters and bell hops dying and leaving behind a fortune secreted away after a life of toil.

“Why can’t a young couple working at McDonalds at minimum wage become financially independent in seven years?” asks David Parker, author of ‘Income and Wealth’.

Parker then goes on to explain how it can be done and how he did it himself as a lowly-paid teacher and musician. The trick is to forego immediate gratification, live with your parents if you have to, live frugally and attempt to save half of what you earn. That’s right, half.

It’s a radical idea and it’s amazing that it hasn’t gained more attention. You can view an interview with Parker here where he tells the story of how he became a millionaire and built up a large property portfolio on a teacher’s salary in San Francisco.

He shows there is no relationship between income and wealth, as evinced by the number of high-earning people with all the accoutrements of wealth – houses, cars and Rolex watches – but little in the way of savings.

A McDonalds employee in the US earning a minimum wage of $10 (R180) an hour would come away with a gross wage of $2 400 (R43 000) at the end of the month. That’s a pretty decent salary by South African standards, and perhaps unrealistic, but if half of that is saved each month, that amounts to R259 000 a year.

Double that up for a married working couple, and the savings become quite impressive, enough for at least a one-third downpayment on a residential property of, say R1.5 million. Repeating this formula every year and, assuming a 4% appreciation in property values, the couple would have enough owners’ equity after 10 years to sell all the properties and buy one house outright, bond-free. The rental income from this would replace the couple’s combined income from working at McDonalds.

Taking it back to SA

Translating this to South Africa has some challenges, but they are not insurmountable.

For a start, anyone following this formula would have to choose the right areas, since the appreciation in SA property prices varied between 2% and 8% in 2021, according to Statista. The Western Cape is a safer bet for anyone seeking steady growth in owners’ equity, while parts of Gauteng are standing still or going backwards.

The hard part is to save 50% of gross monthly income. Saving 20% or 30% a month seems more realistic, given rising inflation and costs of living. This could be done if a young couple shacked up with their parents for the first seven years or so, and survived on the absolute bare minimum.

Robert Kiyosaki’s book ‘Rich Dad Poor Dad’ explained how the rich get rich by investing in income-producing assets, such as property. The advantage of property is that the bank is financing most of the asset acquisition, so anyone with savings of R100 000 can theoretically borrow R800 000 or even R1 million, depending on their ability to service the loan.

Parker elaborates on Kiyosaki’s theme, showing how investing in income-generating assets over a ten-year period – even on minimum wage – produces sufficient income to replace any income from working.

He then explains how those successful in business are less interested in the actions of government because they know how to circumvent regulation. Admittedly, this is written from a US perspective, but we know from the SA Revenue Service’s (Sars’) campaign to rope SA’s rich into the tax net that there is some universal truth in this.

A teacher, Parker applied his natural curiosity to the field of economics, and he is clearly well-read on the subject.

Unashamedly libertarian in outlook, he offers robust critiques of Karl Marx, John Maynard Keynes and Thomas Piketty, the French economist who claims wealth inequality is on the march everywhere, particularly in more recent decades, due in large part to tax cuts for the wealthy. The only way to rectify this, argues Piketty, is through a more progressive tax regime such as existed in France in the aftermath of World War II. The problem with this is the potential for tax arbitrage, as over-taxing the rich prompts them to flee to more congenial tax regimes.

Interestingly, Parker sees Marxism as less an economic philosophy than a system of social control, yet governments everywhere continue to experiment with a failed ideology in the expectation that next time, with a bit of tweaking, they’ll get it right.

David writes that Marx’s “language and ideas are those of medieval scholasticism – not the free ideas of Western culture.”

The value of this book is to challenge the accepted notions of what causes poverty, and provide a road map out that does not involve government’s redistributing other people’s property.