How to determine if you've saved enough to be a PAW.

Frugal_Millionairess

There's an interesting equation in the book The Millionaire Next Door to help you figure out if you are a PAW, prodigous accumulator of wealth, regardless of your income. It is a really tough standard, but an interesting one.

Here's the standard, it's on page 13 of the book of the expected net worth.

Multiply your age times your realized pretax annual household income from all your sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.

Then the book states to be a true PAW, you should be worth twice the level of wealth expected.

It's an interesting computation and gets to the point high income earners are often not if fact "wealthy" at all because the truly affluent tend to be quote page 28 - FRUGAL, FRUGAL, FRUGAL.

So calculator in one hand, beer, tea, wine, Diet Coke in the other....happy computing. My family does not quite meet this standard, but have always found it rather inspirational. Those who do - majorly pat yourselves on the back!

Eileen

P.S. There are shortcomings to this equation, especially if you've just started out or are changing careers, but it's at least a mental milestone to look to.

bendix

You again?

What exactly do you want?

chewmylegoff

Frugal_Millionairess wrote: »

There's an interesting equation in the book The Millionaire Next Door to help you figure out if you are a PAW, prodigous accumulator of wealth, regardless of your income. It is a really tough standard, but an interesting one.

Here's the standard, it's on page 13 of the book of the expected net worth.

Multiply your age times your realized pretax annual household income from all your sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.

Then the book states to be a true PAW, you should be worth twice the level of wealth expected.

It's an interesting computation and gets to the point high income earners are often not if fact "wealthy" at all because the truly affluent tend to be quote page 28 - FRUGAL, FRUGAL, FRUGAL.

So calculator in one hand, beer, tea, wine, Diet Coke in the other....happy computing. My family does not quite meet this standard, but have always found it rather inspirational. Those who do - majorly pat yourselves on the back!

Eileen

P.S. There are shortcomings to this equation, especially if you've just started out or are changing careers, but it's at least a mental milestone to look to.

according to this stupidly pointless "equation" i would have had to spend 30,000 or less since starting work 9 years ago, or £3,333 per annum, which is roughly half of the minimum annual rent i have paid during that period.

looks like another principle which only works if you manage to marry an investment banker who pays for everything. still, nice work if you can get it.

laffer

bendix wrote: »

You again?

What exactly do you want?

:rotfl::rotfl:

Jonbvn

chewmylegoff wrote: »

looks like another principle which only works if you manage to marry an investment banker who pays for everything. still, nice work if you can get it.

:rotfl:

Sorry OP - looks like you are unable to foist your "spam" onto us cynical Brits.

steadysaver

So after working for only three years I am supposed to have accumulated a net worth of £91,000. If you assume as in your statement that this is "household" income, then I/We should be worth £140,400.

What a pointless equation. It follows the general mathematical rule of, put rubbish in, get rubbish out...

steadysaver

PAW.... Pretentious American W***er????

shop-to-drop

steadysaver wrote: »

PAW.... Pretentious American W***er????

Why so rude?

You may not like the logic but others may find some inspiration from it. If investments have been made over a lifetime this could be a realistic be it vague but achieveable goalpost that some could get a sense of satifaction from. If you don't like it fair enough but don't spoil it for others.

steadysaver

shop-to-drop wrote: »

Why so rude?

You may not like the logic but others may find some inspiration from it. If investments have been made over a lifetime this could be a realistic be it vague but achieveable goalpost that some could get a sense of satisfaction from. If you don't like it fair enough but don't spoil it for others.

There is no logic to it. The equation is too linear and heavily weighted to elderly life where is might make sense. But as a model tracked at the beginning of a working life it is like Portsmouth F.C.... Pointless

steadysaver

steadysaver wrote: »

There is no logic to it. The equation is too linear and heavily weighted to elderly life where is might make sense. But as a model tracked at the beginning of a working life it is like Portsmouth F.C.... Pointless

In-fact the figure will also be heavily skewed in later life too, depending on salary.

mr_fishbulb

steadysaver wrote: »

In-fact the figure will also be heavily skewed in later life too, depending on salary.

And will also be affected by inflation in future years.

Someone who is earning £100,000 p/a now is better off than someone who is earning £100,000 p/a in 50 years time, but the equation does not allow for that.