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The Millionaire Next Door

December 31st, 2007 at 07:30 am

I've been re-reading this book to refresh my memory and give myself a little encouragement and push. I have Millionaire Women Next Door, too, and I'll be starting on that next.

So the formula to see if you are a PAW (prodigious accumulator of wealth), AAW (average accumulator of wealth), or UAW (under accumulator of wealth) is this:

Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by 10. This, less any inherited wealth is what your net worth should be.

They also say that you are a PAW if your net worth is twice the amount of wealth expected. And you are a UAW if your net worth is half or less than the amount of wealth expected.

I used DH's age since he is the one bringing in the money and older by 9 years. Our net worth should be $226,600. Half of that is $113,300 so according to the book we are not quite UAWs, but pretty close. Yet I know we can do better.

I figured that if we paid off everything except for the mortgage we still wouldn't be there, but we would be a lot closer at about a net worth of over $195,000 or so. But it is still very eye-opening and I can see us doing very well in the next 5 years if we keep our debt low and continue living below our means.