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The Millionaire Next Door

December 31st, 2007 at 03:30 pm

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.

Posted in The Millionaire Next Door | 10 Comments »

10 Responses to “The Millionaire Next Door”

  1. Englishteacher Says:
    December 31st, 2007 at 05:21 pm 1199121666
    1199121666

    I have heard of that book. Would you recommend it?

  2. merch Says:
    December 31st, 2007 at 05:45 pm 1199123111
    1199123111

    http://www.nytimes.com/books/first/s/stanley-millionaire.html

    Here is a link that sums up the average first generation millioniare.

    I did a rough calculation ( i didn't include my emergency fund, cars, or car loans) but I am an AAW. Woo hoo!!! If i got rid of my mortgage I would be PAW.

  3. disneysteve Says:
    December 31st, 2007 at 05:52 pm 1199123529
    1199123529

    It is a great book. Some of the numbers are outdated at this point, but the theory is still sound and worth reading. The book talks about how millionaires live, and how different it is than how many people think millionaires live. They don't live in expensive homes, drive fancy cars and wear costly jewelry. They live modest, not showy lives. I seem to recall them also talking about parents who over-support their adult children and how that hampers those children from every becoming independent.

  4. fern Says:
    December 31st, 2007 at 06:10 pm 1199124631
    1199124631

    I really liked that book, but didn't know about Millionnaire Woman Next Door, which i'll check out now...

    I am a PAW, and proud of it. Savings have always come first, then money to pay the bills. Luckily, I've always had enough to go around!

  5. scfr Says:
    December 31st, 2007 at 07:33 pm 1199129612
    1199129612

    Another proud PAW here ... working on becoming BA (Balance Sheet Affluent, which is something Dr. Stanley explains in his follow-up book "The Millionaire Mind.") In addition to the points disneysteve very nicely summarized, Dr. Stanley's books illustrate that many millionaire savers not only live modestly and well below their means, but they are very happy too! They take great pleasure in "simple" things such as spending time with family and getting together with friends. They are neither flashy jet-setters nor miserly Mr. Potter / Scrooge types.

  6. koppur Says:
    December 31st, 2007 at 08:17 pm 1199132275
    1199132275

    According to that, my net worth s/b $135,720 to make me an UAW. Our net worth is in the negatives right now. How depressing.

  7. collegemomma Says:
    December 31st, 2007 at 08:48 pm 1199134126
    1199134126

    Yes, it is a very good book! Like disneysteve said the numbers are a bit outdated, but the concept is the same.

    It is so great to see so many PAWs on here! It definitely gives me hope to reverse our situation. We have always bought homes under the amount the loan officer said we qualified for. That is a horribly inflated number! We would sit down and figure out the amount we could really afford. We upgraded once, but really we spent the same for our new home that we sold our old home for. Now we are done and happy with the home we are in....not too big, not too small.

    Ooo...and I forgot about The Millionaire Mind! I think I'll see if the library has a copy of it.

  8. disneysteve Says:
    December 31st, 2007 at 10:48 pm 1199141322
    1199141322

    Actually, the whole concept of being impressed by a millionaire is outdated. The number of milionaires in the US has skyrocketed, even with the recent housing slump. Between real estate gains and 401k and other retirement plans, having a net worth of $1 million really isn't such a big deal anymore. I'm sure there are at least a few here on the forums.

  9. ceejay74 Says:
    December 31st, 2007 at 11:25 pm 1199143550
    1199143550

    Should be at: $421,600
    Actually at: $60,000
    Hmm...

  10. Joan.of.the.Arch Says:
    December 31st, 2007 at 11:52 pm 1199145160
    1199145160

    I went looking for a net worth calculator because I'm never sure how to count in things like pensions and tax deferred investments at this point pre-retirement. Anyway, I found this one along with a pie chart showing percentages of households having various levels of net worth. Only 2.7% were said, in 2003, to have net worth of a million dollars or more.

    Text is http://cgi.money.cnn.com/tools/networth/networth.html and Link is
    http://cgi.money.cnn.com/tools/networth/networth.html

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