09 Jan 2007 | Comments | Wealth Management | Comments feed

Wealth Accumulator Formula

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I read the book The Millionaire Next Door in year 2001. It is a marvelous book! Here is one of the gem:

One’s expected net worth (ENW) = [Age X (Realized Pretax Annual Household Income - inheritance)/10] - Inherited wealth

Example, Mr. Lee’s annual income is RM100,000, age 35. He inherited nothing from his ancestor.

Lee’s expected net worth = [35 X (RM100,000-0)/10] - 0 = RM350,000.

According to Dr. Thomas J. Stanley ( the author ), there are 3 categories of wealth accumulator:

1. PAW - Prodigious Accumulator of Wealth
2. AAW - Average Accumulator of Wealth
3. UAW - Under Accumulator of Wealth

If Mr. Lee’s net worth is RM800,000, which is more than 2 times of ENW, he is a PAW.
If Mr. Lee’s net worth is RM50,000 only, which is less than half of ENW, he is a UAW.

Let’s calculate ours, which category do you belong to?

Millionaire Mind

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