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?
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woohoo! i made PAW
This formula is complete nonsense.
It gives the linear increase in net worth, from age zero.
According to this, the increase in your net worth from age 10 to age 25 (close-to-nothing teenager earnings, then college loans, then starting off on an entry-level salary) is the same as from 40 to 55 (when people’s earnings peak).
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