I’ve been wanting to read this book for awhile so when I came across it at the library this week, I decided to check it out.
I’m only on the first chapter thus far but I’ve already been struck by some interesting thoughts.First, there is a formula they give you to calculate what your net worth should be based on your current income and age. “Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.” – The Millionaire Next Door Based upon this formula you can get an idea of if you are doing well for your situation or if you are simply squandering all your income. I discovered my husband and I are thankfully in the PAW category (prodigious accumulator of wealth) as opposed to the alternative UAW (under accumulator of wealth). Of course you can also be a AAW (average accumulator of wealth). They discuss NBA players as an example who make $5 million a year but are only worth about $1 million because of the lavish lifestyle they feel they need to have. Under this example, they should be worth approximately $15 million. At just $1 million net worth they are seriously UAW’s. Basically, just one chapter in and I’m realizing I am not nearly frugal enough! You don’t get rich by having an enormous income. You get rich by being FRUGAL FRUGAL FRUGAL!