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| Tuesday, April 17, 2007 |
| I am an AAW |
At least that is what the wealth calculation in the book The Millionaire Next Door says I am. What is an AAW? That would be an Average Accumulator of Wealth. Yup, I am average. To be considered a Prodigious Accumulator of Wealth (PAW) I would have to have a Net Worth double what I have now.
How can you find out if you are an Under Accumulator of Wealth or AAW or PAW? Just plug in your age, household income, and net worth into this little Wealth Calculator.
While it is interesting to see where you fall in the three categories used by the authors, it is not the be all and end all Net Worth calculation (I don't think I have found one of those yet!)Labels: Calculation |
| posted by Boston Gal @ 6:35 PM *
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| 5 Comments: |
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The calculator is fairly useless as it does not take into account how long you have been in the work force. If you are a 24 year old, have been out of college for two years, earn $130,000/year and have $100,000 saved, the calculator says you are an UAW and that your desired amount of savings is $288,000 (more than the total amount you have made in your lifetime).
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This was a bit interesting. I was an AAW. But, most everyone I know would be a UAW.
It seems that the PAW category for a 26yr old is 5.2 times annual income. I graduated in 2003. It looks like my total salary for my life has been about 60% of the net worth required to be a PAW.
I think there are too many factors to considder. For instance, getting a recent raise skews your results. I've gotten 6 raises in 4 years. I agree with beth that time in the workforce makes a huge difference. Maybe it should ask what your average income for the last 5 years is. Usiing that figure, my net worth is right under the "desired" figure.
-If you are 20 years old, the desired net worth is 2 times your annual income. But you've only been out of high school for 2 years.
- I was apparently a PAW as a kid, where you only have to have marginally more than your annual net income to be a PAW.
Just out of curiosity, I ran my numbers for future years. Contributing the max to retirement funds for the next 16 years and paying off my house will make me a PAW at age 42. But, if that all goes according to plan, I imagine it would realistically put me in the top 2-3% of the net worth for people of my income.
This might be setting the bar just a tad too high. Interesting, though.
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I agree, the calculator's not so good. I've been at my job less than 8 months and it says I should be worth over $200,000.
I'm only 26.
-limeade
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I thought I was doing okay. My net worth is about what Boston Gal's is. But apparently, I need to get my butt in gear.
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Beth is absolutely correct, the calculation is utterly useless. She brings up one good point about it not taking into account your years worked, and there are many other reasons the calculation doesn't make sense either. That whole book is actually quite dumb, it is made for the mass-market so it does a good job in making people feel good. But the authors stastical analysis is repeatedly dismissed by stastisticians. We had an entire lecture in my stats class dedicated to outlining the flaws in that book.
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The calculator is fairly useless as it does not take into account how long you have been in the work force. If you are a 24 year old, have been out of college for two years, earn $130,000/year and have $100,000 saved, the calculator says you are an UAW and that your desired amount of savings is $288,000 (more than the total amount you have made in your lifetime).