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I have just re-read The Millionaire Next Door. It's one of my favorite book in my book shelf. I agree with almost all the points in the book except some minor ones and one big one.

I have a lots of trouble of the definition of PAW and UAW. The book defines the average accumulator of wealth as someone having a networth approximately equal to the annual salary multiply by the person's age and divide by 10.

annual slary * age / 10

Thus, a person age 50 having an income of \$50,000 would be expected to have a networth of \$250,000.

This seems to work fine except if you are 25 you would be expected to \$125,000. One would not be able to save that much even if one does not spend any money. If some one graduated from college at 22, one would have worked 3 years since and would have less than \$125,000 after tax.

I would like to propose a new formula to calculate one's expected networth. Number of years worked * annual salary / 5.

annual salary * # years worked / 5

Thus, the same person would only be expected to be worth \$30,000. This formula is softer on younger people, but more strict on older people compare to TMND's formula. Here's the comparision:

Let's assume a person started working at age 22 and makes \$50,000 per year:
`Age  TMND formula   My formula---- -------------- ------------------25   125,000        30,00030   150,000        80,00035   175,000        130,00040   200,000        180,00044   220,000        220,00045   225,000        230,00050   250,000        280,00055   275,000        330,00060   300,000        380,00065   325,000        430,000`

What do you think?
Felbi.