Are You Wealthy?
How are you doing on building your financial wealth?
Are you on track? Ahead? Behind?
Today, I’ll help you answer that question.
Give me two numbers (Your Age, and Your Income), and I’ll tell you whether you’re wealthy! It doesn’t get much easier than that!
Are You Wealthy? Just enter your age & income, and you can find your answer. Click To TweetThe Wealth Formula is a very simple calculation to give yourself a sense of how you’re doing, and to answer for yourself the question: “Are You Wealthy?”. I’ve created a simple cheatsheet for you to run your own numbers. Before we get to that, however, I’ve got some explaining to do…..
The Wealth Formula
The Wealth Formula was developed by Thomas Stanley, Ph.D. in his classic book “The Millionaire Next Door”. To see my summary of the book, simply click on this link: 7 Factors That Millionaires Have In Common.
I was familiar with The Wealth Formula from reading The Millionaire Next Door, but decided this week to develop a quick cheatsheet for you, my reader. I recently heard a podcast on Radical Personal Finance, and it motivated me to build a simple spreadsheet for you to be able to run “your own numbers” through The Wealth Formula. (BTW, I love the work Joshua Sheats does on the Radical Personal Finance podcast. If you’re not a listener, you’re missing some great info!).
Two Numbers To Answer “Am I Wealthy?”
The beauty of The Wealth Formula is its simplicity. Simply enter your Age and your Annual Income, and the wealth formula gives you a guideline target of your net worth. I’ve done all of the math for you, so all you’ll have to do is enter those two numbers in this spreadsheet to see your results.
The Wealth Formula – An Example (40 Year Old with $100k Income)
The Wealth Formula is best explained with an example. Let’s assume Bianca is 40 years old, and earns $100k:
According to Dr. Stanley, you can calculate a general guideline of your Wealth Status by simply multiplying your Age X Income, then dividing by 10. Then, compare the results with your actual net worth. In Bianca’s case, the ranges would be as follows:
- Wealthy: $400,000 Net Worth (40 Years X $100,000 Income / 10 = $400k)
- Prodigious Accumulator Of Wealth: $800k
- Average Accumulator Of Wealth: $200k – 400k
- Under Achiever: < $200k
I’ve built the spreadsheet to show your results as following, using Bianca’s numbers as the example:
The Matrix
Using the model, I’ve run multiple scenarios to give you a quick glance at something that may be close to your situation. In a minute, you’ll have a chance to run your own numbers:
Net Worth
Ok, I lied. I said you needed two numbers to know if you’re financially wealthy. In reality, you need to know a third number: Your Net Worth. (If you need a refresher on Net Worth, click here). Net Worth is one of the most important numbers you need to track to determine your progress on your road to building wealth. If you need a spreadsheet to calculate your Net Worth, click here, then save a copy of the file to your computer to input your numbers. Alternatively, you can head over to Personal Capital, enter your info, and it’ll generate your Net Worth for you.
The Wealth Formula is better than Net Worth. It factors in Age & Income. Click To TweetThe limitation with looking exclusively at your Net Worth is that it excludes the impact of your age and income on any comparison you may do with others. If you’re 30, your net worth will most likely be lower than someone who’s 50. However, you may be ahead of where that 50 year old was when she was your age. Age and income matter, and The Wealth Formula factors both of those variables into the equation.
Now that you know your net worth, you’re ready to address the question, and answer for yourself:
“Are You Wealthy?”
Run Your Own Numbers
To answer the question “Are You Wealthy?”, simply CLICK ON THIS LINK. The link will take you to a spreadsheet I built for this article. Simply enter your numbers in the yellow cells, and view your results in the green cells! If you’d rather, you can simply click on the spreadsheet below to be taken to the link:
PS: If you want to see a cool “Wealth Formula” embedded into a post, check out my friend’s post @ 10! Ten Factorial Rocks. How did he do that? Wow, very cool!
Note: The guidelines are not recommended for “young folks” (let’s call it < 25 years old), or anyone who has just entered the workplace after a long and expensive education (e.g., Physician, lawyer). Make sure you exclude any inheritance money in the formula.
Inflation Adjustment: Some argue that inflation in the years since Dr. Stanley wrote The Millionaire Next Door would cause the results from The Wealth Formula to be overstated. If your wage increases with inflation, you could creep higher in the 1996 brackets and appear “wealthier” than the definitions intended by Dr. Stanley back in 1996.
I disagree, and argue that your salary is used in the formula to calculate the “wealth ranges”, so the ranges would (and does) adjust with inflation to a large extent.
To calm any critics, I’ve added this “inflation adjustment” to the 1996 bracket ranges. Choose how to view it, but showing both ranges gives you the option as you see fit.
To make the inflation adjustment, I used this link, which shows that $1 in 1996 is worth $1.57 today. I then added an “Inflation Adjustment” in column J to reflect inflation since the book was published, multiplying the ranges by 1.57. In my view, this is “double counting” inflation, since it’s already reflected in your higher “inflation-driven” salary. However, if it causes just one of you to save a bit more, I’d argue the benefits of looking at it both ways outweigh the costs of depression amongst the majority of you. Chose for yourself how you think inflation should be addressed, then use the appropriate column for your personal comparison.
Regardless of the limitations of The Wealth Index, I find the concept interesting, and felt it was appropriate to share with my readers.
Conclusion
The use of The Wealth Formula is a good guideline to give you a general answer to the question: “Are You Wealthy?”. Use it as an interesting bit of information to guide your next steps, but be careful about drawing too many concusions from the results. Folks could argue with the methodology (I suspect we’ll have some interesting comments on this post), but I think it’s an interesting analysis that provides a helpful guideline.
If you’re an “Under Accumulator”, recognize that you have some work to do. If you’re a “Prodigious Accumulator”, make sure you’re balancing your life today with your future goals. Take your spouse out to dinner, and celebrate! It’s an interesting formula to help you get a gauge on how you’re doing, and I hope you find my “cheat sheet” an interesting tool to evaluate your current position on your journey toward a great retirement! Also, don’t forget that “financial wealth” is only one form of wealth, and one which I would argue is of less importance that some of the others. Keep money in perspective, and strive for “wealth” in all areas of your life!
How Are You Doing? I’d love comments on your results from The Wealth Index. Any surprises? Do you think it’s helpful in answering the question:
Are You Wealthy?
While there is no perfect methodology to measure how wealthy we are, it is always nice to get another set of benchmarks or affirmation. Especially from someone as note-able as Dr. Stanley. No real surprises for me, but part of the problem with this gauge is accounting for a rapid rise in income, net worth will eventually catch up if you have the habits of a PAW (prodigious accumulator of wealth)!
The Swans in with the first comment! Yeah, that high income at a young age is such a drag, right?! No doubt that makes the PAW mark much harder to achieve, but I think that’s a great problem to have! Congrats on a job well done, LOVE your blog!!
“The guidelines are not recommended for “young folks” (let’s call it < 25 years old), or anyone who has just entered the workplace after a long and expensive education (e.g., Physician, lawyer)."
Phew! I was already trying to justify why I was an under accumulator when I feel like I'm doing pretty well. It is tough catching up after getting a late start. I went straight through to law school from undergrad and then got a public service job. That said, I'm catching up! Planning to move from under accumulator at 30 to wealthy by 35 and prodigious by 40.
Matt, you should listen to the Radical Personal podcast that I linked to. Joshua speaks about exactly your situation, and why that gets distorted by The Wealth Formula. He made exactly your point, that you’ll start out “behind”, but end up very much “ahead”. Thanks for stopping by!
I was thinking the same thing! Where’s my equation!?!?
I’ll get there. Building $100k in wealth in 5 years is doable for me!
No surprises for me, but I think it’s always good to check in on where you, are utilizing different methods. This is an excellent tool for that, especially for those new to concentrating on their finances. Hopefully, it will be used as a good motivator. Thanks for sharing Fritz!
“This is an excellent tool…” Happy to hear the positive feedback, Amy! Makes my time putting it together well worth the effort! I hope it motivates folks, as well! Thanks for dropping in!
Thanks for pulling this together. At 48, I’ve been working to figure my financial life out for over 25 years. Dr. Stanley’s book was one of my first and favorites! This stuff never gets old – at least not for me. Thank you for your work and I completely agree with your recommendation for Radical Personal Finance. I appreciate that you and Joshua understand that Pesonal Finance is just that – personal. You both share ways to succeed using common sense and not hard rules like so many other voices we hear out there.
Keep up the great work, Fritz! It’s much appreciated.
“You both share ways to succeed using common sense…” Yep, that’s what I’m all about!! I’m honored to be mentioned in the same vein with Radical Personal Finance. Joshua’s amazing, and a real asset to the “community”. I’m nowhere near his league (have you seen all of those letters behind his name? Wow!), but trying to contribute in my own little way! Thanks for your kind words.
Cool, retired for a little while now but looks like I qualify as an inflation adjusted PAW! I think the calculator may have simialr problems with people at the end of their careers that it has with the very young people. In some cases, like mine, my pay the last three years of my career more than doubled over the last three years I worked. And the last year before I chose to retire was huge compared to any other year. That certainly made walking away at 60 a simple decision but it also makes it harder to use algorithms that assume a somewhat linear income increase over time. Of course, if you haven’t already prepared for retirement before you retire then you are probably up the proverbial stinky creek without a paddle! Love what you and your team do, you really help people and that’s extremely cool.
Steve, DOUBLING your pay in your final 3 years, congrats! I think we’ll excuse the calculator getting tangled up with THAT kind of income! And yet, you made inflation adjusted PAW!
What more can I say: Steve’s CRUSHING it! Thanks for the kind words re: my blog. Much appreciated!
Fritz:
Another “spot on” article and I am sure the spreadsheet will be so very helpful for a lot of people. If you don’t mind I’ll plan on using it and some of your other posts when I teach my first “Financial Peace University” class in January. No surprises for me, it was fun to look at it however. Also loved reading your synopsis on the “Millionaire Next Door”.
“If you don’t mind”?? I’m HONORED! Thanks for your continued support, Kirk.
I think “our” readers are due another guest post when you get a chance – your PCT adventure would be a fantastic story! Good luck with your hike, I’ll be tracking you on the map!!
Nice work Fritz. Im not where I want to be for multiple reasons, but I’m actually pleased with where I’m at because of a few things, namely my income, earning potential, and savings rate.
I also second your recommendation re: Joshua Sheats
Ty, being pleased where we’re at is a great thing to be able to say. It looks like you’re having a great life, and I’ve no doubt of your future success! Look forward to meeting you at FinCon!
Fritz, my article on this topic titled “Are you a PAW yet” has an embedded calculator that’s easy for readers to calculate their ratio. I am sharing it here for reference: http://tenfactorialrocks.com/paw/
Ok, you just below me away! HOW in the world did you embed that?? Super Cool, AND you beat me to the topic by almost a year! (Missed your first article on PAW, thanks for sharing. Amazing minds think alike, eh?).
Ok, time to share your secret. How DID you do that? I thought about embedding a calculator for my article, but had no idea how. Impressive, and proof that we can all learn from each other!
Thanks for the kind words Fritz. I am glad you consider me as a fellow ‘amazing’ mind. I will email you on how to embed this type of calculator. Meanwhile, if you can reference this calculator in your article, I would be obliged. In the end, we both want our readers to benefit in their FI journey, hence my request. With a ratio near 3, I am a PAW, in case you’re wondering.
With a ratio near 3, you’re blowing things up!! Impressive! Happy to add a backlink to your post, you’ve earned it! Still can’t believe you beat my by > 6 months, AND embedded the formula! As your nic says, you “Rock”!
Apparently, I’m wealthy, but not a PAW. It’s difficult to get there as a physician. We start with a negative net worth at 30. It takes time to catch up!
Yeah, but pulling in your big bucks (even working half time!), you’ll catch up in no time! Wink. Thanks for stopping by, doc!
I’ve been calculating my network for a few years now, but it was fun to see that I fall within the “wealthy” category. I also started investing/saving at the age of 30 (because of earning my PhD). However, even though I started with a negative net worth, about 4 years later with a combination of intentional frugality and a high savings rate (above 50%, and working towards 75% this year), I’ve been able to almost reach the half way mark to FI (or at least financial security). Thanks for sharing this calculator!
US, sounds like you’re crushing it to me!! Working toward 75%! Wow, you’re in Mustachian country with numbers like that!! Keep it up, and you’ll be to FI in no time!! Glad you liked the calculator, thanks for taking the time!
Very cool and simple calculation. Certainly, for the middle-aged crowd, the numbers are spot on. If I use the gross income, I actually don’t make it to PAW. It’s pretty hard in my tax bracket. But with the net income, I get to the highest level, yay!!!
One thing I noticed: I wouldn’t do the CPI adjustment. If income and wealth are measured in the same year there is no need for an inflation adjustment. Of course, if any specific dollar numbers had been set back when the book was written you’d have to do the adjustment. But all they did was calibrate the cutoffs as wealth to income ratios. With or without CPI-adjustments the ratios stay the same because you change the numerator and denominator at the same time. 🙂
Cheers!
BIG ERN! Thanks for your insightful comments. I always like your logic, and agree with you on the inflation adjustment. I’ve read some who criticize the formula because of it, but if you think it through that criticism is unfounded. I’m proud to think that Big ERN and I think alike!! Thanks for taking the time to leave your thoughts, much appreciated!
I will second Big Ern’s input. Moreover, wages have just barely kept pace with inflation over the past 20 years or so, meaning there’s no no reason to suspect that any part of the equation has changed relative to the other since the book was written. The original formula is fine (though I think it’s most useful if you’re 40-50 years old.
We’re newly minted PAWs, but when I run the numbers we need about twice as much as we have now, for a somewhat early retirement, and 3x to be truly FI (unless we restructure our lives considerably, which is another story.) Interestingly enough, after roaming through census income data, it appears to me that for our age and household income, we were in the top 3-4% of net worth. Sometime I wonder if I’m being far too aggressive in determining our goals.
Hey! This Bianca chick sounds like a real awesome gal. Obviously you’ve made her a few years older than she has to be but for the sake of round numbers I’m sure she will let it slide…but only for a slight kick back to meet the income she should be making in regards to this formula. Should you forgo the offer, you should know she is bordering on the line of average but is happy to accept donations to be pushed to the wealthy side. 😁
You have no idea, Cuz! Bianca’s awesome, tho you’d never believe she’s 40. I’ll make sure she gets 50% of any commissions I earn from this post! Plus, as a bonus, I’ll send along 100% of any donations received from readers. Let her know for me, will ya?
What a really cool tool! Thanks for pulling together that spreadsheet. I know it will motivate a lot of us. It’s so important to stay on top of all of these numbers – whether you’re wealthy now, or plan to be financially independent sooner than later. Your blog is such a great resource –and reminder. Thanks Fritz. By this calculation, I’m a PAW — pretty fascinating stuff!
YAY You! Congrats on reaching PAW! You should buy a second home. I’m thinking a cabin, in the mountains. There’s one on my road that just had an AWESOME restoration done. I’ll put you in touch with the owners. They’re really nice folks, I’m going to miss having them as neighbors!
Ah, but plans have changed. We are moving too! LOL… Things change quick, eh?
We’re keeping the cabin as a rental and buying another home to retire in. Working a deal as I type this– keep fingers crossed!
Ouch. I am not an accumulator, but I suppose I only have had 5 years of making my actual income…still it is time to get serious about saving or else I will be working until I am 60…and that does not sound like fun.
Nice summary and great calculator. Thanks for sharing!
Hey Dad! I wouldn’t worry about it too much that early in your career. As the footnote warns, it’s not as valid for those early in their working years. Refer back to it, I’m sure you’ll see yourself climbing shortly!
GREAT post! 🙂 Love everything about The Millionaire Next Door. And I love this method! Thanks for doing all the work for us, Fritz!
So, I figure our net worth in 2 separate ways – overall net worth – including our home, college savings, cars, etc. But I also calculate just our investment net worth (not including cash savings). We are PAWs on overall net worth and between wealthy and PAW on investments. I’m really happy with that. Looking forward to becoming 100% PAW!!!
Good news for you, Amanda. I believe (others will correct me if I’m wrong!) that typically “net worth” includes home, college savings, cars, etc. I know mine does. If we assume that’s what was intended by Dr. Stanley, you’re a PAW!!
Also, I couldn’t agree with you more about The Millionaire Next Door. There’s a reason it’s now considered a “Classic”. Well earned. Great book.
I really enjoyed this and find that I’m wealthy though I really don’t feel wealthy.
A couple of comments. I agree with you that you don’t need to inflate the wealth number because it would seem if you inflate that figure you also need to index income as well so you’re essentially in the same position.
Do you know if this works for both married and single people. if a married couple together earn 100k do we look at that figure as income? Perhaps I’m looking for too much in a simple formula
As someone intrigued by numbers, I see there’s a “doubling” effect to get from one wealth category to another but do you know if there’s an algorithm used to derive the figures from one age group to another?
Thanks for sharing and sorry if I’m over complicating it.
Paul, I can see that you’re a thinker. I respect that! Glad we’re aligned on the “inflation thing”, think it’s best to go with the “original” numbers.
As for married, that’s a great question. Assuming you’re planning on staying married, I’d include both incomes. You’re expenses are as “a family”, so you’re comparing apples-to-apples. As for the math formula/algo question, I’m afraid I’m not a mathematician! I’m not sure if it’s simply based on Dr. Stanley’s research of what Net Worth (eventual) Millionaires had by age, or if it’s a pure mathematical equation. I suspect it’s based on his research, but I’m only speculating.
Never apologize for over complicating anything. It’s the sign of an active mind!
According to the formula, I am a PAW, even if I use an age of 73 and I am currently 49. According to the formula, I am wealthy. Why don’t I feel wealthy and why am I struggling on pulling the trigger on ER? I have really been struggling with this decision for several years. I am stuck in OMY land.
Thank you Fritz. I really am enjoying your blog. It’s been great to get some reflection by someone close to my age. The average blogger is much younger than us and they are smart and interesting people, but it’s nice to get a different perspective as well.
Mike,
I can’t tell you how much your comment means to me. It’s GREAT to hear from people are in a similar spot, and to know that the words I’m writing are hitting home. I can’t tell you how rewarding that is.
Thanks for your comment. I sent you a private email with some thoughts about OMY. Hint to others: A future post is planned on that!!
I can definitely relate to your situation Mike. I’ve been threatening to pull the trigger on my career for the last two years and continually postpone it. I’m several years older and I am making definite plans to retire at the end of this year but even though, by every external yardstick, I should be fine, internally it’s a different story. For me it’s scary to remove the security of a nice, steady income and replace it with your own investments no matter how well it’s worked over the years. Health care costs have me particularly worried and I’m in good health.
There’s been much discussion on being financially prepared but not much on being mentally prepared once you’ve reached FI so I look forward to more on this topic.
I understand Paul. I have made a second career out of studying personal finance and running the financial calculators. The calculators all say that I should be fine with a little margin. It’s one thing to run everything on paper and a totally different thing to put it into motion. I was hoping to make it to 52 before FIRE for a little extra cushion in my plans, but I recently had a medical screening test done that I didn’t get good results on (a coronary artery calcium test). This is probably going to precipitate the FIRE decision within the next year so that I can focus on my health. It’s nice to have like minded people to communicate these concerns.
Mike, sorry about your health issues, definitely an area that causes many to rethink their retirement timing! It sounds like you’re in good shape $ wise. Get out and Live Life!! Thanks for the email exchange, nice “talking” with you.
Looks like we are doing well… At least when I include are bricks…!
We are PAWS, but I do have another caveat on the measurement. They also don’t always work well with highly volatile income. We fit this definition where a large portion of my salary is tied to the stock market and my wife is still changing her career status. I think regardless we’re PAWS due to timing but the difference between both working and company stock riding high and just me working and company stock hurting has a major impact when multiplied by my age.
As much as my wife and I save we have always felt a bit short on this type of calculation. Although in the Wealthy range we fall short of the higher category. For salary, i combine both salaries together for me and my wife.
Comparison is a funny thing. I’m sure there is some investment banker in Manhattan who is worth $5 Million and feels inadequate next to those next to him who are worth $30 Million or more.
The White Coat Investor developed a similar formula for physicians, as follows:
Expected Net Worth of Doctor = Salary X Years since Training X 0.25
Under accumulator of wealth means 200% of ENW
According to Thomas Stanley’s formula, I am definitely an under accumulator of wealth. According to the White Coat Investor’s formula, I just barely qualify as a PAW.
I think the formula and interpretation was truncated. It should read:
Expected Net Worth of Doctor = Salary X Years since Training X 0.25
Under accumulator of wealth means 200% of ENW
Still truncated, most likely a syntax error from the symbols I used (less than and greater than). Last try:
Expected Net Worth of Doctor = Salary x Years Since Training x 0.25
If you have less than 50% of your ENW, you are an under accumulator of wealth. If you have more than 200% of your ENW, you are a prodigious accumulator of wealth.
3rd try’s a charm, Doc! Interesting modification from WCI, but it makes sense for someone earning a high salary after years of training. Thanks for sharing!
Darn, I’m not a Prodigious Accumulator Of Wealth even at 50% savings rate!
This is really cool Fritz – you know I’m always up for a new spreadsheet!
I’m a bit disappointed to find that I’m an “Average accumulator of wealth”, but I’m pretty close to crossing the threshold into “Wealthy”. I think some of it has to do with my more recent income changes – when you’re getting consistent raises, the target keeps moving 🙂
There’s really not much difference between under accumulator and PAW – I would currently be the former (30 and < $75k) but anticipate being just a little sub-PAW at 40. Just goes to show how quickly wealth can grow with two wage owners who exercise just a little bit of thrift!
I have a huge problem with this “method”. It’s a very simplistic linear approximation of a mostly expontial curve. This formula only works well if you’re in your 40s and on a fairly traditional or moderately early retirement path (i.e. want to retire in your mid 50s to 60s). Pretty much everyone but FIRE fanatics, and scions of well off parents (no student loans and/or a trust fund) reads as an “underaccumulator” up until somewhere in their 30s even if they are on a solid path to comfortable retirement by age 50, and “average” is on track to FIRE very early. To be a PAW before age 30-ish pretty much requires having few/no loans, landing a good job straight out of college, and having MMM level savings discipline from day 1 that means you can probably retire shortly if not already.
By the same token, if you are 55, this formula suggests that you should have saved about 11x earnings to be a prodigious accumulator of wealth, which is only enough to retire at 60-62 ish depending on ss/pensions. At 5.5x earnings, it says you are wealthy, when you may have to step up your savings just to retire before 65, and are way behind someone who’s saved 15% their whole life and started out with 37k in student loans. In my book a “prodigious accumulator of wealth” is already FI by age 55 if not sooner.
I’m really disappointed in the book’s authors for promoting this, and with so much of the financial press for picking it up. If they even put a square term in there, they could have come up with an approximation that isn’t *ludicrous* outside of a fairly tight range.
Try this one: take your age, divide it by 4 and lose the remainder. Then take your age minus 20 years. Multiply these together. Divide the result by 20. Multiply by your annual income. then subtract 30,000 (75% of the average student debt for a bachelor’s degree in the US) or whatever your debt was coming out of school. This is only a bit more complicated, and while still nowhere near perfect, it matches up a lot closer for a lot longer with the exponential curve for around a 35+% savings rate that I’d say represents prodigious wealth accumulation of the scale discussed in Millionaire Next Door for the typical readership (middle aged).
Since I had to play with a spreadsheet a bit to get a result, here’s an only slightly dressed up version with a public link to show what my formula looks like relative to Stanley’s compared to a 35% SR accumulation. You can play with the inflation adjusted investment return rate and income.
https://docs.google.com/spreadsheets/d/1-YnSFI2efUKdjKK67VXj2GeBh87kRY7pDnQbCbFe7lU/edit?usp=sharing
Hey Zurich Gnome (wow, what a nic!). I see you’re a thinker, and I applaud that. Thanks for challenging the logic, and (more importantly) offering a suggested improvement. Well done, and exactly the type person I LOVE to see reading my posts, and challenging the topic. Well done.
Thanks! I appreciate it. I found your site just today when I saw that you’re scheduled for an AMA in /r/FI. Looking forward to it. Good stuff here. BTW, the nick is from my old world of warcraft banker, who was known for things like owning half of the auction house — I’m actually in the US.
Just because a nerd can’t leave it alone, I realized that even with a pure linear function, just shifting things a bit to steepen the curve but not imply people are earning their current salary while in a crib as an infant makes a huge difference too.
I plugged the following formulas into my spreadsheet and they fit for a LOT more ages than the book’s even though they are almost as simple.
For “wealth” use (age-23)*income/5 and for “prodigious wealth” use (age-23)*income/2.
Both of these still undershoot at older ages, but they are within reasonable bounds from mid twenties to late 40s, and underaccumulator looks a lot more reasonable from age 25 on. The fact is, I work with “underaccumulators” all the time, and can usually find a reasonable retirement plan for them if they’ve been saving *something* significant, just not as comfortable as they are used to living, and generally involving working until mid to late 60s. Those well above the line sometimes get the happy news that they can retire a little earlier than they were originally thinking.
It’s a bit ironic that I posted a google doc link in my first comment on a newly discovered blog the *exact same day* that there’s a huge google doc phishing exploit going around. LOL, no wonder nobody appears to have clicked on that page. But for any who will go where others fear to tread, the data is all there. 🙂
Yep, you’re a nerd! Pretty cool formula (yep, I’m a nerd, too)! And, thanks for your Google virus! Smiles.
Great article Fritz. The Millionaire Next Door, I think, is the bible of PF and I’ve read it two times. My favorite line from the book comes from the Millionaire Texan who describes those with high ticket items like a luxury car or a McMansion but a UAW as, “Big Hat, No Cattle.” 🙂
It is, indeed, a great book! Love the “Big Hat, No Cattle” line, as well! Thanks for commenting!
Yikes. I would have been fine in my old position with half the income I make now! I’ve been in my new job for only 2 years. I’m an underachieving overachiever!
I like this formula, but a more complete version should account for not just current income, but some aggregation of amassed lifetime earning. People don’t just enter the workforce and being to earn a wage which only goes up with inflation each year. A sudden large bump in earnings, which is easily possible for many on a typical career trajectory, could push you from a PAW to a AAW based on the formula.