So this rule of thumb is not very useful to someone who just started getting the ball rolling, so to speak.Īnother issue that I have is that the calculation uses your current realized pre-tax income instead of the average throughout your working years. What I didn’t realize back then is that I haven’t saved long enough to benefit from any compounding of interest whatsoever. I was a UAW, or under accumulator of wealth, according to Dr. This, less any inherited wealth, is what your net worth should be.” The problem with the rule of thumbĪs a 31-year-old who had just started getting serious about my finances, I remember being outright discouraged by this calculation. “Multiply your age times your realized pretax annual household income from all sources except inheritances. The book also offers a simple rule of thumb to determine if you are wealthy… Most are frugal– only a few could have ever supported a high-consumption lifestyle. Most never become millionaires until they are fifty years of age or older. Most millionaires never earn $500,000 in one year. The surprising finding is that most millionaires in America don’t really live in mansions, drive luxury cars, or wear expensive watches. The bestselling book identifies common traits that show up again and again among those who have accumulated wealth. Stanley, The Millionaire Next Door (published in 1996). One of my favorite personal finance books of all time is the one that was written by the late Thomas J.
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