Saturday, 22 September 2007

PAW or UAW? Compare yourself to the Millionaire Next Door

One of favourite books relating to personal finance (see my recommended reading list for some of my other favourites) is "The Miilionaire Next Door" by Stanley and Danko. One of the most interesting ideas in the book is the concept of Prodigous Accumulators of Wealth (PAWs) and Under-Accumulators of Wealth (UAWs). Two people (or households) could have the same net worth, but for one of them such an accumulation of wealth may be exceptionally good, and yet for the other this amount rather unimpressive, depending on their relative ages and income levels. In her post about net worth Millionaire Mommy Next Door linked to an interesting tool from Banksite.com that allows you to calculate if you are a PAW or AUW and compare your net worth to the "expected" net worth for a household/individual of your age and income level. Type for income, age and net worth in and see how you compare...

Copyright Enough Wealth 2007


3 comments:

Anonymous said...

Your grace, where is thy recommended reading list?

enoughwealth@yahoo.com said...

It's the block of six books in the RH margin (under "Sponsors" since they're linked to my Amazon.com affiliate code) ;-)

The books are:
'Millionaire Next Door'
'Intelligent Asset Allocator'
'Road to Riches'
'Little Book that Beats the Market'
'Birth of Plenty'
'Secret History of the South Sea Bubble.'

Actually, I'd recommend 'Random Walk down Wall Street' rather than 'Little Book' as I think the odds are against picking winning stocks. I invest mainly in a well-diversified stock portfolio of around 30 stocks for my leveraged direct stock investment, and via index funds in my retirement account. I still have a portfolio of US stocks picked using the methods outlined in the 'Little Book', but it's only part of the speculative 10% of my overall investment portfolio.

Millionaire Mommy Next Door said...

Thanks for the link to my net worth post! Nice to see another PF blogger in my age and net worth group. Seems to me that most PF bloggers are in their 20's and 30's and working their way out of debt. It's always good to hear from different perspectives.