All Things Financial breaks down a rule of thumb in the popular book, The Millionaire Next Door. I haven’t read the book, and I know I should, but the rule of thumb just doesn’t seem to work for me. I’m a huge fan of statistics and formulas (one of the reasons I like Baseball Mogul), but this one doesn’t seem to up to snuff.
According to the math a 22-year old just out of college making $65,000 (what some engineers can probably make in Boston), should have a net worth of $143,000. More than likely, the poor person probably has some school loans to pay and is in the negative. I’m a very frugal person. I’m about 100K less than where I should be according to the formula. There were a few years where I was unemployed which is definitely a factor. However, I’m still just 8 years out of college and I’m supposed to have around a quarter million saved?
I think I’ll have to work on a formula that just takes into account only the working years.
Empty Spaces Inc. says
i think the formula doesn’t apply unless you’re 35.
well educated people don’t start earning until the mid-twenties sometimes, so they’re at a disadvantage.
Concentrate on building your financial knowledge and making a good return on your investments. don’t worry about a one size fits none formula!
Lazy Man and Money says
I’m not going to let the formula get me down. I realize the flaws in it, and that’s enough.
There should be a better formula that takes into account just the working years. I’ll have to get to work on that.