{"id":38236,"date":"2021-06-10T11:52:49","date_gmt":"2021-06-10T15:52:49","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=38236"},"modified":"2021-06-11T00:20:53","modified_gmt":"2021-06-11T04:20:53","slug":"prodigious-accumulator-of-wealth","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/prodigious-accumulator-of-wealth\/","title":{"rendered":"Are You a Prodigious Accumulator of Wealth?"},"content":{"rendered":"\n

Who is a prodigious accumulator of wealth? How do you calculate to see if you are a prodigious accumulator of wealth (PAW) or an Under Accumulator of Wealth (UAW)?<\/p>\n\n\n\n

A prodigious accumulator of wealth has a net worth (excluding inheritance) at twice the expected level for their age, while an under accumulator of wealth has a net worth less than half of the expected level. You can calculate your expected net worth by multiplying your age times your annual household income divided by 10.<\/p>\n\n\n\n

Read more about prodigious accumulators of wealth below.<\/p>\n\n\n\n\n\n\n\n

The Definition of Wealthy<\/strong><\/h2>\n\n\n\n

Most people would say someone with a lot of expensive material possessions is wealthy. But most people living high-consumption lifestyles have little accumulated wealth; they spend all they earn<\/strong>. Instead of acquiring material possessions, especially status symbols, the truly wealthy focus on building financial assets that appreciate or increase in value.<\/p>\n\n\n\n

Net worth\u2014the current value of your assets minus liabilities\u2014is one way of defining wealth.<\/p>\n\n\n\n

In this book, being a prodigious accumulator of wealth is defined in two ways: 1) having a net worth of at least $1 million, and 2) having a high net worth for someone of your age and income. <\/p>\n\n\n\n

(Shortform note: at the time this book was published, 3.5% of U.S. households had a net worth of at least $1 million. In 2018, the figure was 3%<\/a>, or 11.8 million U.S. households.) About 95% of millionaires have a net worth of $1 million to $10 million. They are the focus of this book because their level of wealth is attainable by many Americans.<\/p>\n\n\n\n

Are You Wealthy Enough to Be a Prodigious Accumulator of Wealth?<\/strong><\/h3>\n\n\n\n

A way to assess your own wealth is by calculating what your net worth <\/strong>should be<\/em><\/strong> based on your income and age<\/strong>.<\/p>\n\n\n\n

The greater your income, the greater your net worth should be. Also, the older you are\u2014that is, the longer you\u2019ve been earning income\u2014the greater your net worth should be. For people your age who earn what you earn, there\u2019s an expected level of net worth. If your net worth is significantly below that level, you’re probably an under accumulator of wealth; if your net worth is significantly above the level for your age\/income category, then you\u2019re a prodigious accumulator of wealth.<\/p>\n\n\n\n

We\u2019ll explain how to calculate that in a moment. First, consider two examples\u2014the first is a lower-income household that\u2019s wealthy because they spend less, and the second is a high-income household with a less-than-expected net worth because they spend much of their income:<\/p>\n\n\n\n

1) A 41-year-old firefighter and his wife, a secretary, make $55,000 a year. They spend modestly, save, and invest, resulting in a net worth of $460,000. The expected net worth for this age\/income group is $255,000\u2014so for their category, this couple are prodigious accumulators of wealth.<\/p>\n\n\n\n

2) A 56-year-old doctor makes $560,000 a year. His net worth is $1.1 million, but it should be more than $3 million. He lives a consumption-oriented lifestyle and isn\u2019t wealthy for his category.<\/p>\n\n\n\n

Prodigious Accumulator of Wealth Formula<\/strong><\/h4>\n\n\n\n

Here\u2019s how to calculate how much you should be worth:<\/p>\n\n\n\n