The third lesson was the most interesting to me because it went beyond the usual advice doled out by financial personalities.
This is where many people fail: they earn a lot, but it gets spent, so they never accumulate significant wealth. Your defence is how much of your income remains yours. Your offence is the income you earn, so you should maximize the money coming in by getting a lucrative job or building up a successful business. They state that you need both a good offense and a good defence to become wealthy. To make this lesson more accessible, the authors have come up with a sports metaphor. On the other hand, UAWs spend their time thinking about luxury purchases and how to best spend their earned income. Instead, it is derived from investment growth or property appreciation. Government policies are less likely to affect them because a lot of their income isn’t realised. PAWs spend many more hours a month looking after their budget and investments than UAWs, with the result that they spend less on consumer goods and own more assets.īecause they start building wealth at a young age, they have fewer problems to worry about in their lives.
The second aspect explains how wealthy people plan their finances and careers. For this reason, the formula shouldn’t be taken as a serious measure of success. That is nowhere near enough to retire and keep a similar standard of living. On the other hand, a 65-year-old in their 40 th working year earning the same amount would be expected to have only £325,000. And if you have twice the amount of money, you’re a prodigious accumulator of wealth (PAW).Īlthough it’s fun to play around with, keep in mind that this formula is linear, so it only really works for middle-aged people.Ī 25-year-old in their second working year earning £50,000 would have to have £125,000, which is more than they have even earned before-tax at that point. If your net worth matches the number, you’re an average accumulator of wealth (AAW). If you are below this, you are an under-accumulator of wealth (UAW). To find your target net worth, you multiply your age by your income and divide the resulting number by ten. Who are UAWs and PAWs?Ī basic concept is the idea of wealth accumulation as a formula. Instead, each generation creates their own fortune by living an average life on an above-average income and investing the surplus. Only a fraction of the millionaires interviewed inherited their wealth. Instead, they work hard, live below their means, and get rich slowly through steady investing. The first and maybe most central theme is that the majority of wealthy people don’t act like they have a lot of money.
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