By JLP | September 14, 2006
Have you ever wondered if you were “wealthy?” There is a rule-of-thumb formula used in The Millionaire Next Door for determining whether or not you are wealthy. For those who are interested, their simple formula is:
So, if you are 35 years old and your household income is 60,000 per year, your networth should be $210,000 [(35 X $60,000)/10 = $210,000] in order for you to be considered wealthy.
If you are 9 years old and you get an allowance of $468 per year, you would be considered wealthy if your net worth was greater than $421.
The theory behind this formula is that the older you are and the more money you make, the more wealth you should have. So, the number is relative for each person’s situation.
Now, what I can’t figure out is why they chose the number “10” as the divisor. The book does not say. But, like anything, this is supposed to be a rule-of-thumb formula that is simple and easy to use.