Author Topic: PAW vs UAW  (Read 6509 times)


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« on: June 20, 2014, 02:19:57 PM »
As mentioned in my journal, I just finished reading the chapter in The Millionaire Next Door about doctors.
I'd like to become a solid PAW, which seems to be [(age*income)/10]*2.
Does income mean net, take-home?
And I'm so far off, but I've only been earning at my current level for 2 years. Surely this equation does not apply so early in a career?
I know it's an arbitrary goal to shoot for, but it IS a goal.

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Re: PAW vs UAW
« Reply #1 on: June 20, 2014, 02:47:47 PM »
The PAW and UAW is only a guide and I would not take it to seriously early in your career.

I also fell into the UAW category as I am early in my career. My expected worth per the PAW formula is $285,000 and my net worth is sitting at 130K which I consider pretty good for 28.

Fast forward 10 years my expected worth per the PAW formula would be $570K but my expected net worth based on my savings rate is $1M.

I would focus on your savings rate/investing rate and you will eventually become a solid PAW.


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Re: PAW vs UAW
« Reply #2 on: June 20, 2014, 04:14:51 PM »
Based on the formula for an average accumulator of wealth (AAW):

Someone who is 60 years old and makes $!00K a year is only supposed to have a net worth of $600K? Seems low to me.
Someone who is just out of school at age 25 and makes $50K a year is supposed to have a net worth of $125K? Seems high to me.

In addition, income varies over a lifetime. What if you make $50K for a long time. According to the formula, you are a AAW at 50 years old with a net worth of $250K. Then you get a promotion that doubles your income. Suddenly, you become a UAW because the formula says that you are supposed to be twice as rich at that new income level? It sucks.

Anyways, I think that this formula is only a very rough guideline. It probably does not apply in most cases. But if you still want to use it, income means pretax.
« Last Edit: June 20, 2014, 04:17:13 PM by John74 »


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Re: PAW vs UAW
« Reply #3 on: June 20, 2014, 09:15:53 PM »
Yeah, that formula sucks for people too young (20s) or too old (60s).  It's okay for mid-30s through mid-50s.

Still too low for Mustachians though.

I propose what I think is a much better formula here, if you like formulas to measure your progress against where you "should" be:
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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Re: PAW vs UAW
« Reply #4 on: June 21, 2014, 12:24:51 PM »
The formula is based on a long-term assumption of 20% annual savings rate.  So I think if you're above that, you'll eventually make it to PAW (unless your income keeps shooting up).


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Re: PAW vs UAW
« Reply #5 on: June 21, 2014, 04:00:30 PM »
   Given the power of compound interest, the transition from UAW to PAW can be very, very swift. The formula is kinda lame for many as Arebelspy points out.