For the past week, I’ve been reading The Millionaire Next Door, a look into the lifestyles of millionaires and how they are not so different from your regular neighbour next door. They have become millionaires through smart, frugal living and adhering to a budget, no crazy impulse spending and surprisingly they do not purchase many luxury goods.
We all know why I am not yet a millionaire; I have a propensity for “trading wealth for acquiring high-status material possessions”. Too many fancy vacations, expensive hobbies that don’t last and a few designer-clothing items have knocked me off the fast track to millionaire status.
In fact, according to the calculation in the book, I am about $281K off the mark to what my net worth really should be for my age. How is that for a major shock? You read right, I am $281,000 dollars off the mark. I’ve already gone through the “my RRSP savings are not enough” stage and am now moving on to the “my net worth is paltry” stage. My current net worth is $15K. Yep, paltry.
“How to Determine If You’re Wealthy”
The book offers up a simple formula to calculate your net worth:
Multiply your Age times your realized pre-tax (gross) annual household income from all sources. Divide that by ten. The resulting number is what your net worth should be.
According to the book, I am a UAW, or Under Accumulator of Wealth – now I have one extra title to add to my moments of financial disgrace. Why am I a UAW? Well, I’ve spent most of my adult life trying to forget my tumultuous childhood (kids can be mean), by trying to impress and please others through the false façade I’ve created. I have worked, I have earned and I have sacrificed my entire financial future/independence to impress others exclusively. How is that for honesty?
Now that the moment of truth is out of the way, it is absolutely no reason for me to be discouraged, this can still be solved by pulling up the bootstraps, practicing frugality exclusively and cutting myself off from all temptations – read fashion/clothing.
Buying only what I need? DONE. Continue coupon clipping – I’m on it!
Focus is the name of the game; I must remember the long-term benefits of budgeting; which is not having to work forever.
Once my debt is gone, my next mission is to take big steps toward a “Go to Hell Fund” because I don’t know about you, but I do not want to have to work forever.
Do you have a Go to Hell Fund? Is your net worth on track for your age/income?
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