I remember reading about PAWs, UAWs, and AAWs. I also remember that the formula for what your net worth should be on average (to be an AAW) is your income (without inheritance[s]) multiplied by one tenth of your age.

But I also remember reading that this "net worth" should not include your house.

Did anyone else find this in the book - that your net worth doesn't include your house?

I've looked through the book to try and support this memory, but I don't see anywhere that it says your house is not apart of your net worth.

For example, say Jeff makes $200,000.00 per year, he is 45 years old.

4.5 x $200,000 = $900,000 --> If Jeff were to be an AAW (average accumulator of wealth) he would need to have a net worth of $900,000.

Now, Jeff owns a home worth $600,000, and has $300,000 cash.

In the books "standards" is Jeff an AAW or a UAW, given that if household property is not included in his net worth, he will only have a net worth of $300,00. On the other hand, it would be $900,000.

Thank you for any help. I appreciate all contributions.

  • 1
    For a start, read Ideal net worth by age X? Need comparison references and no, I don't believe Dr Stanley includes home in net worth. Savings and net worth isn't linear it's exponential. I love his writings, but this math is too simplistic. To retire at 50, we needed 12X our income, which was approx 25X our annual budget. 5X income by 50, 6X by 60? Too little by far. Commented Mar 14, 2015 at 4:07
  • Okay, yeah - that does seem a bit oversimplified. Nevertheless, in my question, you are saying that Jeff doesn't have a net worth of $900,000, and only $300,000? @JoeTaxpayer
    – Kelsey
    Commented Mar 14, 2015 at 19:22
  • 1
    Yes. $300K is what he has "for retirement." Of course, he has $900K to leave the kids. Commented Mar 14, 2015 at 19:23
  • 1
    What do you mean by PAW, UAW, and AAW?
    – yoozer8
    Commented Oct 14, 2019 at 19:00
  • Differences between UAW, PAW, and AAW are explained here: en.wikipedia.org/wiki/The_Millionaire_Next_Door. An individual who is an under accumulator of wealth (UAW) has a low net wealth compared to income. One who is an average accumulator of wealth (AAW) has a Net_Worth = Age * 0.1 * Annual_Income.
    – jia103
    Commented May 22, 2022 at 16:24

2 Answers 2


It's debatable whether home equity belongs in one's net worth depending on what your goal is. If the goal is to figure out how much you are leaving the kids when you die, of course the house counts. If you are calculating your nest egg and are determined to rent an apartment in the city, and will sell the house, again, it counts. But, in my opinion, it's a slippery slope to think of your $250K paid off house the same as $250K available for retirement. Because it's not.

How do you value your home when calculating your net worth? is a recent Q&A on the topic.

I respect and have read Dr Stanley's work, and believe he's looking at retirement savings only, and not including the home equity.

Keep in mind, also, his rule of thumb, the Age/10 times income, is cute, but not representative of the savings curve. A 20 year old doesn't have 2X his income saved. In the answer I linked in my comment, I show it taking until nearly 35 to have 2X, but by 55, jumping to nearly 9X. The curve isn't linear, nor would you expect it to be. The first few years of savings compound, first slowly, later, quite rapidly.

Your question was almost a yes/no, and my response was "no, don't include house." I hope the rest helps you understand the process.

  • Agreed about the "it depends". When other investments go up and down in value, they can be sold and you have cash that can be spent on expenses or to buy additional investments. The value of your primary residence goes up and down as well, and the number is nice to know but you can't just sell it any time and spend the money. The SEC defines who is an accredited investor a few ways and one is that you have a $1M net worth not including your primary residence for this same reason, so that you didn't buy a $100K house, sit on it for many years, and have no other invested assets.
    – jia103
    Commented May 22, 2022 at 16:30

Disclaimer: If I recall correctly.

Dr Stanley removed the calculation of net worth in the book Stop Acting Rich. In the book, the Millionaire Next Door, the home was included in the net worth calculation.

Stop Acting Rich was published in 2009 and has some language dealing with the people that had a majority of their wealth calculated into inflated home values of the housing bubble. It gave a very inaccurate view of the prosperity of many households. When the bubble burst, the wealth disappeared.

That is not true wealth.

No real analysis here, just a history of his writings.

  • 1
    Hmmm - do I need to grab both books to see which said what? 2009 for Rich? Wow. Time flies. Dr Stanley has since passed on. Sad day for me. Commented Jan 18, 2017 at 21:32
  • 96 for MND. Twenty years. Holy cow.
    – Pete B.
    Commented Jan 18, 2017 at 21:45

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