Who wants to be a millionaire?

HOW MUCH money are you worth? And how much is that compared with what you ought to be worth at your age?

I have found the answer in a wonderful American formula that's explained in a book called The Millionaire Next Door. It's all about the rich (and how they got rich).

The formula is simple: take one-tenth of your age and multiply it by your household income. That's how much wealth you ought to have. Wealth is your assets minus your liabilities. Before you get depressed, your assets include the equity you own in your home, your pension fund, any savings and investments you have, and valuables.

This test is useful because it tells you where you stand in relation to your own circumstances - not against the general population. It's easy to look prudent in general terms as Treasury figures suggest only one in four adults in this country has more than pounds 200 in savings.

The formula is not aimed at people who want to be millionaires. It's about making enough provision for yourself in retirement. (If you do want to be a big player, you should be looking to have double the wealth figure generated by this formula).

Virtually everyone in the UK will fail the wealth test, even if they are saving and investing some spare cash. If your assets are less than half the projected wealth figure, the book labels you as an under-accumulator of wealth who will have difficulty making ends meet during your retirement.

It's useful to look at where you stand, but don't get hung up on it. Americans are much more accustomed than we are to making individual plans for savings and retirement. (And they pay less tax than we do.)

The answer to the question of how much you need to save and invest in order to build up a decent pot all depends on what sort of lifestyle you are looking for in retirement (as well as on how much you want to spend enjoying yourself before then).

Maybe now isn't the best moment to mention the stock market, but if you have an optimistic nature and some spare cash, then shares are cheap and probably haven't hit the bargain basement yet. If you can spare pounds 20 upwards a month then you should consider a punt on shares.

If you are feeling especially adventurous, have a look at Asian funds (see the feature on this page for some expert recommendations). Investment trusts are also worth considering as many of them are trading at double- figure discounts to the assets held in the fund. What's more, there are no rip-off initial charges on investment trusts (because they don't pay commission to financial advisers).

If you are interested in finding out more, the trade body the AITC (0171- 431 5222) has a good factsheet on international general investment trusts. Who knows, this could be the star investment that one day takes you all the way up to meet your projected wealth figure.

If you haven't got any spare cash, take a frugal tip from the millionaires in the book. Author Thomas Stanley estimates that 85 per cent of millionaires still cut out and use money-off shopping coupons.

'The Millionaire Next Door', by Thomas Stanley & William Danko, is published by Pocket Books, $11.20 plus shipping. Available from US-based internet bookstores.

i.berwick@independent.co.uk

News
The surrealist comedian at the Q Awards in 2010
people
News
Russell Brand arriving for the book launch in East London
peopleRussell Brand cancels his book launch debate due to concerns about the make-up of the panel
Sport
Christiano Ronaldo enjoys his opening goal
champions leagueLiverpool 0 Real Madrid 3: Ronaldo and Benzema run Reds ragged to avenge thrashing from their last visit to Anfield
Arts and Entertainment
Awesome foursome: Sam Smith shows off his awards
music22-year-old confirms he is 2014’s breakout British music success
PROMOTED VIDEO
Life and Style
Six of the 76 Goats' cheese samples contained a significant amount of sheep's cheese
food + drink
Arts and Entertainment
Contestants during this summer's Celebrity Big Brother grand finale
tvBroadcaster attempts to change its image following sale to American media group
Extras
indybest
News
Wilko Johnson is currently on his farewell tour
people
Arts and Entertainment
Sarah Dales attempts to sell British Breeze in the luxury scent task
tvReview: 'Apprentice' candidate on the verge of tears as they were ejected from the boardroom
News
Call me Superman: one of many unusual names chosen by Chinese students
newsChinese state TV offers advice for citizens picking a Western moniker
News
ebooksAn unforgettable anthology of contemporary reportage
Voices
New look: Zellweger at Elle's Women in Hollywood awards on Monday
voicesRenée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity, says Amanda Hess
Arts and Entertainment
Julianne Moore and Ellen Page are starring together in civil rights drama Freeheld
film
Voices
'Irritatingly Disneyfied': fashion vlogger Zoella
voicesVicky Chandler: Zoella shows us that feminism can come in all forms
Life and Style
health
Arts and Entertainment
Pink Floyd on stage at Live 8 in 2005. From left to right: David Gilmour, Roger Waters, Nick Mason and Rick Wright
music New album The Endless River set to overtake boyband for most pre-ordered of all-time
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Trainee Recruitment Consultants

£20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...

Day In a Page

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

'Renée Zellweger's real crime was to age'

The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

Disney plans live-action remakes of animated classics

From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
Thousands of teenagers to visit battlefields of the First World War in new Government scheme

Pupils to visit First World War battlefields

A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
The 10 best smartphone accessories

Make the most of your mobile: 10 best smartphone accessories

Try these add-ons for everything from secret charging to making sure you never lose your keys again
Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

Liverpool v Real Madrid

Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
West Indies tour of India: Hurricane set to sweep Windies into the shadows

Hurricane set to sweep Windies into the shadows

Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?