The $5 million retirement plan: focusing on a positive net worth is leading the Thomas family to early retirement

Black Enterprise, July, 2004 by Nicole Lewis

9] To use a portion of my wealth to strengthen my community

10] To ensure that my wealth is passed on to future generations

PRINCIPLE 5

To measure my personal wealth by net worth, not income

After years of concentrating on improving their net worth, the couple has several lessons to share with anyone who wants to adopt parts of their personal wealth strategy:

Be analytical about saving. Whoever manages the family's finances should use a financial calculator, run the numbers, and keep track of your net worth by writing out your assets and liabilities and calculating the difference. "It takes more time to watch a movie or go shopping [than to calculate your net worth,]" Stephen says.

Know how much money you'll need to retire. Figure out today what type of income you will need at the point of retirement, then design and execute an annual savings plan to get you there. Be sure to balance your wealth accumulation with current and future levels of consumption.

Only take risks that you can afford. For example, the couple recently took a $25,000 credit card cash advance at no interest for six months and invested the money for six months with a company that renovates houses for resale. The investment yielded a 20% return, earning the couple $5.000. Stephen cautions that their expertise in finance and their ability to absorb the loss made this investment less risky for them. Using a cash advance for investment purposes is not for everyone.