Goal: Your Fifth Number

If you haven’t read about your first four numbers, go do it now.

Now for the Fifth Number.

This is firmly in Pookah Finances 301. It is your long-term goal. This is the amount of post-tax income you need to maintain a debt-free, comfortable, meeting the first four numbers, lifestyle that can tolerate the expense of a heart attack or two.
As with the previous four numbers, your specific situation may vary. This is presented only as a goal to start from.

You need $40,000 annual income, after taxes.

  • You can tolerate a reasonable mortgage.
  • You can raise a family of 4-6.
  • You can maintain your first four numbers.
  • You can sock away extra money for retirement.
  • You can, if you are so inclined, help the next generation of your family deal with some of their expenses.
  • You can take vacations.
  • You can donate cold hard cash to causes you find worthwhile.

That is your Fifth Number.

This is the amount of after-tax income that you need.

This number involves risks.

This number is the hardest to reach, because we don’t like to take risks, and we don’t use our hired professionals wisely and with a critical eye.

Your goal is to get this much after-tax income by passive income.

If you can achieve this number through passive income (dividend-paying stocks, CD’s, or other investment vehicles; part-ownership in a business, residuals from a book, a patented invention, investment properties, producing and selling videos online, etc.), then you can retire early.

If you already have some passive income, use it to achieve your first four numbers.

If you have passive income, and have met your first four numbers, use this passive income to generate more passive income — additional investments, reducing taxes, starting up an online business (low overhead, very cost-competitive).

Meeting your first four numbers gives you the tools you need for the fifth.

  • Your emergency fund will help keep you out of debt, and protects you from debt not only while you reach your fifth number, but also once you’ve reached your fifth number.
  • Your IRA helps you control your tax burden while setting you up for reaching your fifth number in retirement.
  • Your 401K (or equivalent) reduces your tax burden while setting you up for reaching your fifth number in retirement.
  • Your lawyer on retainer keeps you from getting sued into the poorhouse, and opens up doors to all those financial professionals who will help you reach your fifth number.

For your Fifth Number, remember this warning: Overnight success is the result of many years of hard work, heartbreak, failures, and starting over from scratch. There is no such thing as an overnight success. Even famous, multi-million-dollar artists spent years honing their abilities – formally or informally, making contacts, expanding their skillsets, making sacrifices, and making mistakes, before they were “discovered” and became an “overnight sensation.” Very often, we will never know the trials they went through to become an “overnight success.”

Next, I have some Questions and Answers about the Five Numbers.

One Response to “Goal: Your Fifth Number”

  1. […] on the Fifth Number. I’ve done some more analysis on the Fifth Number. I’m looking at ways to set goals for […]

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