Author: David Bach
|The Automatic Millionaire (2003) is an action guide toward managing your finances and investment. David Bach emphasizes that a person can get rich without starting his own business with the limited income he has.|
The Automatic Millionaire summary provides an overview of how millionaires keep their wealth by investing and saving their money. The book explores almost the same concepts as The Millionaire Next Door by Thomas J. Stanley and William D. Danko that narrates that the Rich people are able to retain their money for a lifetime because they prefer financial stability and a happy retirement life over shiny things, for instance, Prada and Bentleys. The key to retaining money and economic well-being thus according to the authors is to change the habits and perspectives we have towards spending money. Bach also explains that what we spend is far more important than what we earn because through controlling our earnings we can achieve our financial dreams.
The Automatic Millionaire Key Points
The Latte Factor
All the caffeine addicts might be wondering what becoming rich has to do with Latte and some of you might be commenting: leave my latte out of this! Sadly, David Bach is preaching us to save the same amount of money in the book.
The key concept here is to save every day a little amount of money. When you save small amounts and invest it regularly the compound interest becomes a huge sum of money over time. If you apply this idea you will become more observant about your daily spending. What you spend matters way more than what you earn according to Bach. You need to control yourself and exercise your willpower. Increasing your lunch to XL by spending extra five dollars may sound cool at that moment but when you do this every other day it will cost a lot. Remember these words by Thomas J. Stanley: “Whatever your income, always live below your means.”
Set up an Emergency Fund
While we are focusing on saving a little and investing we must not ignore the fact that we can face a financial crisis someday. The economy is tumultuous and this is why you must create an emergency fund.
Do you know that 40% of Americans claim they could not they couldn’t come up with even $2,000 in an emergency? Isn’t that miserable? An emergency fund is like a reserve account that you only use in case of extreme emergency. When you have no other option left. Determine how much you’ll need for food, rent, and other expenses. This is the amount for each month that you must have in your emergency fund. Try saving this amount for six to eighteen months. Bech suggests you have an automated emergency fund so you save yourself some time and trouble. Having an emergency fund in place will ease your anxiety related to your finances to a great extent. David Bach suggests saving 5% every time.
Save up for Your Dreams First
When you get your monthly salary what do you do? Most of us have this instinct that tells us to pay our bills, pay taxes, stack up groceries and get our essentials. But the author is asking you to put yourself first. David Bach suggests that every month when you get a salary, or whenever you get any form of income put your dreams and goals first. As long as it is a small but consistent saving it will work. You will always have enough money left to pay rent, bills, taxes, and buy groceries. But if you start accommodating essential firsts you will be left with no money and eventually no savings.
Save so that you can move from being a Renter to a Homeowner
The next step is becoming The automatic millionaire homeowner: a powerful plan to finish rich in real estate. It is crazy but true that those who rent houses pay way more than the homeowners. As a renter, you are basically paying a homeowner an amount much larger than it costs to buy a house. The difference is you pay little by little and not at once. To save money and to own your own house, David Bach suggests buying a house, getting a thirty-year mortgage, and using an automatic biweekly payment plan to pay it down. In this way, you will be able to pay a thirty-year mortgage three years earlier than the estimate.
The Automatic Millionaire Quotes
“Money is not an end in itself. It is merely a tool to help us achieve some particular goal. If the way we handle our money conflicts with our personal values, we are not going to wind up living happy and fulfilled lives.” –David Bach
“The fact is, none of us really has a choice: We are all playing the money game whether we want to or not. The only question is: Are we winning?” –David Bache
The Automatic Millionaire Review
The book is not only about making money, it teaches you how to make an extraordinary life for yourself. By committing to saving daily and investing, you will be able to gain personal peace and financial success. The Automatic Millionaire will transform you into a financial mastermind who can live the financial life of his dreams by keeping his current job. The financial Knowledge you will gain from The Automatic Millionaire is invaluable. If you are just getting started on reading books and exploring financial independence this will be a good read for you.
To Whom I Would Recommend The Automatic Millionaire
- To the twenty-five-year-old millennial who has just started earning and wants to invest and secure his future.
- The thirty-five-year-old manager who has been saving money for years but does not know what to do with it.
- To anyone who wants to become better at managing money and savings.