One of the top selling books on the topic of personal finance is: The Automatic Millionaire, by David Bach. What this book is promising to the average people: to become millionaire is possible if they do handle correctly their finances and if they do invest wisely. But is the Automatic Millionaire a book worthy of the attention? The promises part of it, are they true ? Is the solution realistic? Let’s talk a bit about that.
The book will start with the following scenario: how an average couple earning 55K can finally retire at the age of 55 years old. This is a bold case study because it’s hard to believe considering all the costs of living from your mortgage, college tuition for your kids, loans, and living expenses.
So what David Bach is explaining is that all you have to do is simply to keep your money. Many of us are able to spend like $5 a day on some great coffee. But if rather we do start to save that amount. We will be right now on the path to become millionnaire and to finally retire early. David has a term “the latte factor”. This is related to the fact people will spend money on unnecessary things, when they can use such money to create some financial freedom for themselves.
One of the best tip that David Bach will give out is: pay yourself first of all. Many people will start by paying their mortgage, their debts, and bills first of all. But when you do begin to pay yourself first: it becomes a priority to invest “in yourself”, and not saving your money after paying your various bills, and making many expenses. Warren Buffet is also recommending to do the same.
It’s nice to learn that David Bach was not very idealistic about savings. Since we do know how health problems, accidents, and tons of other factors can indeed hurt our financial position. That’s why he recommends that you have a pool of money which is allocated for such “rainy days”. This is a great idea since no one really know what can happen in the future.
The automatic element found in “The Automatic Millionaire” relates to how you will manage your finances. So you should set up your bank accounts in a way that the moment a paycheck is entering, the money will automatically goes to various sections of your financial strategy, like an investing account, an account for retirement, and another one for those rainy days. This is a great and nice idea: you don’t really have to think about how to handle your finances.
David is talking about some possible returns from the stock market that may not work at all with lots of people around. The economy isn’t how it used to be so this aspect of the book may or may not be applicable to the reader. In that book, this concept is crucial. So you need to think about some alternative investment strategies if you want to keep the goal of this book.
The resume everything, to plan the right strategy, you will find some great financial tips and advices in “The Automatic Millionaire”. The author, David Bach, did keep the whole book very easy to read and understand. The best thing is that this book has many applicable concepts you can apply, and use, right away.
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Tags: David Bach, The Automatic Millioniare, wealth building