book review of the automatic millionaire

Book Review of The Automatic Millionaire

Erik Book Review, Economics, Finance, and Markets, Financial Education, Thoughts of a Mastermind, Wealth Creation 9 Comments

book review of the automatic millionaireDo you want to be rich? How great would it be to be a millionaire and not have to worry about money? One of my goals is to become a millionaire. I want to not have to worry about money in the future. How can we achieve these goals? Is becoming rich easy? What if I told you, there was a one-step formula to follow, to live life and finish rich? I will be sharing with you my thoughts in a book review of The Automatic Millionaire, by David Bach.

The Automatic Millionaire, by David Bach, contains a plan for you to retire rich. David Bach argues there is one thing you need to do to finish your working years rich: pay yourself first.

Pay yourself first? Yes. It’s that easy. In The Automatic Millionaire, Bach talks about why paying yourself first will enable you to become a millionaire, automatically, and lays out a 7 step plan for financial success.

The rest of the post includes a summary of The Automatic Millionaire, my takeaways from the book, and my recommendation for you. Enjoy!

Summary of The Automatic Millionaire

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The Automatic Millionaire is all about automating your personal finances so you can focus on living life. There are so many solutions through technology that after setting up, you can forget about and grow your wealth. Let technology handle the transfers from your paycheck to savings, investment accounts, debt pay accounts, and charity.

The #1 Tip for Becoming Rich: Pay Yourself First

Paying yourself first will enable you to become an automatic millionaire. What’s paying yourself first mean? Many us pay ourselves last: we first, pay our rent, then utilities, then grocery bill, the government through taxes, the local bar we love to frequent, and the list goes on and on. At the end of the month, whatever we have left, we maybe put into savings. There has to be a better way to save right?

Pay yourself first.

In The Automatic Millionaire, paying yourself first means putting money in a traditional retirement account – saving your pre-tax income for the future. Paying yourself first means prioritizing your savings and investments first, before anyone else gets your money.

But I Can’t Pay Myself First, I Don’t Have Any Money to Save!

One other big point brought up in The Automatic Millionaire is The Latte Factor. The Latte Factor, David Bach talks about, is the small daily expenses which have the potential to add up over time.

Spend $3.50 on a coffee and $1.50 on a bagel daily for breakfast at Starbucks, and you end up spending quite a bunch of money. That’s even before lunch and dinner!

David Bach recommends examining your expenses (that sounds familiar to my advice, the first step to financial success is tracking your expenses!) and really thinking hard about what you need. $10 a day can add up drastically when saved over 30 years. At a 10% market return, you can easily become an automatic millionaire by saving $10 a day!

The Automatic Millionaire Blueprint

At the end of The Automatic Millionaire, David Bach provides us a blueprint for becoming an automatic millionaire:

  1. Pay yourself first automatically.
    • By investing 10% of your salary and income, you will increase your odds to nearly 100% of becoming a millionaire at retirement. David Bach recommends using the pre-tax option to make it easier to get 10% into savings.
  2. Deposit your paycheck automatically.
    • Set up direct deposit so you never see your paycheck – I know I wouldn’t be great about going and cashing my check at the bank!
  3. Fund your “rainy day” emergency account automatically.
    • Having an emergency fund is essential. What happens if you lose your job? What happens if something breaks in your house? Make sure to transfer your cash over automatically to your emergency account so you can make sure it happens.
  4. Fund your dream account automatically.
    • Similar to #3, what are you looking to do in the next 2-3 years that will require a nice cash payment? Want to take a nice vacation! Personal finance is personal! There’s nothing wrong with spending your hard earned cash!
  5. Pay your credit card bills automatically.
    • Destroy your debt! After destroying your debt, make sure to pay off your credit card each and every month. Interest is a waste of money!
  6. Pay all your monthly bills automatically.
    • Schedule all of your utility and monthly bills automatically so you don’t forget.
  7. Give to charity automatically.
    • With money, comes opportunity. Giving back is one of my goals in the future, I want to help others reach their goals. Monetarily or with your time works here. At this point, I prefer my time, since I’m still accumulating wealth. I volunteer at local high schools and provide advice to Masters students in the program I went through.

Following these steps will definitely help you get to financial freedom.

My Takeaways from The Automatic Millionaire

With all books, I want to have some takeaways for myself. Unapplied knowledge is useless until it is appied!

For me, I thought The Automatic Millionaire was a great and quick read with many actionable tips. I recently increased my pre-tax retirement contribution to 20%, so I’m doing well on that front.

One thing that I’ve been ignoring has been my Latte Factor and have been spending a little more each day on random stuff then I probably need. Most days at work, I end up going out for lunch, and I spend $7-10. Add in the occasional coffee and treat from Target (I love me some Monster trail mix!), I can end up spending $15+ in a day before dinner!

To address this, I’ve already started making my own coffee at home, and I’ve also been buying in bulk, so I don’t have any temptations mid-day.

My Recommendation for You

The Automatic Millionaire is a easy and quick read with many actionable tips. I’d highly recommend it for you if you are just getting started on your way to financial freedom. Financial success is so simple, but yet so many people don’t take the necessary steps to making it work for them.

Tracking your income and expenses, and automating your finances will do wonders for your financial situation. It won’t improve overnight, but watch as year by year, your investments, savings, and debt situation all improve. I’m excited to see you become an automatic millionaire.

book review of the automatic millionaireReaders: are you paying yourself first? Are you on the way to becoming a millionaire, automatically? Are you following The Automatic Millionaire Blueprint?

Erik

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Comments 9

    1. Post
      Author
  1. I started paying myself first shortly after I joined the work force. I started automating my savings. it goes directly to my retirement account before I have access to it. At the end of each year, if I get any bonuses, I will save those too.

    Once I learned how to live on less than what my salary is, i just got used to it and never missed the money in my savings accounts because I never had access to it in the first place.

    Over a period of ten years, I achieved the millionaire status. Now, I am on my way to make my second million.

  2. This is a good read. Feel like sometimes financial books can repeat the same message, not that thats a bad thing.

    Maybe it is because I have read a bunch now but I feel like this one can be summed up easily. Automate what you can so you don’t have the chance to spend the money that hits your account.

    1. Post
      Author

      Definitely agree with you, though I could also say that many blogs say the same thing! And yet all of them have their own unique spin on a topic!

  3. I agree with Damn Millennial, it feels like all the books just repeat the same message ! And they do:) Sometimes, for us, it is a needed reminder that we are on the right track and doing the right things, and for others is another wake up call to hopefully get them started.
    I didn’t read that book but if it becomes available (at the library of course), I will check it out.

    1. Post
      Author

      This was a few hour read, and while I agree it definitely repeated some of the information I had learned before, it was still very valuable information!

      Have a good weekend!

  4. Totally agree that The Automatic Millionaire is great for people that are just starting out. I think I was advanced enough in my money journey that I didn’t get much out of it, but I still recommend it to a lot of people. Super easy to read and covers the most important parts of personal finance pretty well.

    1. Post
      Author

      Thanks for stopping by Matt. Happy Saturday!

      Are you thinking about making edits to the design of your blog? Let me know if you have any questions on that.

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