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?
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, takeaways from The Automatic Millionaire, and a reading recommendation for you.
Book Summary of The Automatic Millionaire
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, and live life worry free.
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.
Using The Latte Factor to Save More Money
Bach’s trademarked idea for building wealth is what he calls “The Latte Factor.”
The Latte Factor is all of your small daily expenses which have the potential to add up over time.
Spending $3.50 on a coffee and $1.50 on a bagel daily for breakfast at Starbucks is already $5 for the day. That’s even before lunch and dinner! If you aren’t careful with the small expenses, you can end up spending quite a bunch of money.
Bach recommends examining your expenses, and really thinking hard about what you need. $10 a day can add up drastically when saved over 30 years for your retirement.
With a 10% market return, you can become a millionaire by saving $10 a day!
The Automatic Millionaire Blueprint
Throughout the The Automatic Millionaire, Bach talks about numerous ways to build wealth and become rich over time.
At the end of The Automatic Millionaire, Bach provides us a blueprint for becoming an automatic millionaire:
- 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.
- Bach recommends using the pre-tax option to make it easier to get 10% into savings.
- Deposit your paycheck automatically.
- Set up direct deposit so you never see your paycheck.
- 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.
- 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!
- There’s nothing wrong with spending your hard earned cash!
- Pay your credit card bills automatically.
- Get out of debt! After destroying your debt, make sure to pay off your credit card each and every month.
- Interest is a waste of money!
- Pay all your monthly bills automatically.
- Schedule all of your utility and monthly bills automatically so you don’t forget.
- Give to charity automatically.
- After growing your wealth, you have a great opportunity to give back and make a difference. You can give back with your time or with your money.
Following these steps will get you on the path to financial freedom.
Takeaways from The Automatic Millionaire
With every book you read, it is a must to have takeaways and actionable items to implement in life.
The main takeaway from The Automatic Millionaire is making sure you are staying on top of your Latte Factor.
If you are not spending your money on things which bring you joy and value, you can waste a lot of money fast.
Making coffee in the morning, instead of buying it at Caribou Coffee or Starbucks, could lead to hundreds of dollars of savings over time.
Similarly, cutting down on snacks or eating out could result in accumulating wealth very fast.
The secondary takeaway is the importance of AUTOMATION.
Technology has allowed humans the ability to do so many things. The same is true for personal finance. We can automate almost all of our payments, bills, and investment contributions after a one time set-up.
Spending money is harder when the money is automatically invested for you month after month. Do yourself a favor and automate your personal finances. You’ll be on your way to building wealth in no time.
The Mastermind Within Recommends The Automatic Millionaire
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.
Financial success won’t improve overnight.
But, over time, year by year, your investments, savings, and debt situation all improve.
I’m excited to see you become a millionaire.