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The Automatic Millionaire by David Bach has been one of the top selling books on the topic of personal finance. The promise of this book is that even average people can become millionaires by managing their finances correctly and making smart investments. But is the Automatic Millionaire a book worthy of the attention? Does it really deliver on its promises and offer a realistic solution? Let’s find out.
The book starts out by giving you a scenario of how an average couple earning $55,000 can retire at an early age of 55. 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.
David Bach explains that all you need in order to do the same is to conserve your money. Most people spend $5 a day on luxury coffee but by using that money to save it, you can get on the road to becoming a millionaire and retiring early. David coins this term “the latte factor” where people spend money on unnecessary expenses when they could use that money to create financial freedom for themselves.
Probably one of the best advices given out by David is to pay yourself first. Most people start by paying off their debt, mortgage, and other bills first. But by paying yourself first, you make it a priority to invest in yourself rather than save a meager amount after spending your money on other things. This was also recommended by world famous investor Warren Buffet.
It’s great that David Bach wasn’t so idealistic about saving as we all know how accidents, health problems, and other factors can 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 good idea as you never know what can happen in the future.
The automatic part of The Automatic Millionaire lies in how you manage your finances. You can set up your bank accounts so that when you put in your paycheck, the money automatically get allocated to different parts of your financial strategy such as an account for investing, an account for retirement, and an account for a rainy day. This is great because you don’t really have to think about how to manage your finances.
What may not work with many people is getting the kind of returns from the stock market that David proposes. The economy isn’t how it used to be so this aspect of the book may or may not be applicable to the reader. This is a very important aspect of the book and you have think of an alternative investment strategy if you want to keep to the goal of the book.
Overall, the Automatic Millionaire shares some great financial advice and great tips for planning a strategy. David Bach has kept this guide simple and it’s a great read. The best part is that you’ll get many applicable strategies you can put into use immediately.
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Source by Ben Sanderson
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