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The Automatic Millionaire - A Powerful One-Step Plan To Live And Finish Rich

06 Nov 2011

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Book: The Automatic Millionaire: A Powerful One-Step Plan To Live And Finish Rich
Author: David Bach
ISBN-13: 978-0767923828

Many books on Personal Finance Management gives a lot of tips, tricks & advice to manage our finances well. The main reasons why many people don’t follow it through the years are, either the concepts explained are very abstract or it requires a lot of discipline to follow the advice year after year. There are other kinds of books which show you a literally non-existent route to become rich overnight. David Bach differs very much from the others. He shows us

The best part is that you can read this book in an hour or two and setting up the automated plans may take another couple of hours. That’s all David asks from you to make you rich. Interesting?. For me too. The book’s title is Automatic Millionaire. This doesn’t mean that, if you follow all the tactics explained in this book, you will become a millionaire. It depends on how early you start saving, how much you are saving and how long you are planning to work. But, the sure thing is that you will be richer when you retire, if you follow the simple concepts explained in this book.

I will provide a gist of some of the concepts explained in this book. But I would prefer you to read the book by yourself.

The Latte Factor:

This is for those who live from paycheck to paycheck and have nothing to save. David asks us to track each and every penny spent for a day/week. There will definitely be some dimes, dollars that you can save in little things. Most of us ignore this, because the amount is too small to save. But David shows us, those little amount can grow into huge investments, if invested properly. I think, this is interesting and I started tracking my expenses for a month. Let me see how much I can save.

Pay Yourself First:

If you earn a dollar, your govt takes close to 30 cents and you are left with only 70 cents for everything including your savings. He suggests that pre-tax savings are the bound to grow faster than post-tax savings, considering you plan to save the same amount in both the cases. He explains it with the detailed tables and shows us how much we would “lose”, if we don’t save pre-tax amount. 401(k), 403(B), 457 plans in US are best suited for these kind of savings. In India, we can save 12% in PF, and 88% in VPF and more in PPF. Suggestion from David - If possible, max out the investments that is allowed. I decided to put 88% in VPF.

Three Rules of Emergency Money:

No one can escape from a bad day, unless we are prepared for it.

Debt-Free Home Ownership:

“You can get rich renting. Landlords get rich and renters stay poor”. Home is the only thing that David suggests you to buy on debt. Some of the reasons are

David gives us elaborate tips to close the loans earlier than the actual tenure. I am gonna use them on my home loan.

Credit Card Debts:

Just like Warren Buffet, David suggests us NOT to use credit cards. “Millionaires don’t do debt!.” Either you have credit card debt or not, you should probably read this chapter as well. He gives us techniques to pay off the debt in a reasonable amount of time, to negotiate with the banks on the interest rates, which credit cards to pay and what are the things to consider when balance transferring the debt. etc., I am going to use these tips with HDFC Bank on the recent fraud charges on my credit card.

Tithing:

Giving back to the Society!. Here he gets philosophical. “The more you give, the more you receive.” No scientific evidence, but personal and statistical evidence for tithing. 10% of your income is ideal. More or less depends on your heart. As always, you get tax exemptions on the donations to charity. I won’t stress on this factor. I have been tithing for a long time and I don’t see any direct correlation to the money that I earn. Or at least, not yet !.

The beauty is that this book is packed with all the resources that you may need to make all the above automatic, so that you don’t miss anything !.

Thanks David !. For a wonderful book packed with real, practical wisdom.

Please buy the book from your local bookstore.

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