Book Review: The Automatic Millionaire
I recently checked out David Bach's The Automatic Millionaire courtesy of my local public library. I buy books only if I know I am going to read or refer to them again and again. The library helps me "preview" books that I am considering purchasing. TAM was a really easy read, I was able to finish it in a day. At first glance, The Automatic Millionaire seems to present its readers with original, fresh ways to create and stick to a financial plan, but upon further investigation, its a repeat of the principles of the classic The Richest Man in Babylon sprinkled with some modern tips.
The first chapter introduces you to an average couple with an average salary and a not-so-average bank account. Even though theyve never made over $54k combined per year they are millionaires. Heres How were they able to do it: 1) they saved a percentage of each paycheck, 2) prepaying their mortgage and 3) not having expensive habits like smoking or trying to keep up with the Joneses. In the following next chapters, we learn how to apply The Automatic Millionaire principles. In chapter two, Bach asks you to identify your Latte Factor (Bach coined and registered the phrase)--for some people its obvious, daily coffee from Starbucks, cigarettes or dinners out, or even that smoothie from Jamba Juice. The trick is identifying and limiting your unnecessary expenditures. You can check this calculator to see how much your habit will cost you.
Later we learn to pay ourselves first beginning with whatever percentage feels comfortable and adjusting it over time. Now assuming youve chosen to pay yourself automatically, saving for retirement in a work-sponsored retirement plan or a IRA is your best bet. Bach provides numbers and websites for people who dont feel like doing the research themselves. Finally, he suggests creating a rainy day fund and has a few suggestions on where to keep it liquid and relatively safe. The final chapters discuss paying mortgages bi-weekly and automating your giving plan. In the end, it's just like all personal finance books, the ideas work, if you put them in to practice. My rating is a 3.
5- must buy
4-worth it, good reference guide
3-get it from the library or buy it used
2-okay, but nothing original
1-pass
This is also posted at Financial Freedom Trek.
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