The Automatic Millionaire - David Bach
Rating: 5/5
80/20 Summary:
Pay yourself first, automate the process, own your house, and live debt free. Paying yourself first means investing in retirement accounts with pre-tax income. Automate this process with direct deposit and automatic contributions to retirement accounts. Your goal is to save at least 10% of your pre-tax income. Owning your home and paying off the mortgage early will increase your wealth. Automation applies here as well. Finally, the author gives a strategy for eliminating credit card debt. In total the book illustrates how to live debt free while fully funding your retirement.
Reader thoughts:
The summary explains so much that you might question why it was worth a whole book. In fact, one reader commented at the end, “It’s very repetitive.” The concepts are so simple and practical I wonder why they aren’t common knowledge. Every person on the planet should understand these concepts. The Automatic Millionaire gives practical, actionable guidance. Unlike many self-help books that ask you to change your life and implement unintuitive models to deliver marginal improvement, this book gives strategies that you can realistically implement in one hour with life-changing impact. I'd already implemented many of these strategies, but Bach gave deeper insight and pushed my thinking further on this subject. For example, consider his suggestion to invest 10% pre-tax to retirement accounts. This is the only way to pay yourself first, legally. If you don't do this, the government gets first dibs on every dollar you earn. Previously, I thought it sufficient to hit the company match on my 401(k) and the annual IRS limit in a Roth IRA. After reading this book, I maxed out my pre-tax and after-tax retirement contributions. Annual limits exist for both categories of accounts. In a 2016 update, Bach gave statistics to address the topics of investment returns and recessions such as 2007-2009.
Near the end of the book the author provides an excellent summary. It could replace the rest of the book with minimal impact on a reader's financial results. Here are the steps to become an automatic millionaire. Pay yourself first. Deposit your paycheck. Fund your "rainy day" emergency account. Fund your dream account. Pay your credit card bills. Pay all your monthly bills. Give to charity. Just add 'automatically' to the end of the last seven sentences and you have Bach's summary minus explanatory notes. Before you skip most of the book in favor of the quick summary, at least consider that Bach is an experienced financial planner. He gives many practical details throughout. My main criticism is how repetitively he talks about automation and paying yourself. But considering that's the central message he is trying to impress upon the reader, repetition may be justified. Look at our debt-ridden society. People clearly haven’t got the message. In the author's own words, "The purpose of this book is not just to share the secrets with you. It's also to get you to put them into practice." Read the book. Do what it says. Have a better life. Move this book to the top of your reading list and you’ll thank yourself later.