Bach, David. The Automatic Millionaire. Doubleday, 2003. *Canadian Edition
Summary: Bach suggests average people (middle class) have the potential to retire wealthy if they take a few hours and automate their finances (specifically investments). If a person sticks with this strategy over a lifetime they will retire as a millionaire.
Topics addressed: Planning ahead for retirement, saving sources, rainy day fund, debt-free homeownership, debt-free lifestyle, tithing.
Fundamentally sound approach to wealth building. He suggests:.
What you’ll learn is how to become a millionaire – steadily and surely – over the course of your working life. It’s the tortoise’s approach to wealth, not the hare’s.
The Proverbs highlight a similar approach:
“Dishonest money dwindles away, but he who gathers money little by little makes it grow.” (Proverbs 13:11, NIV)
Highlights the value of small change for a long term plan. Bach writes:.
How much you earn has almost no bearing on whether or not you can and will build wealth.
He calls this principle the ‘latte factor’. Bach suggests we need to focus on cutting small dollar amounts out of our spending. He shows how such small changes result in significant financial results in the future. It will make you think twice before making a quick stop to pick up something on your way to or from work.
Suggest the convenience of automation. Have your money drafted right out of your checking account before you even know its there. He suggests if you are responsible for doing something you likely won’t keep up with it..
. Bach suggests automating everything – including tithing. The advantage of automation when it comes to saving is it is painless and you often don’t even know you are doing it. This level of ignorance is not appropriate for giving. In the act of giving we need to continually remind ourselves of what we are giving and why. I don’t suggest automating your giving.
. The book has a lot of negative things to say about budgeting. I suspect if you want to sell a lot of books you had better minimize budgeting. Here are some of the things he says about budgeting ‘goes against human nature’. This I think is a positive part of budgeting. Our human appetite needs to be curbed not satisfied. The budget does help our spending and our saving.
. Proposes that renting a home is horrible while owning is essential. Here are some quotes:
You can’t get rich renting
The fact is, you aren’t really in the game of building wealth until you own some real estate
As a person who spent my first five years of marriage renting I obviously see some value in renting. What does Bach suggest? Playing the leverage game. His genius plan involves using other people’s money since real estate prices almost always go up. You can even buy a home with 0% down. This allows you to be in a home much faster. Blahhh. Good thing 2008 has passed to teach us some important flaws with this type of thinking.
Overall I enjoyed the book and thing it has some helpful suggestions. Like almost every financial book you will probably find one piece of information that is worth the purchase price of the book. Read and enjoy the first five chapters. During the last few chapter I spend more time writing criticism notes than underlining helpful sections.
This book is recommended for:
- A young person who has yet to start saving for retirement
- A person who has been saving, but their saving is sporadic
- Anyone wanting to learn how to set up a personal retirement account (IRA in America or RRSP in Canada)
Final thoughts. Before proceeding to implement any retirement plan I suggest you read Part I and Part II of Is it Biblical to Save for Retirement? This will give you a biblical context with which to use when considering your retirment alternatives.