“The Automatic Millionaire” by David Bach

Paper Info
Page count 4
Word count 1114
Read time 4 min
Topic Literature
Type Book Review
Language 🇺🇸 US

Introduction

“The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich” is a personal finance book written by David Bach that offers tips on how to become an automatic millionaire. The author bases his discussion on two main financial concepts namely, paying oneself first and the power of compound interest. The book has a sensational title that grabs the attention of any person willing to apply a proven financial plan to become financially independent. In the book, Bach gives readers a realistic financial system that is founded on timeless principles that guarantee financial prosperity if implemented properly. The plan is unique and easy to implement because there is no need for a budget or willpower, interest in money is not a requirement, and the plan can be set up in an hour. The information contained in the book has the potential to secure the financial future of readers only if they implement the author’s recommendations.

Pay yourself first

The first part of the book discusses a timeless financial principle known as “pay yourself first.” This concept involves taking away money for investment from one’s income before spending on living expenses. In that regard, it is only permissible to spend the money left after making deductions for investment. This concept is simple but difficult to implement because many people spend most of their money on insignificant expenses and leave little or no money for investment. Others believe that the concept is difficult to implement because of the high cost of living and the innumerable expenses they have to deal with. However, they misunderstand it because even a small amount set aside everyday suffices. The concept is made more feasible by another concept discussed by the author. The small amount set aside daily grows over time into a fortune through the power of compound interest. Compound interest makes setting aside ten dollars every day a wise financial decision that makes sense in the long term. Bach states that people who harness the power of compound interest become rich and secure their financial future. The author suggests making the plan automatic by withdrawing the money from one’s paycheck every pay period and channeling it to the right investment accounts. Bach reiterates that the success of the plan is based on automation. Automation prevents the temptation to use all the money for living expenses and save none.

The latte factor

The ‘‘latter factor” is a concept the author introduces to help readers overcome their inability to pay themselves first because in many cases, their living expenses exceed their earnings. According to the author, the most important factor in the creation of wealth is the money spent and not the money earned. He argues that many people embrace the erroneous idea that the fastest and most effective way to become rich is to increase one’s income. However, this idea is wrong because in many cases, when income increases, new expenses emerge. The concept refers to the seemingly insignificant daily expenditures such as buying lattes that people spend a lot of money on. The author suggests cutting out the daily small expenditures and investing the money. The little money saved from cutting the small expenditures seems insignificant. However, the power of compound interest grows it into a financial fortune if invested wisely. Bach argues that each person’s latte factor is different and it necessary to evaluate daily expenses thoroughly. Giving up these daily expenses is difficult because of the pleasure derived from them. However, they are obstacles that prevent many people from profiting through giving up insignificant indulgences and using the money saved to create a financial fortune.

Automation

The author applies the “pay yourself first” concept to various aspects of financial life and shows readers how they can become financially secure. These areas include building an emergency fund, getting out of debt, and buying a home among others. The author advises readers to create an automatic deduction system that takes a certain portion from the checking account and moves it to an investment account every pay period. For example, a deduction of $100 can be made every pay period to an emergency fund or to a mortgage account. Automation makes becoming an automatic millionaire easy because it eradicates the temptation to spend all money on expenses. The fact that people spend the money left after deductions makes it an effective financial strategy to attain financial independence. In addition, automation has a powerful psychological effect because it makes saving and investing effortless. Money is deducted and channeled to the right account by an automatic system without fail.

Personal opinion

The author offers great financial advice that can help readers secure their financial futures. However, he goes overboard in certain cases and offers wrong information. For example, he recommends the setting up of a system that pays the mortgage handler twice in a month instead of once. In that regard, he recommends a payment every fortnight. This advice sounds good but is not plausible because the system introduces extra costs through frees that accumulate to eliminate the benefit of making payments twice. The author offers a great financial plan and offer suggestions on how to implement it. The book is insightful and practically applicable because in addition to offering advice, the author outlines steps that can be followed to attain financial prosperity. For example, he suggests that readers examine their daily expenses in order to eliminate the seemingly insignificant expenditures that drain money that could be invested. The book is east to read because the author uses simple language and financial terms that are easy to understand. The book is well ordered because each chapter discusses a different concept. The book is practical and a god read for individuals who do not have their financial lives in order.

Conclusion

“The Automatic Millionaire” is a great book for people who do not have their financial lives in order because it offers great advice on how to create a fortune. The author focuses on two main concepts namely pay yourself first and compound interest. Each concept is discussed in detail and recommendations on how to apply them to different financial situations are provided. The author uses simple language and easy-to-understand financial terms. The concepts discussed are easy to apply and guarantee financial independence if applied properly. The success of the plan discussed in the book is based on automation. Bach advises readers to create an automatic system that deducts a certain portion of their income and channels it to a different account. He then advises them to spend the money that is left on living expenses. The book is a great source of information for anyone pursuing financial security and independence.

Cite this paper

Reference

EssaysInCollege. (2022, May 24). “The Automatic Millionaire” by David Bach. Retrieved from https://essaysincollege.com/the-automatic-millionaire-by-david-bach/

Reference

EssaysInCollege. (2022, May 24). “The Automatic Millionaire” by David Bach. https://essaysincollege.com/the-automatic-millionaire-by-david-bach/

Work Cited

"“The Automatic Millionaire” by David Bach." EssaysInCollege, 24 May 2022, essaysincollege.com/the-automatic-millionaire-by-david-bach/.

References

EssaysInCollege. (2022) '“The Automatic Millionaire” by David Bach'. 24 May.

References

EssaysInCollege. 2022. "“The Automatic Millionaire” by David Bach." May 24, 2022. https://essaysincollege.com/the-automatic-millionaire-by-david-bach/.

1. EssaysInCollege. "“The Automatic Millionaire” by David Bach." May 24, 2022. https://essaysincollege.com/the-automatic-millionaire-by-david-bach/.


Bibliography


EssaysInCollege. "“The Automatic Millionaire” by David Bach." May 24, 2022. https://essaysincollege.com/the-automatic-millionaire-by-david-bach/.