On Saturday Jordan recommended that I read a book called The Automatic Millionaire by David Bach. I picked it up on Sunday and finished reading it yesterday. It’s a really good and motivating quick read that I’d strongly recommend everyone should read — especially those of us in our twenties and thirties.
The book covers a lot of material and principles that I already know and live, but it really drives home some basic points that are tried and true and can literally make you a millionaire over the course of your working life (and can even lead to an early retirement if you’re aggressive with how much you save). Those concepts are simple:
- Automate everything
- Pay yourself first
It’s all about automating the flow of your money so you don’t have to think about it. In fact, Bach even encourages that you throw away your budget after your system is in place. I think he’s right. Once you’re investing enough (10 to 20 percent of your gross income, depending on how much wealth you wish to accumulate and how soon you want to retire) and have built up your “rainy day” or emergency fund (rule of thumb is three months’ expenses; start saving 5 percent of your net if you need to build one), then what’s left over is the money you use to live on (you can even automate paying all your bills). It’s simple but it makes sense. If you don’t see the money — if it’s building up in an investment that’s earning you money — then you don’t have to think about it.
The other basic concept — paying yourself first — is great. Calculate how much you earn on an hourly basis and how many hours you worked last week. Then figure out how much you invested or saved for yourself as a measurement of hours in your working week. If you worked 40 hours last week, how many hours did you work for you?
Please do yourself a favor and buy The Automatic Millionaire. Then act on it. It really is that simple.
