Most people do not like to pick up personal finance books. Let’s face it, generally speaking they can be quite dry, packed full of statistics and numbers, and after just a few pages you are left with a sour taste in your mouth. It is no wonder that most people have never read a single book on finance in their life. If you are to read one book, that will give you more knowledge than many of your peers, you should read The Automatic Millionaire by David Bach.
The title of the book really explains the ultimate goal: automatic wealth accumulation. Throughout the pages you will read stories about students David has taught that employed his practices and saved enough to retire early. These people were not lawyers or doctors; they made modest incomes and had the same opportunities as most people out there. What set them apart was they took their finances seriously, and instead of frivolously wasting money on stuff they do not need, they set it aside to live a rich life later.
If you have read anything about personal finance, you will most likely have heard of the Latte Factor. It is the simple idea that small purchases do not seem like much at the moment, but they add up quickly. By being conscious of your spending, David shows how these purchases can be skipped in order to have a fully funded retirement. Instead of buying expensive flavored coffee, David points out that you can be paying yourself in order to break away from the 9-5 as soon as possible, and then do what you really love.
The book was written in 2005. As we know, the financial world has changed a lot since then. While some of the numbers David uses in his examples still apply, many now seem to be off. For instance, he talks quite a bit about earning an average of 10% in the stock market. Over the long run you could probably get close, but you may want to substitute some smaller numbers to make your retirement estimates a little more conservative. Overall, the concepts are simple, the ideas are nothing extraordinary, and putting them into practice really only takes a few minutes. The bottom line comes down to making it all automatic; don’t rely on your dedication and discipline when these systems and processes are ready to do it for you.