Bach tells the story of how he was inspired by a couple named "The McIntyres", who retired with much wealth despite having normal jobs. Their main secret was to automate payments into their savings and investments, because humans can't be trusted to just do it on a regular basis.
Bach says that budgets don't work because they are hard to stick to. Instead, deduct money into your savings account automatically each month. This is true to an extent, but budgets are important because they are like a map that helps you to chart your progress. A budget is like a fuel gauge on a car, which tells you how much gas you have left. I'm convinced you always need a budget, even if its difficult to stick to.
The latte factor is explained, and this means keeping an eye on small expenditures such as coffee, because they add up to more than you think.
Bach says the two main keys to financial success are: first, pay yourself first, second make it automatic. The paying yourself first bit is derived from the book The Richest Man In Babylon, but Bach says that many people say it but few actually really do it properly, so the procedure must be done via regular direct bank debits.
Homeownership is seen as a vital component to getting rich, and Bach says a mortgage must be paid off as early as possible in order to avoid big interest repayments. Short term pain, for long term gain. Bach says you can't get rich renting, and landlords get rich while people who rent stay poor. You aren't really in the game of building wealth until you own some property. Bach says you must buy a house, and pay it off early via automatic bank deductions.
Downsides are that Bach says you can become a millionaire by starting early enough, and investing into investments that compound interest at 10% per year. Quite a few finanicial books and gurus say a similar thing, but the reality is that safe investments such as banks generally give out a tiny return of roughly 4% interest. One finance guru who offered rates of 10% return consistently, was the worlds biggest fraudster, Bernard Madoff, and that was one big con. You will not get 10% consistent risk free returns on your money from the bank over many years. 3% is a more realistic figure backed up by historical and current bank data. What is the highest return you were ever offered for saving with your bank? How long did that offer last for? This shoots Bachs whole 10% consistent returns plan in the foot. Nevertheless, saving money over many years, even at a small interest rate of 3% is far better than doing nothing.
This is a very short and simple book, but it can drag out a point over an entire chapter, luckily it is not overly excessive in this. Sometimes repetition is the best way to learn. Is this book better than "Start Late, Finish Rich"? I think not, because "Start Late, Finish Rich" has more of an urgency to it, as many people will not think seriously about their finances until later in life.
Moneyseeker3000 rating: Three stars out of 5 for "The Automatic Millionaire"
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