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BFN Book Review: The Automatic Millionaire
A Powerful One-Step Plan to Live and Finish Rich
By David Bach
BFN Book Reviews
My, my, my, I have not done a BFN book review in a long, long time. The main reason is that I have not finished a PF book in quite a while, actually. I’ve started some, but have not been able to make it through any (busy, busy, busy). Well, I was poking around at the library the other day and picked up one I’ve been meaning to read for a while, David Bach’s The Automatic Millionaire, and it didn’t take me very long to make it through this book.
What is this book about?
This book is a general personal finance book. It pretty much covers the basic PF topics you’d expect to see in an overview book and it doesn’t go into tremendous detail on them. For instance, there is no detailed explanation of mutual funds or asset allocation or anything like that. But its power is in its simple message – figure out how you want to save, invest, pay down debt, and then automate all of it. Sure it’s pretty simple, but it is also powerful and effective.
Who is the author?
David Bach is a financial planner who has written a number of books and hosts seminars under the “Finish Rich” flagship. His other books include Smart Women Finish Rich, Smart Couples Finish Rich, and The Finish Rich Workbook.
What are the best parts of the book?
As full disclosure, I must admit up front that this is my kind of book! The main one that Bach teaches is automating as much as possible in your financial life. I wholeheartedly agree with this concept and I believe that I am in much better financial shape today because I automated some of my financial strategy years ago.
Besides automation, another area where the author will grab some proponents is that he hates budgets. If you hate budgets, then this is the book and the plan for you (and if you hate budgets and love automation, you are floating on cloud 9 when reading this book). Unlike Dave Ramsey, Bach claims that budgets don’t work because they are unnatural and no fun. Instead, he proposes avoiding budgets by basically automating as much of your financial plan as possible.
Another foundational concept the author presents is to pay yourself first. This, again, is critical to achieving your financial goals. If you wait until the end of the month or year to save, there won’t be anything left to save. Instead, you must do your saving at the beginning of the month before taking out any money for bills and living expenses. And after you decide how much to pay yourself first, then you automate this process.
If you are asking, “David, where do I find this money with which to pay myself first?” well, he has an answer for you there. He uses the term “The Latte Factor” to explain those things that, though they are small expenses, add up over time if we do them often enough. He challenges his readers to track every penny of spending for a few days to expose their Latte Factor, whatever it may be. He then proposes that they start by cutting down on these expenses and saving some of that money instead.
Finally, and what I found most interesting in this book, is that the author devotes a chapter to automated giving. Again, I do feel that tithing is of critical importance to a financial plan (and I automate my giving as well). He is very careful not to offend anyone with this chapter but he does discuss the importance of giving and mentions how those who give money away tend to have more money flow back to them.
Finally, Bach does a great job of encapsulating why we should be taking care of our finances and planning for our futures (hint, it’s not just to get rich and buy a huge mansion or something):
Becoming an Automatic Millionaire is not simply about accumulating wealth. It’s also about relieving stress and worries about the future-about putting yourself in a place that enables you to enjoy life now as well as in the future. In other words, having an automatic plan should not only change your future, it should also change your present.
What is not-so-good about the book?
As I mentioned, this book is not a complete detailed overview of everything financial. On second thought, maybe that is actually a good thing. If you are looking for detailed investing strategies or asset allocations, then this book will not contain what you are looking for. Well, that’s pretty much all I’ve got – there’s not much to complain about with this book.
So what is my recommendation?
I definitely recommend this book for a read – especially if you don’t like budgets and you like automation. It is a quick read, the author keeps your interest, and he provides very practical advice. In fact, he goes so far as to include numerous phone numbers and websites for specific companies to make it oh so easy to take the next step and get started.
In fact, this book actually inspired me to take action. As a result of reading this book, I increased the contribution into my 401k. I also thought about increasing my wife’s contribution and accelerating our mortgage, but haven’t pulled the trigger on those yet. That notwithstanding, what is more important than a book that actually causes you to take action? So grab a copy of the book or check it out from your local library (that’s what I did), but do read it.
Want to borrow this book? Search your local library
Want your own copy? Buy this book now at Amazon.com
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Thanks for any excellent book review, it’s always helpful when others make life and little easier and do the hard work for you by reviewing the key parts of the book, so that you can decide if you want it. I agree with the point about automating as much of the financial aspects as possible
I agree, I really enjoyed Bach’s book and I read it at a crucial point in my financial life that it really helped me. It is a simple book, but that is the beauty of it – IMO
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