The Automatic Millionaire, Expanded and Up - David Bach

The Automatic Millionaire and David Bach’s other books have received widespread praise. Critics praise Bach’s simple, actionable advice and ability to make learning about personal finance fun and accessible.

The Automatic Millionaire teaches readers a simple system for building wealth over time without requiring a high income, budgeting, strict discipline, or risky investments. The system aims to make saving and paying off debt automatic.

Bach wrote Start Late, Finish Rich to show that it’s never too late to take control of your finances and plan for a secure retirement. Smart Couples Finish Rich and Smart Women Finish Rich provide advice tailored to couples and women.

The Automatic Millionaire Homeowner, Debt Free for Life, and Go Green, Live Rich provide guidance on buying a home, eliminating debt, and saving money through environmentally-friendly changes.

The story of Jim and Sue McIntyre in The Automatic Millionaire illustrates Bach’s key principles. The McIntyres built wealth and retired early by:

• Paying themselves first through automatic contributions
• Spending money only on the essentials
• Paying off their mortgage early
• Avoiding debt and impulse purchases
• Letting their money work for them over time through investment

The “Latte Factor” refers to the small, habitual expenses that drain money away each day without people realizing it. Cutting out the Latte Factor and saving the difference can lead to dramatically greater wealth over time thanks to compounding.

The key lessons are: spend less on small indulgences, pay yourself first through automatic saving, avoid debt, pay off mortgages early, cut wasteful spending, start saving young, keep costs low, and let your money work for you over the long run. Building wealth is more about how you manage your money than how much you earn. Small changes can have a huge impact.

In summary, Bach’s advice focuses on making gradual but impactful lifestyle changes that allow you to spend less, save more, and put your money to work building wealth automatically over time. His approach aims to give readers financial security and freedom regardless of their income or how early they started saving. The trick is making the right choices and then setting up a simple system to make achieving financial goals inevitable.

Here’s a summary of the key points:

• Contribute at least 10-15% of your income to tax-advantaged retirement accounts like 401(k)s and IRAs. Start at whatever percentage you can and increase it over time as your income rises.

• Choose to contribute a percentage of your pay rather than a flat dollar amount so your contributions automatically increase with pay raises.

• Contributions are less painful than expected because the money is deducted before taxes. Your take-home pay will still seem largely unchanged while your retirement balance grows significantly over time.

• Take full advantage of any matching offered by your employer. That’s free money that can really add up over the years.

• Consider using automatic contribution increase options if offered. This makes increasing your savings rate painless and helps ensure you save enough over the long run.

• The money contributed can grow tax-deferred for decades. Thanks to the power of compounding, even modest initial contributions of a few percent can accumulate to a sizable sum over time.

• It’s important to start saving for retirement as early as possible. Time is your most valuable asset due to how long the money can compound. Start saving now, whatever the amount, rather than waiting to save more later.

• You have control over the percentage and can decrease or pause contributions if needed. But avoid doing so unless absolutely necessary. Consistently saving over the long run is key.

• Review your retirement accounts at least once a year to make sure your money is allocated properly based on your timeline to needing the funds. Make any necessary changes to ensure strong growth.

• Saving for retirement should be a lifelong habit. Though it may seem far off now, your future self will thank you for the financial security an employer-sponsored retirement plan and diligent saving over time can provide.

The main message is that saving diligently for retirement through employer plans like 401(k)s over your working life is one of the most significant financial gifts you can give yourself. Make contributing the first expense in your budget each month, increase it as your income rises, start as early as possible, and remain consistent for decades to accumulate financial security for your future retirement.

• Contribute at least enough to get any matching offered by your employer. Not doing so is leaving free money on the table.

• Increase your contributions by at least 1-2% each year. Small, regular increases will add up over time without too much sacrifice. Aim for saving 10-15% of your income for retirement.

• If possible, max out your retirement plan contributions. Contribution limits are set each year by the IRS for 401(k)s, IRAs, etc. Maxing out is one of the best ways to build wealth.

• Contribute automatically through payroll deduction. This makes saving for retirement a habit and the money comes out before you have a chance to spend it.

• Choose a simple investment approach like target date funds, balanced funds or robo advisors. Contributing is more important than how you invest. These options provide automatic diversification and rebalancing.

• Don’t delay in enrolling in your employer’s retirement plan or setting up IRA contributions. Time and compounding returns are two of the biggest factors in accumulating wealth.

• If self-employed, look into retirement plans with high contribution limits like SEP IRAs, SIMPLE IRAs and solo 401(k)s. Putting away a large portion of your income in a tax-advantaged way can really help build wealth.

• Take steps each year to increase your financial literacy. Learn about investing, taxes and money management. Make it a habit to improve your knowledge and skills over time.

• Consider working with a financial advisor for help creating a comprehensive financial plan. A good advisor can help you set financial goals and determine how much you need to save and invest to achieve them.

The summary outlines several of the key principles and strategies for maximizing your retirement contributions and building wealth over the long run. Following these principles consistently can make a big difference in your financial success.

• Increase your retirement plan contributions by at least 1-2% per year to take advantage of compounding returns and build wealth over time. Making automatic increasing contributions is the easiest way to save enough for retirement.

• Open an IRA, like a Roth or traditional IRA, in addition to any employer-sponsored plan like a 401(k). IRAs provide more investment options and potentially lower fees. Contribute as much as allowed each year.

• Have an emergency fund with 3-6 months of essential expenses. Keep this fund in a savings account for easy access, not buried in the backyard! Use it only for real financial emergencies, not discretionary spending.

• Take action now to start saving for retirement and building your emergency fund. The sooner you start saving, the less you need to put aside each month thanks to the power of compounding. Review and increase your contributions over time as your income rises.

• Make saving and investing automatic by contributing each time you get paid. This makes building wealth a habit, and you’ll achieve financial security and independence as an Automatic Millionaire.

• Keep good financial records and review your accounts regularly to make sure fees are low and your money is working for you. Shop around at different providers to get the best returns at a low cost.

• Setting and tracking goals will keep you motivated to achieve financial freedom. Reward yourself for meeting milestones to stay on track for success. You can do this!

The key message is that by taking small automatic actions and reviewing your progress regularly, you can achieve financial security over the long run. Start saving for the future and paying down debt today using the automatic habits of the Automatic Millionaire. Let me know if you have any other questions!

The key principles the author learned from The Automatic Millionaire are:

1. Automate your finances. Set up automatic deductions from your paycheck for saving, investing and paying off debt. This makes building wealth a “set it and forget it” process.

2. Pay yourself first. Take your savings and investing deductions off the top of your paycheck before paying any bills. Save at least 10-15% of your income for retirement and other goals.

3. Start small and increase over time. If you can’t save 10% at first, start with whatever amount you can and increase it regularly. Small, consistent steps will get you there over time.

4. Have money auto-deducted and auto-transferred. Set up automatic transfers to move money from checking to high-interest savings and investment accounts. This makes saving simple and prevents you from spending the money.

5. Automate bills and extra debt payments too. Set up auto-pay for credit cards, utilities and other monthly bills. Make automatic extra payments on high-interest debts like credit cards to pay them off faster.

6. Review your progress regularly. Check accounts like Mint.com to see your money growing in savings and investments and debts decreasing over time. This keeps you motivated to continue the automatic habits.

7. Take action and get started now. Don’t delay in setting up an automatic money management system. It’s simple to do but most people don’t act, and they miss out on the benefits as a result. You have to make the decision to change your financial future.

The key to becoming an Automatic Millionaire is taking action. By applying the principles of automating her money and paying herself first, the author has built up substantial savings in her retirement, children’s college funds and emergency fund. She is secure in the knowledge that she is creating a bright financial future for her family, even while working two part-time jobs. The system really works if you work the system. Anyone can do it by starting small but starting now.

David Bach is the author of the personal finance book The Automatic Millionaire. In the book, Bach promotes an automated system for building wealth over time through consistent saving and investing. The key steps are:

1. Save money automatically from each paycheck by setting up automatic transfers to move money from your checking to your saving and investment accounts. Start with whatever amount you can and increase it over time.

2. Pay off debt automatically by setting up automatic payments for credit cards and other debts. Pay at least the minimum but pay more when possible to eliminate high-interest debts.

3. Open tax-advantaged retirement accounts like a SEP IRA or Solo 401(k) if self-employed. Contribute automatically to these accounts from your paycheck or business revenue. Increase contributions annually.

4. Invest new money in low-cost stock index funds for the best long-term returns. Choose a simple portfolio and invest money regularly through automatic transfers.

5. Make saving and paying yourself first a habit. Review your expenses and look for ways to cut out unnecessary spending so you can put more money to work for your financial future.

By following these principles of automating your finances, living below your means, and using the power of compound interest, Bach argues anyone can become an “automatic millionaire” over time. Bach founded Finish Rich Media and teaches these concepts through books, seminars, media, and his former work as a financial advisor.

The key takeaway is that with automatic saving, investing, and debt payoff, you can build wealth and achieve financial freedom without much additional effort. Bach’s simple system has resonated with many readers and helped them gain control of their finances.