The Automatic Millionaire

The Automatic Millionaire is an actionable, step-by-step plan for building wealth without being disciplined by relying on fixed percentages, small payments, and automated transactions.

As the saying goes, there are a million ways to make a million dollars. And while some might suggest focusing on only a few things, like earning more, killing debt, and investing as much as you can, others make good use of frugality.

For example, I remember Ramit Sethi rebelling against the idea of denying yourself your precious latte in I Will Teach You To Be Rich. David Bach, however, thinks that this latte money is the exact cash that could make you a millionaire.

He calls it the “Latte Factor.” It means that by saving just a little every day, you could retire early and rich. For example, if you put $10 a day – the equivalent of one $3.50 latte and a $7 pack of cigarettes – into a brokerage account that nets 10% a year on average, you’d have $700,000 after 30 years and $2 million after 40.

David has coached many clients and couples throughout the years, but no other family showed him the power of saving a little as clearly as the McIntyres. They established a retirement plan early on and gradually raised their savings from 4% of their income to 15%.

As a result, they accumulated about $2 million worth of assets by their early 50s, despite never earning more than $40,000 per year!

One way the McIntyres achieved so much with so little is the idea that no one deserved to get a chunk of their income more than themselves. What does that mean? Well, we all have unavoidable expenses. Bills we must pay. Taxes. And so on. But if we give all these other people and businesses our money first, there’s usually not much left! So, instead of spending however little we have at the end of the month out of frustration, we should invest a fixed cut of our income into our dreams first. As long as you keep it small, there’ll always be enough money left to pay for everything else. In the US and many other countries, you can even make use of pre-tax retirement accounts, which take money out of your gross income, not the net. With these, you might even have more money to spend after taxes than you’d otherwise have! Even if these aren’t available, try to set up a system that automatically takes a certain percentage out of each one of your paychecks. David says that if you can manage to save and invest just 10% of your gross income or roughly one hour’s pay every day, you’ll end up just…