NGW Book Club | April

April Read: The Automatic Millionaire by David Bach.

A guide on how simple it can be to BECOME A Millionaire  

Automate Your Life and Develop Millionaire Habits

OVERVIEW: Develop Millionaire Habits

I now have a tie for favorite personal finance book of all time, The Automatic Millionaire.  (Tied with Love Your Life Not Theirs by Rachael Cruze).  I love the simplicity of the plan.  Like Dave Ramsey followers everywhere have learned, grandma knows how to do finances best.  And it often includes CASH.  The plan should be so simple it seems boring.  Your investment plan likewise should be boring.  And my favorite suggestion of all time from this book: It all needs to be automated.  You need to pay yourself first.  It is all about priorities and developing millionaire habits.

Automation is huge.  Your time is money, time is limited, and you are worth it.  Take steps to automate your life as much as possible today.  Automation for me cuts down on stress and gives peace of mind.  Goodbye late payments.  Without automation, failure is a certainty, per Bach.

I learned firsthand the art of automation years ago, but it did not hit me until this year how important it can be. I thought everyone automated their payments.  Woa, I was wrong.   We were in our Financial Peace University Class, and a fellow classmate was talking about all the ways she uses cash.  She uses cash to pay every single bill.  Her gas, her mortgage, her water bill, her phone.  Everything.  She talked about all the time (and GAS!) it took to drive around to each place to pay each bill, and that it made her realize more where her money was going.  While I am ALL FOR using cash to help you stay on budget, paying a water and gas bill with cash was getting a bit out of hand, in my mind.  We later would learn that she was unemployed, with two children at home, and was about to lose her house.  She talked about how she never had enough time in the day.  She struggled to find time to get a job.  That is when it hit me.  Instead of taking all that time, driving from place to place to pay bills you MUST pay anyway, she should have been automating and getting those precious hours back.

And wouldn’t we all love to get some hours back?  What would you do?  Get another job?  Take more time with your kids?  Maybe finally take a nap again?  Ah what a dream.  All the bills, paying themselves.  Automation is a powerful thing my friends.

Millionaire Habits: Automate Your life

Another thing I thought while reading this book was that it was not much different than what I already knew.  Chapter one was somewhat underwhelming for me.  However, keep reading!  It gets better.  I am glad I kept going.  By the end, I didn’t want to put it down.

I would also like to give a kudos to the amazing Whitney Hansen, who recommended this book on her personal finance blog.  She said this book changed everything and inspired her blog!

Top 6 Quotes:

“If your financial plan is not automatic, you will fail!”

“You have got to accept the idea that, regardless of the size of your paycheck, you probably already make enough money to become rich.”

“When two people work together to accomplish a goal, they can usually achieve it twice as fast as either of them would have working alone.”

“If you are serious about finishing rich, you will eventually need to own some property.”

“Your life should be interesting – your investments should be boring.”

“The American way: The more we make, the more we spend. And if we’re not careful, the more we owe.”

Action Step:

I realized that I can buy all the personal finance books in the world, and it won’t matter unless I really implement it.  Likewise, I know a lot of people who know things they should be doing or implementing, but never take action.  This is probably why there are a lot of overweight dietitians.  And fitness experts that have fallen off the bandwagon.  So, today I called Wells Fargo (meh) and changed our mortgage payment to biweekly payments.  In under 10 minutes, they put in a “ticket” to change my account to biweekly payments FOR FREE.  I just had to ask.  And yes, I will be double checking to make sure it happens.  For reals.

Why Bi-Weekly PAYMENTS

Because there are 52 weeks in a year, there are 26 biweekly periods. So if you make 26 half payments, that is the same as making 13 regular monthly payments, or 1 extra payment per year.  And cut years off of the life of your loan.  Yes, please.  I am doing 1 extra payment per year without trying.

What I didn’t Like:

The book spends a lot of time on traditional IRA and 401K/403B plans.  But I personally am a huge fan of the Roth IRA and 401K/403B.  Dave Ramsey, who is so near and dear to my heart, also recommends Roth options.  Maybe it is the little “instant gratification” monster inside, but I LOVE to look at my retirement accounts and think how it is ALL MINE.  (picturing Yertle the Turtle) All of it, taxes have already been taken out.  All that is there will be available at retirement.

What I implement in my current personal finance plan:

  1. Make everything automatic
  2. Get rid of debt
  3. Make retirement savings automatic

On the Dave Ramsey plan, when in Baby Step 2, you STOP contributing to retirement.  This is the place where I choose to deviate away from Dave. (sad)  I do a “Dave Hybrid” which I love.   I contribute just enough to get my workplace match, and no extra.  At my place of work, this is 4%.  When I finish BS2, I will implement Bach’s plan.  I am currently debating between 15-20% because retiring early sounds amazing.  But funding college for our currently imaginary children (hopefully less imaginary in 2 ish years), is also important to us.  So, it is going to be all about that balance.

So what will I do after BS2?  I plan to invest or save my raises, automatically.  At my job, we get an annual raise.  What I have learned over the last two years is that, every year I am SO EXCITED for my raise to take effect.  However, I always overestimate that 2-4% impact on my pay.  I hardly notice a difference.  But, 2-4% can have a HUGE impact on your retirement.  Thus, I plan to bump my retirement savings up according to the raises I receive.  The plan?  Mid-March every year, I will log into my retirement accounts and bump up my retirement contribution percentage.  In about 5-6 years I could be doing 20% without hardly noticing.  AUTOMATICALLY.  Like I never even knew it happened.  By the time my imaginary children are no longer imaginary and will be heading off to school, I will be contributing 20% and I can start keeping the raises I make!  Or less glamorously saving them.  That is the exciting part.

Would I read it again?

Yes!  And I plan to buy it for family members too.  And graduation gifts.  Books for everyone, like Oprah.

The Automatic Millionaire: Retiring a Millionaire does not have to be hard.

Cheers to falling in love with reading again!

Sarah

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