This book shows how anyone can turn a modest income into a fortune over time.
The author demonstrates that earning a million dollars does not require any complicated financial wizardry, or even a disciplined spending budget – it only takes one simple step!
You do not have to read the entire book if you don’t have time. This book review provides an overview of everything you can learn from it.
At the end of this book review, I’ll also tell you the best way to get rich by reading and writing.
Without further ado, let’s get started.
Lesson 1: Pay yourself first before you pay anyone else
Taxes, insurance, and rent are all expenses we cannot avoid. Only after we pay for these expenses can we set aside some money for ourselves, right? Not quite. While it may seem that this order of things is mandatory, the truth is, you can reverse it.
Giving money to yourself is the first thing you should do. Ultimately, you work to support the well-being of your family and yourself, not those of other people.
Setting up a pre-tax retirement account can immediately correct the order of things and ensure that you are paid first.
Not only can money be automatically deposited into a savings account, but it is also a smart financial move. The money in your retirement account will only be taxed when you withdraw it, so the tax rate will likely be lower than the one you’re paying on your current income.
Furthermore, you will now have more pocket money as a result of diverting these funds. Let’s say you earn $50,000 per year. Assuming that the current tax rate is 30 percent, that leaves you with a net income of $35,000, and if you put aside $5,000 for retirement, you will end up with $30,000.
If you use a pre-tax retirement fund, that $5,000 will be taken straight from your $50,000, leaving you with $45,000 that will be taxed at 30 percent, which leaves you with $31,500. That’s an extra $1,500 a year to spend!
Investing at least an hour of every day’s earnings into future prosperity is now a priority.
Currently, the average American saves less than five percent of his income, which only adds up to 22 minutes per day.
To become an automatic millionaire, you need to save at least 10% of your gross income – the more the better – and by putting aside an hour’s wage, every single day, you will surpass that goal.
If you wait until the end of the year to set aside your 10 percent, you might not have budgeted properly. To save time, have the money automatically deducted from each paycheck. That’s what an automatic millionaire does.
Consider it this way: you can’t afford not to save at least $14 a day for 35 years. This will provide you with a small fortune of $1.6 million if you take 10 percent interest!
Lesson 2: Setting up automatic payments to savings accounts is the way to become an automatic millionaire
Let’s look at the McIntyres again, who despite modest salaries became millionaires.
In addition to paying themselves first, one of the secrets to their success was avoiding the stress and frustration that come with budgeting their spending.
As a general rule, if you need to be disciplined in order for it to work, it won’t work.
People are not designed to deprive themselves of instant gratification in order to reap some hypothetical rewards a few decades down the road, so we are hardly inclined to budget for the future.
The McIntyres decided to take themselves out of the equation after they argued a bit about saving money.
They decided to automate putting aside a portion of each paycheck rather than trying to control their behavior; they could decide the exact percentage they would set aside.
As soon as the decision was made, the automatic payment system was enacted, which deposited the money into a savings account automatically.
It’s easy to understand why this works. You will not be tempted to spend it if the money does not appear in your checking account!
The following tips will help you set up an excellent system for automatic saving.
Remember to utilize the pre-tax retirement account mentioned earlier. You will save a lot of money this way. Second, don’t assume you have chosen the best retirement plan for you. In fact, you should never assume you have one.
It may be possible to get a better interest rate. Make sure you have the best retirement account even if you are self-employed.
You might be wondering, what if I have no retirement plan? Create an individual retirement plan as soon as possible by visiting a bank, brokerage firm, or mutual fund company.
You should pay close attention to how your plan can protect you from market fluctuations as you review your options. Make sure the money you invest is in a portfolio that is diversified and contains a variety of instruments, such as bonds, cash, stocks, and Treasury bills.
Lesson 3: Make your automatic financial plan include an emergency fund
A steady and prosperous income is not guaranteed in life. Sleepless nights can be caused by this basic uncertainty, when you contemplate all the dreadful what-if scenarios involving pay-cuts or unexpected layoffs.
It makes sense for your automatic financial plan to include an emergency fund.
Having an emergency fund not only acts as a financial safety net, but it can also reduce stress and let you live a more relaxed life.
The advantage of being an automatic millionaire is that you build wealth while putting an end to all your energy and time spent worrying about your finances.
In case of an emergency, most Americans have less than three months’ worth of expenses saved up. It isn’t surprising that unemployment is a stressful feeling under these circumstances.
Saving up could reduce this fear and give you more freedom. By saving up between six and 18 months’ worth of wages, you’ll find it easier to say no to overtime offers from your employer or to change your career path altogether if you’re not inspired at work.
By automatically putting away 5 percent of each paycheck, you can start building an emergency fund.
Nevertheless, this is a real emergency fund and should only be used in case of disasters such as natural disasters or emergencies such as medical emergencies.
Just as with your retirement account, you should make sure your emergency account is with a reputable financial institution that earns you the right interest rate.
You can, for example, place your regular 5 percent payments into a money market account and earn more interest than you would in a typical savings account.
The government bonds are also a good option if you want to earn reliable interest, but be aware that they usually take a while to redeem.
You are still better off with either of these methods than keeping emergency savings buried in the backyard!
Lesson 4: Renting is more expensive in the long run. Invest in homeownership
Sue and Jim McIntyre were not only clever with their automatic savings plan. But they also made the right choice when it came to housing.
They owned two homes by the time they reached their early fifties; they lived in one and rented the other, which provided an additional source of income.
We could follow in the footsteps of the McIntyres and cease paying rent and become homeowners as soon as possible.
Essentially, renters pay their landlords around the same amount as they would if they were paying monthly mortgage installments. The end result is that, despite paying the same amount, renters have nothing to show for it.
The worst part is that all that money goes straight into the landlord’s pocket, keeping the tenants strapped for cash and preventing them from becoming homeowners.
There’s good news for those worried that they’ll never be able to pay off a mortgage: The rate of foreclosures – when a homeowner is evicted for not paying their mortgage – is currently less than 2%.
As you move from renting to buying, you’ll need to make some important choices, such as choosing the right kind of mortgage and figuring out how to pay it off quickly.
There are many types of mortgages available, so choose wisely. Using a fixed-rate mortgage makes sense when interest rates are low. You should set up a biweekly payment plan with your bank, rather than a monthly one, to make your mortgage payment faster.
In place of paying the monthly fee through twelve payments, you will make 26 half-payments, adding up to 13 full payments in a year. Getting your mortgage paid off as quickly as possible isn’t a matter of time alone. The result will be lower interest rates as well.
Using the biweekly payment plan, for instance, could save you over $44,000 on a 30-year $250,000 mortgage!
However, even if you implement all of these tips right now, you might be feeling buried under a mountain of debt. Let’s see how to get yourself out of this mess.
About The Author
The world-renowned financial expert David Bach has helped countless people improve their financial situation.
The New York Times, Wall Street Journal, BusinessWeek, and USA Today have all listed his books on their best-seller lists.
His books include Start Late, Finish Rich and Smart Women Finish Rich.
Buy The Book: The Automatic Millionaire
If you want to buy the book The Automatic Millionaire, you can get it from the following links:
How To Get Rich By Reading and Writing?
You must be an avid reader who is hungry for knowledge if you are reading this book review. Have you thought about making money using your reading and writing skills?
Thanks to the Internet, the world has undergone a massive change in recent years. Blogging has now become the best way to make money online.
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Warren Buffet said, “If you don’t find a way to make money while you sleep, you will work until you die.”
Instead of looking for a 9-5 job and staying in your comfort zone, it’s better if you become your own boss as soon as possible.
Find out how to build a blog and become a wealthy blogger today!