David Bach’s The Automatic Millionaire is one of the most popular works in the personal finances area. Its title is a huge eye-catcher, and readers say that its content is also very useful and down-to-earth. David Bach focuses on two basic concepts.
The first is that people should start to pay themselves first by automating contributions to retirement accounts and making other investments, before they start to pay the bills and buy the things necessary for the everyday life. The author shows that the compound interest can make even a tiny sum of money can grow into a fortune over decades. People who have tried this concept say that it works.
Simple maths show that if someone puts away only $10 a day, and his investments earn an average of 10% a year, after 40 years he will have a staggering $1.66 million in his account. While most people think it is impossible to turn $10 into a considerable wealth, the power of compound interest makes it a reality. And if this process is made automatic, saving money becomes really easy.
The second concept introduced by David Bach in The Automatic Millionaire is The Latte Factor. The harsh reality is that many people spend more than they make. However, everyone has small, useless daily expenditures that can be reduced. These small expenditures, if invested, can also build up into considerable sum of money. For example if someone manages to save about $11 a day on the small snacks and lattes, over a week it will add up $77. Over a year, that would be more than $ 4,000. If this sum is invested at an average of 10% annual return, the total balance of the account can reach $1 million over 25 years.
David Bach’s The Automatic Millionaire is the best work ever written about personal finances. The author writes gives very simple concepts and techniques that are guaranteed to work for everyone.