★ Rockstar Book Review: “The Automatic Millionaire”

Posted January 27, 2017 6:00 am by with 7 comments

Book:
David Bach
Price:
$13.47

Reviewed by:
Rating:
4
On January 27, 2017
Last modified:January 27, 2017

Summary:

A book worth reading for anyone who has not reached their regular saving and/or debt repayment objectives.

automatic millionaire book

This is part of our Rockstar Book Review series.
Be sure to check out all previous books we’ve covered!

“The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich” by David Bach

rockstar rating 3 and half stars

Who it’s for: Anyone who finds it difficult to save money.

Readability: HIGH. Bach keeps his writing light, and the font size, layout and sections invite us to keep turning the page. You can tell that he really wants us to succeed throughout this 200-page book. Bach’s writing style is inviting enough for me to want to read another one of his books: “Smart Couples Finish Rich“.

What I liked about it: Bach opens with a story about meeting a millionaire-next-door-type couple, Jim and Sue. It’s a great hook that he repeatedly goes back to throughout the book. His advice about automation is also simple, easy to put into practice, and proven effective as a saving and investing strategy. Finally, the Time Value of Money Chart he included in the second chapter sends a clear message that acting now is better than later.

What I didn’t like about it: The author’s emphasis on homeownership and watching the little expenses (“The Latte Factor“) side step the fact that housing and transportation are the two most significant expenses for any household, and that a good portion of the spend on these are wants and not needs (due to a general focus on luxury vs. functional “requirements” and inflated home values). Finally, the automation suggestions become repetitive, as the means of automating tend to be similar for every type of savings and investing activity.

Find it @ Amazon for $13.47 || Or free at the library :)

Solid Advice That Skirts Some Issues and Overemphasizes Others

Here are the main points Bach covers in “The Automatic Millionaire“:

  1. Want to be a millionaire? Pay yourself first.
  2. Automatic allocation of money helps us meet our goals.
  3. Homeowners are significantly wealthier than renters.
  4. Credit cards are a significant driver of consumer debt.

#1. Pay Yourself First

The author stresses the fact that rich people focus on paying themselves first before paying any other financial obligation and that this behavior works at virtually any income $40K and up. And that, by keeping that money out of sight, we’re less likely to spend it, especially on silly daily purchases that really add up (latte anyone?). As a result, all types of savings and investments experience regular growth thanks to regular contributions and the power of compounding.

[Y]ou’ve got to accept the idea that regardless of the size of your paycheck, you probably already make enough money to be rich. (pg. 36)

#2. Automatic Allocation of Money Helps Us Meet Our Goals

Knowing and doing are two different things. Bach explains that, when it comes to managing our finances, the key to success is to automate. He stresses the need to automate our retirement savings, regular savings, emergency savings, debt repayment of all types (mortgage, car, credit cards, other), and any accelerated repayment plan we choose to take on.

Another key message is that this automation makes it less likely that our household needs to operate on a budget to avoid mindless spending (though the allocation itself is a budget of sorts that limits our spending) as well as less likely that we will stop the behaviors once the system is in place, especially once we experience its benefits like increased peace of mind.

#3. Homeowners are Significantly Wealthier Than Renters

The author states that when compared to renters, homeowners are vastly more wealthy on average. Bach also asserts that owning a home is the best investment anyone can make* and that a family should accelerate their mortgage payments when possible to pay their home off faster.

Unfortunately, these blanket statements can be dangerous to follow blindly, as are the book ends of affordability he includes in the book. Homeownership needs to be carefully weighed against what a family wants from an affordability, lifestyle and obligation perspective. Ironically, earlier in the book and in a different context, Bach states this truth:

The problem with most financial planning and financial education is that it focuses on numbers and not on people’s lives. (pg. 71)

This belief in homeownership leads many to make decisions that leave families with:

  • A home they find difficult to afford, often because it is larger than needed and/or in an inflated market, not to mention fluctuating interest rates over the payoff period.
  • Significant property maintenance costs they did not anticipate.
  • A dependence on two incomes to cover the mortgage and other living expenses.
  • Significant fees associated with homeownership when families move often: real estate commissions and closing costs.
  • Increased commuting time or other lifestyle changes that are difficult to appreciate until a family starts living in the home.

*One of the reasons this is the case is that, as stated in the book, it tends to be the only significant source of savings many families in Western society have. That, in and of itself, is not reason enough to call it a “good investment”. A primary residence is an asset, not an investment.

#4. Credit Cards are a Significant Driver of Consumer Debt

automatic millionaire backWith their high interest rates and low minimum payments, Bach is not a fan of credit cards unless we pay them off in full each and every month. He emphasizes that millionaires don’t buy what they can’t afford, and that means not using credit cards for items we can’t afford to pay for in cash.

The author makes strong points about the negative impact carrying credit card balances can have on a household, from the regular monthly obligation to the astronomical total interest paid on often-inconsequential consumer purchases. His advice? Pay them off and kill them off as soon as the last payment has been made.

Bottom Line

Despite its patent generalizations in some areas, “The Automatic Millionaire” is a book worth reading for anyone who has not reached their regular saving and/or debt repayment objectives.

Where you can find the book: Amazon @ $13.47
Where you can find the author: DavidBach.com

Other books I’d recommend to help you tackle the hows of saving and paying off debt include “The Total Money Makeover” by Dave Ramsey, “Your Money or Your Life” by Vicki Robin and Joe Dominguez, “The Simple Path to Wealth” by JL Collins and “I Will Teach You to Be Rich” by Ramit Sethi.

*****

PS: To see a list of all previous book reviews, click here.

All book reviews include affiliate links to Amazon.com or other places they’re sold. Thank you to all those who support our site by going through these links!

Hélène is Rockstar Finance’s Curator of Books, and Blogger at FreetoPursue.com. A perpetual student, speaker, writer and coach, you’ll often find her reading, researching or writing. She also likes travelling and hanging out with her husband and their couple of furry four-legged friends.
★ Get The Rockstar Newsletter ★

Love our stuff? Get our top 3 curated articles + our original series automatically sent to your inbox in one compact email, M-F. You won't ever miss a thing :)
NAME:
EMAIL:

7 responses to ★ Rockstar Book Review: “The Automatic Millionaire”

  1. DA January 27th, 2017 at 2:48 pm

    I have a soft spot for this book and it will always have a place on my bookshelf. It was the first thing I read to get me interested in personal finance and taking control of my financial future. Having said that, I agree with the rating and this review.

    I disagree with some of the content and a lot of the projections seem rather optimistic, but the simplicity of the message and the actionable advice of taking advantage of automation was great for me to read when getting started.

    Reply

    • Hélène Massicotte January 27th, 2017 at 5:34 pm

      Hi there DA. I’m happy to hear the book resonated with you, despite a few reservations.

      Reply

    • J. Money January 28th, 2017 at 6:18 am

      Same here DA – one of the first books I read too from cover to cover back in the day. I wasn’t smart enough to catch on to the overly optimistic parts (hah), but whatever gets you to take action and *pay attention* to your money is all good in my books… No pun intended :)

      Reply

  2. FIscovery January 27th, 2017 at 5:13 pm

    Not having a clue about personal finance or money management, I remember how excited I felt after reading this book (first foray into this space) – just some really sound advice – pay yourself first, set it and forget savings, home ownership, be careful with credit cards – nothing overly complicated and it was just perfect to get me started on my money journey.

    Reply

    • Hélène Massicotte January 27th, 2017 at 5:35 pm

      Sounds like it got you off to a good start (and sounds like you kept up the momentum too). Good stuff.

      Reply

  3. Jef January 30th, 2017 at 11:03 pm

    Agree with your review here Helene, while I agree with the principles of automating and paying yourself first for me there wasn’t particularly much else to be gained from the book..

    Having said that it offers solid advice for those starting out!

    Reply

    • Hélène Massicotte January 31st, 2017 at 7:51 am

      I agree. Any money book that presents even one principle that can significantly improve a household’s financial situation is worth a read!

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *