Published on http://www.aggietownsquare.com on October 21, 2009.
"How I turned $1,000 into $5 million," "Get rich playing games," "Rich Woman," "Life sucks, get rich" and "How to make money for dummies" are just a handful of the "get rich quick" titles I found while looking for finance books online. With shiny gold covers, flashy text and mounds of green bills stacked in the background, one thing is certain: these books are a load of crap. I'm not very old, and I haven't experienced much in my life, but I know that money doesn't come that easy. When I enrolled in family finance this semester, the teacher instructed us that we would need to purchase and read "The Automatic Millionaire." I quickly categorized the book with the rest of the above mentioned list. I distrusted the book even more when I saw the little gold sticker on the cover that read, "Do it once, the rest is AUTOMATIC!" Why on earth was a university professor requiring us to read such balony? I would soon find out.
Turns out, the book was quite interesting. Not only did I enjoy reading it, it actually gave legitimate and plausible financial advice and made me want to do something about my financial situation. The basis of the book, by David Bach, is that regardless of your self-control, budgeting skills, paycheck or financial circumstances you can be become a millionaire automatically. Yes, it sounds like another gimmick, but Bach makes some convincing points that his system can make anyone a millionaire. I don't want to give it all away (because aren't these financial books all about suspense!?), but here are a few important things I learned from the book that anyone can apply right now.
1. The way to wealth is not get-rich-quick schemes and risky investments. Financial success is the result of slow and consistent savings: the sooner begun, the better.
2. Budgeting doesn't work. Unexpected expenses come up and people don't stick to the planning and self-control a budget requires. The solution? "Paying yourself first." A concept people have heard since they first received allowances in elementary school but that most don't practice. Doesn't it make sense? You pay the government, you pay the bills, you pay for groceries, gas and clothing, why not actually pay yourself?
3. The key to making "paying yourself first" a success is making it automatic. If contributing regularly to savings isn't made automatic it falls through the cracks just like budgeting. So, Bach recommends somehow automating saving money, just like taxes or auto-bill pay. I was unaware, but many employers make it possible to automatically take money from your paycheck and directly deposit it into a savings account (good) or a retirement fund (better). Bach recommends starting small (saving 4-5 percent of your monthly paycheck) and slowly increasing the percentage saved. The best part is that once you tell automate the process, it happens every month without you even thinking (hence the "automatic"). You don't consciously have to write a check or transfer money into a savings account, your bank or employer does it for you automatically.
4. It doesn't take a huge paycheck to be wealthy. The book tells of a couple who made about $45,000 per year, paid themselves first and made it automatic. Most of their adult lives they were saving 15-20 percent of their paycheck. The couple retired at the age of 50 with their home paid off and approximately $2 million in savings, retirement funds and assets. Sounds like a hoax, right? Wrong (at least, if we can trust Bach).
5. Discover your "Latte Factor:" candy bars, a drink from the Quickstop, Starbuck lattes, a taco from the Hub or a bag of Swedish Fish. What are the little things you spend money on every day that you could cut back on? Yes, Bach pulls the "if you saved the $3 you spent everyday on lattes and put it in a retirement fund you could be a millionaire" card, but he backs it up with some convincing evidence of it working. Go without the $3 pizza in The Hub and pack a sandwich, or forgo the $4 latte and make your own. With the money saved, begin and contribute to your automatic savings program.
6. Make sure credit cards are working for you (not the other way around). Credit cards are useful but not when you stack a balance with 14-percent interest. Pay off your credit card every month. People in debt never become millionaires.
These are simply snippets from the book that I found helpful and applicable to anyone's financial situation. Did it spark your interest? My shameless plug for "The Automatic Millionaire" worked. This book is a fast read that will motivate you to take charge of the direction your finances are going. Does it sound cheesy? Yes. Fake? Maybe. But I guarantee that you'll learn at least a thing or two that you can apply to be headed down the path of a millionaire.
-karlie.brand@aggiemail.usu.edu
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