book reviews

3 Tips from The Automatic Millionaire that Have Stood the Test of Time

The Automatic Millionaire has been out for over a decade. There have been plenty of other personal finance books published since then. And yet, people continue to pick up this bestseller, which was re-released a few years back. That’s because The Automatic Millionaire has some tried-and-true tips that continue to stand the test of time. Here are three of them.

1. The Latte Factor

People love to make fun of this tip today because it’s so over-promoted as a money-saving tip. In fact, you’ll see many money-saving blogs with headlines similar to, “how to save money without giving up your daily latte.”

The idea, of course, is that if you spend $5 per day on a latte then you’re wasting thousands of dollars. The Automatic Millionaire highlighted this idea. In fact, author David Bach went on to write another book titled The Latte Factor.

Despite the fact that people love to make fun of the cliche, the lesson here is a valuable one. Spending on little things adds up. If you put those bills on a credit card, then you don’t pay the card in full each month, they add up even more. Pay attention to your daily spending, not just on lattes but on every little item. What can you cut out? Where can you cut back?

2. Invest Before You Budget

The first portion of The Automatic Millionaire is all about how you must pay yourself first. This is one of the first things that comes up in any review of the book, new or old. That’s because it’s solid advice.

When you get a paycheck, you should distribute money to your investments, including your emergency fund and your retirement accounts. Then you should take what’s left and use it to figure out the rest of your budget, including your living expenses.

This doesn’t come intuitively to a lot of us. It’s easy to get into the mindset that you need to pay your bills first then try to save whatever might be left. Nevertheless, the “pay yourself first” idea is a more solid way to set yourself up for a strong financial future.

3. Automate Your Money

This shouldn’t be novel advice anymore. It wasn’t even truly novel back when the book was first written. But nowadays, when we all have smart phones and there are so many different financial apps available to us, nobody should be manually moving their money around.

Automate your deposits. Automate your transfers into various savings and investment accounts. Set up automatic payments so that all of your bills pay out on the same day of the month. Get organized. Then, spend less time moving your money around and more time earning it.

Not all of the advice in The Automatic Millionaire has held true over time. A huge portion of the book is devoted to the concept that you should always buy a home, never rent. However, the original book was written before the mortgage crisis. People who went through that may now realize that there are caveats to this aspect of the book. That said, there is still some solid advice in there, even about home ownership. The Automatic Millionaire may not be a new book but it’s a long-lasting one as far as personal finance advice goes.

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