The Automatic Millionaire Book Summary

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Key Insights

Millionaire. It’s a word that conjures images of sprawling mansions and colorful yachts. Of snow-capped French chateaus and $500 bottles of wine, table-service style. The term millionaire connotes a pipe dream for many...and reality for a select few.

We spend our lives thinking that in order to achieve this highly sought after outcome, we would need to find a cure for cancer or discover the eighth continent.

But what if there was another, simpler way?

The Automatic Millionaire looks underneath the tightly-fastened lid of wealth and examines what it really takes to achieve millionaire status through practical, deliberate steps.

Let’s say it louder now for those in the back.

Who wants to be a millionaire?

Small Amounts Add Up

If you are one of the many Americans with an annual income hovering around $40,000 or less, you are not prohibited from becoming a millionaire.

In fact, it is entirely feasible to achieve millionaire status from meager means, so long as you are smart in your investment and budgeting strategies. 

Consider Jim and Sue McIntyre. The couple relied on a key philosophy in their financial endeavors: 

“You can either work for your money or make your money work for you.”

Early in their marriage, the McIntyres began saving. Initially, they were saving four percent of every paycheck, eventually increasing this to 15%. Over time, thanks to compound interest accruing, the value of the McIntyres’ funds increased exponentially.

While Jim McIntyre had never earned a salary of more than $40,00 in a single year, the couple had a net worth of two million by the time they were in their early 50s.

This concept of getting rich gradually over time has a name: the latte factor. Unless you are a Starbucks aficionado, your average latte probably costs around $3.50. Say you get one every single day--you are then looking at a total cost of more than $1,200 per year.

Let’s say you decide to start skipping the lattes and set that money aside each day, plus an additional $6.50, totaling $70 per week. This simple adjustment would leave you with more than $700,000 in 30 years' time and almost two million dollars in 40 years.

Pay Yourself First

Taxes. Rent. Insurance. Most of the time, these life expenses are unavoidable. Once we pay for each line item, we can then set the rest of our paycheck aside for spending money, right? Wrong.

Here is where we need to reverse our logic.

Rather than paying for the necessities and THEN setting aside money for personal expenses, Bach recommends paying yourself first.

This can take the form of a pre-tax retirement account. With a pre-tax retirement account, you are directly depositing money into a savings account, and, because your money will only get taxed once you withdraw it, you will likely be saving significantly. Chances are, the account will be taxed at a lower rate than the one your current income incurs.

Therefore, you will have more money now.

Let’s say you make an annual income of $50,000. If the rate of taxation is 30%, you are then left at a net income of...

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