Analysis of the Automatic Millionaire by David Batch - Book Report/Review Example

Meeting the Automatic Millionaire Bach gives a background of his life and how he started his journey to an automatic millionaire in his mid twenties begins by narrating his encounter with the McIntyre’s-Jim and Sue and how their interaction changed his entire understanding of personal financial management. From this chapter, following come out: There is a difference between looking rich and being rich, automation of financial systems requires neither will power nor discipline and it is possible to live debt free, as well as retire early. The Latte Factor: Becoming an Automatic Millionaire on just a few dollars a day Batch introduces thus concept with an understanding that paying yourself first is a problem for many people with expenses always exceeding income. His story in explaining this concept is lengthy but in the end, the latte factor revolves around little-unnoticed daily expenses that are incurred without much thought, more like buying latte. By channeling these expenditures into automated saving systems, one can easily become a millionaire. Learn to pay yourself first In this chapter, Bach explains the need to “pay yourself first” by having a deduction on future investments ahead of funds for daily expenses. The author explains that even with the simplicity of this concept, most people don’t achieve its intended results because they either don’t believe in it or see it as too difficult to give a try. But Batch explains that this is usually difficult because it’s not automated, so if that was to be done, savings would gradually pile up and in the end, an individual will make adjustment to use the remainder for living expenses. Now make it automatic This chapter is the “automatic” element of the book and explains the need to set up and automated deduction from one’s checking account on each payday, be it weekly or monthly into a separate account. Savings to an emergency fund can be directed to an ING Direct savings account while mortgage payments can be sent to a group that holds the mortgage and nothing else. He explains the need to contribute to 401K by those with access and tackles IRA with a parting shot o how self-employed people can automate their systems. Key lessons from this chapter are that; its psychologically very powerful and makes it extremely easy to adapt to the new way of life where what is left after these automated transfers is used to cover living expenses. In the full length of time, this becomes a lifestyle where paying for one’s future is a routine. By giving phone numbers and investment firms websites in this chapter, Batch necessarily endorses what in my opinion, is a balanced way to invest Automate for a rainy day The chapter discusses with several examples, the need to include emergencies in the automation process. Bach explains that making provisions for unseen adversities sets you up for success and ultimately achieving the title of an automatic millionaire. From this chapter, it emerges that an emergency fund will bring stability and secures your other savings. This chapter covers his three rules for emergency savings; “decide the much you need; don’t touch it; and put it in the right place.” Listing the contacts of high yield online savings accounts makes the chapter practical for those interested in following Batch’s philosophy in saving for a rainy day. Automatic debt free ownership With an analogy from his encounter with the McIntyre’s, Batch explains the possibility of debt-free home ownership. Making mortgage payments bi-weekly, he says, could reduce it by 5-10 years that sounds appealing but is something I don’t agree with. Having a mortgage handler to take care of these payments as suggested by batch attracts fees that are in the end counterproductive and could cumulatively be more expensive compared to setting up a savings account from which monthly payments are made. Batch advocates for ownership against renting and dedicates a chunk of this chapter to explain why. His proposition to taking 100% loan to get out of a rental is a risk that I do not agree with. The automatic debt free lifestyle This chapter stresses the need always to make savings even with existing debt while working towards its reduction because as Batch puts it; a little cash is useful in stepping away from debt in the future. Always save some, even if you have debt while debt reduction should be a priority, having a little cash will help to avoid future debt. He advises that credit card debts should be paid with the lowest first and the largest later. This is one area that I do not agree with Batch because typically, the most moderate amount attracts the least interest on the basis of value, so prioritizing credit card with the least debt is a good psychological gesture; it may not be financially viable because more interest piles on the large credit card debts. Make a difference with automatic tithing This last chapter is a real step back where the author for a moment forgets about getting rich and focuses on the significance of tithing. He looks at the appropriate amount of tithe and how this can also be automated. He recommends a list of credible organizations that can be tithed to, which makes it easier for those with the intention to tithe and do not know where to start. I think the chapter is extremely beneficial to readers intending to make a difference. Summary The book has appealed to me on its practicality. The scenarios described by Batch from his encounter with Jim and Sue to the significance of tithing resonate with ordinary Americans in need of financial management help. In overall, Batch has tackled the everyday challenges of the American people. His thoughts and direction on mortgage payment where he proposes a bi-weekly payment is an area I totally disagree with him. H e should have done further research to establish the financial difference between reasonable payments to his proposal. From the book, I plan to implement “automation”, that is where breakthrough to saving lay. My favorite quote is, “You know,” I said, “every week I meet people who take my classes like you did but who are exactly the opposite of you. I mean, they look rich, but when you get into the details of what they really have, it often turns out that they are not only not rich but broke.” Work Cited Bach, David. The Automatic Millionaire: [a Powerful One-Step Plan to Live and Finish Rich]. Prince Frederick, MD: Recorded Books, 2005. Read More