The Automatic Millionaire: Automatic is in the Details

This is the final article of a three part series on the book by David Bach “The Automatic Millionaire.”  In the first part, we discussed the “Latte Factor” and how to find the money to begin.  We followed that up in the second part with the essentials of making your finances automatic.  In this part, we’ll discuss a few of the finer points of the Automatic Millionaire plan.

Mortgage Miracle:

One of the best asset’s an Automatic Millionaire can have is his/her home.  Instead of throwing away mounds of cash on rent, you can be putting money into your home.  Some think of a home as a poor investment, but there are not many other investments that have exceeded a 10% growth in recent years.

David gives us a simple and easy way to not only own our own home, but to do it sooner.  He introduces the concept of every other week mortgage payments.  The math on this is simple.  If you’re making monthly payments on a mortgage, you make 12 payments.  If you begin making half of your payment every other week, you will have made 26 payments.  26 half payments amount to 13 regular payments.  You will have paid one extra payment in a year.  It may not sound like much, but if that extra payment goes to principal, it could mean a savings of over $100,000 on your mortgage.  Consider a $200,000 mortgage.  If you pay it off as the bank expects you to, it will take you 30 years to own the house outright.  The average homeowner in the U.S. only lives in any one home for 10 years.  Another interesting fact is that for the first 10 years, nearly every payment you make to your mortgage is almost entirely interest.   If you only live in your home for 10 years, you will have built up almost no equity.  If you cannot afford to make that extra payment, David suggests adding 10% to your payment each month.  Doing so will end up at nearly the same place.  Following this plan could pay off a 30 year mortgage in as little as 7 years.

Tithe:

When most of us think of Millionaire’s, we don’t necessarily think of giving money away.  But David points out that a vast majority of the millionaires throughout history have been dedicated tithers.  Not necessarily to a church, but to some non-profit charity.

Debt Reduction:

If you’re in debt, maxing out your 401(k) might not be the best idea.  Save as much as possible to your retirement plan, but make sure and start paying as much as you can to your debt.  And make it Automatic!  When you get rid of your debt, you can make even larger contributions to your retirement than you already are.

I don’t want to cover every point that David makes in “The Automatic Millionaire” because I really think that if you’re interested, you should pick up a copy.  Read it through.  Maybe do it again.  Learn the methods that David teaches and begin applying them immediately.  The sooner you get on the Automatic road, the richer you will be.  It’s not an instant thing and  you’ll have to work at it, but it will all be worth it in the end.

Pick up a copy of “The Automatic Millionaire” at Amazon.

[tags]the automatic millionaire, automatic millionaire, david bach[/tags]