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The Automatic Millionaire by David Bach.
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Author David Bach argues that financial freedom doesn’t come from how much you earn, but how you manage your earnings—if you’re not saving your money with your current income, you’re unlikely to save it in the future. This is because people often increase their spending in line with their income and always have an excuse to avoid saving for the future. The result is that many people miss out on a huge opportunity to enjoy financial freedom. Bach’s Automatic Millionaire process, which we’ll call the “automated path to wealth,” will teach you how to make smart financial decisions, automate your finances, and build your wealth using only a few dollars a day.

Why Do We Often Avoid Saving for the Future?

Bach believes that we struggle to save simply because we’re tempted to spend all of our money before we get a chance to save. But, according to Ramit Sethi, author of I Will Teach You to Be Rich, there’s a more complicated psychological reason underlying this tendency. Sethi argues that people tend to avoid planning their future finances due to:

  • Decision paralysis: When they’re presented with too many options for how to save, they feel too overwhelmed to make a decision.

  • Blaming the system: They choose to focus on economic disadvantages that they can’t control. For example, they believe that those born into privilege have more financial advantages than they do.

Sethi advises you to switch your focus and start taking small proactive steps towards financial success.

You Can Save More Than You Think

If you’re wondering if you can spare a few dollars every day, this first step of the process will help you to examine and understand how much money you’re currently wasting and the savings you’re missing out on.

Track Your Expenses

Bach claims that we all waste money on small expenses that add up over time. For example, a Netflix subscription might seem like a small expense because you’re only paying $8.99 a month, but it adds up to $107.88 per year.

The sooner you identify your unnecessary expenses, the sooner you can eliminate them and put the money you save towards building long-term wealth. Bach suggests the following exercise: Track all of your expenses over the next few days and identify where you’re spending your money. Once you’ve collated all of your expenses, consider if there are any expenses that you can cut out or reduce.

Choosing the Right Expense-Tracking Practice for Your Needs

In his book, Bach suggests you track your expenses for a few days to figure out where you're wasting your money. However, this isn’t going to give you a complete picture of how you spend your money month by month, especially if you have irregular spending habits. To track all of your expenses over the long term, he recommends the Mint app.

Sethi also recommends that you use similar apps to track your spending. However, in contrast to Bach’s argument that you should track with the goal of eliminating all unnecessary expenses, Sethi suggests that you track with a focus on spending mindfully. Split your expenses into four areas (fixed costs, investments, savings, and guilt-free spending), decide in advance how much you want to spend in each area, then allocate a portion of your income to each.

Automate Your Savings

The core principle of the automated path to wealth is that you must automate your savings and investments to ensure financial success—the more you automate your finances, the more likely you are to grow your wealth because you won’t have to rely on willpower and discipline to avoid wasteful spending.

Bach explains that the only way to improve your financial security is to arrange to automatically save 10-15% of your income before you even have a chance to spend it. He claims that you’ll quickly get used to living without this money, and you won’t need to rely on sticking to a budget to build your financial security.

(Shortform note: Dan Ariely, behavioral economist and author of Predictably Irrational offers clarity on why you’re more likely to achieve financial security by automating your finances. His research reveals that you’re more likely to make irrational spending decisions when you feel emotional—you see something you really want and feel an emotional urge to possess it. This is because your emotional side overpowers your rational side, and you’re less able to think about the consequences of your decisions. Automating your finances eliminates this possibility: Your emotional side can’t “commandeer” money that’s automatically managed.)

How Compound Interest Grows Your Money

Bach argues that putting a few dollars aside every day by itself won’t make you a millionaire, but investing those dollars in the right type of account will. When you invest your money in an account that pays compound interest, you leverage your money—that is, you use it to generate further income in the form of interest payments. For example, if you invest your money in an account that pays you 10% annual interest, this means that you’ll receive an extra 10% of what you invested after one year: Invest $100 and after a year, your money will be worth $110.

Thanks to compound interest, the interest you earn also earns interest—the $110 after another year will be worth $121 ($110 + 10%). The more money you continue to add to this account, the more interest you’ll earn. This is how compound interest transforms small, consistent amounts of money into free money over the course of time.

(Shortform note: Calculating compound interest as Bach suggests can seem daunting if you’re not mathematically-minded. Use a [compound...

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The Automatic Millionaire Summary Shortform Introduction

The Automatic Millionaire provides a simple but powerful action plan for you to quickly automate your finances, build your wealth, and achieve financial freedom. David Bach argues that, with just a few dollars a day, you can immediately benefit from this book’s advice and start growing your finances.

About the Author

David Bach is an American financial consultant and New York Times bestselling author. He’s featured on countless TV programs including The Oprah Winfrey Show, NBC’s Today, CBS’s Early Show, and CNN’s American Morning. His website, FinishRich.com, offers financial guidance and further resources to millions of Americans.

Bach’s bestselling books include:

  • Debt Free For Life: Offers in-depth knowledge and tools to help you to achieve a debt-free lifestyle
  • Fight For Your Money: Includes tips and techniques to help you save thousands of dollars a year
  • _[Go Green Live...

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The Automatic Millionaire Summary Part 1: Introduction I Chapter 1: You Can Save More Than You Think

The Automatic Millionaire provides a simple but powerful action plan for you to quickly automate your finances, build your wealth, and achieve financial freedom. Author David Bach argues that financial freedom doesn’t come from how much you earn, but how you manage your earnings—if you’re not saving your money with your current income, you’re unlikely to save it in the future. This is because people often increase their spending in line with their income and always have an excuse to avoid saving for the future. The result is that many people miss out on a huge opportunity to enjoy financial freedom.

Why Do We Often Avoid Saving for the Future?

Bach believes we struggle to save money simply because we’re tempted to spend all of our money before we get a chance to save. But, according to Ramit Sethi, author of I Will Teach You to Be Rich, there’s a more complicated psychological reason underlying this tendency. Sethi argues that people tend to avoid planning their future finances due to:

  • Decision paralysis: When someone is presented with too many options for how to save, they...

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Shortform Exercise: Understand the Impact of Unnecessary Expenses

Identifying where you can cut your spending will help you to build more wealth in the long term. This exercise will help you understand just how much wealth your small expenses can add up to.


What have you spent your money on during the past five days? Remember to include in-store purchases (no matter how small), bills, and automatic subscriptions.

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The Automatic Millionaire Summary Part 2: Automate Your Finances I Chapter 2: Decide On Your Retirement Plan

You should now have a clear idea of how much of your income you should aim to save and how you can benefit from investing your money. We’ll now explain what specific steps you need to take to automate your investments and build your wealth.

The core principle of the automated path to wealth is that you must automate your savings and investments to ensure financial success—the more you automate your finances, the more likely you are to grow your wealth and create millions without relying on willpower and discipline. Over the remaining chapters, we’ll explain the specific steps you need to take to automate your savings and investments so that you can:

  • Retire rich
  • Build savings accounts to cover unexpected expenses
  • Clear your debts
  • Own your home outright
  • Contribute to a better world

(Shortform note: Sethi also recommends that you automate all of your finances to make it as easy as possible to meet your financial goals. In addition to Bach’s goals outlined above, he also suggests that you invest in a [Health Savings Account...

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The Automatic Millionaire Summary Chapter 3: Investment Options for Your Retirement Account

Once you’ve chosen your retirement account, you’ll need to select investment options that determine how your money will grow—retirement accounts can only earn interest on and grow your money if that money is invested into stocks and bonds. The firms you choose for your IRA or self-employment needs will build your investment portfolio based on the investment options you select. As we’ll explore in this chapter, these options will cover how long you intend to invest your money and how aggressively you want to invest.

In this chapter, we’ll explain how to balance your investments for maximum returns—read this before you fill out your retirement plans to ensure you pick the most suitable options for your situation.

How to Diversify Your Investments

Bach explains that to ensure that you get the best return from your retirement plan, you need to diversify your investments—this means that you need to invest your money in a combination of cash, bonds, and stocks. The more diversified your investments, the safer your money—stocks may lose their value, but if your money is diversified, the overall value of your plan will stay consistent. However, the safer your investments,...

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Shortform Exercise: Plan Your Diversification Strategy

Review how your investment strategies need to change to reflect your age and help you achieve your income goals.


How many years do you have left until you hope to retire?

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The Automatic Millionaire Summary Chapter 4: Build a Safety Net

Once you’ve taken care of your retirement and investment options, Bach recommends turning your focus towards building a safety net—a savings account with money you can use for emergencies. In this chapter, we’ll explore how to automate contributions toward your safety net to ensure that you’re prepared for worst-case scenarios.

There are two reasons to create a financial safety net. The first is to prepare for worst-case scenarios. Bach states that the average American has less than three months’ worth of expenses saved—these people are financially unprepared for the bad, unexpected things that could happen such as if they have to isolate at home and quit work due to a pandemic.

(Shortform note: In addition to a safety net to see you through hard times, many experts argue that you should also invest in health insurance to ensure that you’re covered for unexpected medical costs specifically. This will help prevent you from needing to dip too much into your emergency fund if a medical event comes up.)

The second reason to build a safety net is to improve the quality of your life here and now. Bach...

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Shortform Exercise: Determine Your Safety Net Needs

Figuring out how much you need to save to cover your living expenses will help you decide how much money to set aside each month to build a safety net.


What are your essential monthly expenses? Include your rent or mortgage payments, insurance, food, travel, and so on.

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The Automatic Millionaire Summary Chapter 5: Clear Your Debts

Now that you’re prepared for emergencies, turn your focus to getting out of debt. Like most Americans, you’re probably carrying some debt—Bach claims that the average American family owes $8,400 in credit card debt, and, in total, Americans owe approximately half a trillion dollars in credit card debt. Why is this? Bach claims it’s because people are more focused on looking rich than they are on actually being rich. In other words, they rely on credit to maintain the illusion of a rich lifestyle while they risk their financial security.

(Shortform note: Bach’s conclusion that people are in debt because they’re more focused on looking rich is a little reductive. A recent survey revealed that 37% of low-income and middle-income households rely on their credit cards to cover basic living expenses such as groceries and utilities. Further, these people tend to work longer hours or take on a second job just to cover their debts and survive.)

Further, the average American only pays the minimum balance due every month—for $8,400 charged at 18%, it will cost them $20,615 over the course of 30 years...

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Shortform Exercise: Plan How to Clear Your Debts

Debt is an obstacle to wealth. Prioritize clearing your debts so that you can redirect your money towards saving for your future.


Total up your debts: What outstanding balances do you owe and how much interest are you paying for each balance?

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The Automatic Millionaire Summary Chapter 6: Own Your Home Outright

Once you’ve cleared your debts, you can start thinking about bigger savings goals such as buying a house. This is important because, according to Bach, you’re more likely to build long-term wealth if you own your own home and accelerate your mortgage payments.

(Shortform note: Bach believes that renters are less able to build wealth because they’re funneling the majority of their money towards their rental expenses. However, research shows that renters who invest their money into stocks can build more wealth than homeowners. This is because your money earns more interest from stocks than it does from your home.)

In this chapter, we’ll first explore the benefits of owning your own home. Then, we’ll cover how you can get on the property ladder and automate your payments to pay off your mortgage as quickly as possible.

The Benefits of Owning a Home

According to Bach, the average...

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The Automatic Millionaire Summary Chapter 7: Pay It Forward

Now that you’ve set yourself up to build wealth and secure your financial future, let’s explore how you can share your good fortune with others and contribute to a better world.

The automated path to wealth allows you to automate your finances so that you can spend less time worrying about your finances and more time enjoying your life. Bach insists that the point of this process is not just to have more money, but to use the money to do things that make you feel good.

While you can choose to “feel good” by spending your wealth on new gadgets and luxuries, Bach argues that the real value of money comes from how you use it to help others. He suggests donating a portion of your income to a cause you care about—not only will you feel good about yourself, but you’ll also actually feel wealthier and your pursuit of money will feel more meaningful.

(Shortform note: In addition to making your pursuit of wealth more meaningful, philanthropy helps define your legacy. Pape (Barefoot Investor) claims that, after you’re gone, people are only going to remember you for the contribution you made to the world,...

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