investment

I wanted to share some useful tidbits discovered in this book I’m reading by bestselling New York Times author David Bach, titled The Automatic Millionaire.

Obviously I want to be rich, who doesn’t? And I’m not talking about becoming a disconnected billionaire like some of these folks who have been in the news recently. I could settle with having beachfront property in the southeast and a home in the mountains, coupled with a lucrative trust to pass down to the children.

In the book I’m reading there are some very useful and simple pieces of information that can help a person retain wealth. Some of the main points state that you don’t have to have a six figure income to be wealthy. In fact, the author points out that if you make millions of dollars a year and spend it all, you will never become wealthy (unless you hit the lottery, win some massive lawsuit etc.)

This strategy involves cutting useless daily spending (he deems this the “Latte Factor”), purchasing only your home on credit, and paying yourself first. The first two steps in this solution are virtually no-brainers, but allow me to describe the latter.

Paying yourself first involves taking a small deduction (10%) out of your paycheck automatically every time and putting it away into an investment vehicle. He makes the point that once you get used to not having the extra 10% in your pay, and you automate the process, you can sit back and let your money work for you. My calculus teacher in High School taught the same principle; some of you may even know her! So remember before you go and blow that $5 at McDonalds every morning for breakfast to always pay yourself first!