What I Learnt From David Bach about Getting Rich
New York Times Bestselling Author David Bach wrote this little BIG book, called The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich. It’s a book filled with concepts that seem simple enough, but for one reason or another we don’t always do it.
Our parents have probably been telling us this for years, but we probably say to ourselves, “what do they know? They’re not rich” (of course if they are, this does not apply to you!). What I’ve learnt over the years is that most times Mother or Father does indeed know best.
C’mon, I’ll walk you through it. You can pretend you’re reading over my shoulder while I give you a sneak peek into this millionaire lifestyle, then you can judge for yourself if you’re up for the challenge.
Rule #1 – Pay Yourself First
The author says that many of us feel we have to pay everyone first but ourselves: the government, the landlord, the bank etc etc. But no, he says the key to amassing wealth is to start small, by paying yourself a small portion of your earnings into a savings account.
You can start with 4% or 10% then gradually working your way up to 20% or even more, once your circumstances improve. If it’s too difficult to remember, just set up a standing order and have it go straight into a savings account.
You would be amazed how in time this little bit adds up. Funny enough I remember being buried in debt some years ago and one of my coworkers told me to do this and voila, it worked like clockwork when I saw the returns years later.
Rule #2 – Save for Retirement
Now, I know I won’t want to be doing strenuous back-breaking work into my twilight years. If I can write for the rest of my life and have that pay my bills, this would be my ideal situation. But for most people more thought should go into securing a surefire future.
One such way is to set up a pension fund. The author says to forget about budgeting. Those things are archaic. Bach advises again to pay yourself first by saving 10% – 15% of your gross income into a pre-tax pension contribution.
He says most times your company may match (half) the contributions, so it’s a win-win situation that you should not pass up. I know, it’s tried and true. Why? Because the future is unpredictable and you won’t be young forever (note that’s the views of this blogger.)
Rule #3 – Try to live debt free
The author shares that you should avoid credit cards like the plague and try to consolidate your debt. If you must – use just one card with low interest rates (good luck with this in T&T!).
Also home ownership is key because renting only makes landlords rich. When you do save enough to acquire a mortgage, it is advisable to pay it off as soon as possible. The next point will illustrate how you can do just that.
Rule #4 – Cut the Crap
Many of us (especially Trinbagonians) like to spend money. I think it’s part of our culture. But this happens the world over. We think it’s fashionable to spend money on meaningless items of material face value, perhaps as a fashion statement or to keep up with the Joneses or give a certain (deluded) impression of affluence.
Guess what? The really rich do not do this!
We pay lots of money on lunches every day, all the major restaurants, bars, clubs and movie theatres are overflowing even during the week . At Carnival time, the fetes and Carnival bands are oversubscribed and some of us buy costumes that can probably serve as Japanese origami if twisted just right. But I digress.
The author illustrates in the book using examples from his students that when we cut back on our daily expenses such as coffee, cigarettes, bottled water, donuts, muffins (in our case Carib, Stag and Guinness!) etc we end up saving loads of money that can be reinvested into our future on a pension scheme for example which can make us rich in years to come. This is known as The Latte Factor.
Bach says it’s not the big things (costs) but the little expenses that sometimes erode our salaries and make us poor. He imparts that no matter the size of our salary, most people probably earn enough to become rich. Food for Thought!
Rule #5 – Share the Wealth
Ever notice how great you feel when you give? Whether it’s your time, ideas, money or passion, it goes a long way. The concept of “tithing” is a Christian concept of giving back 1/10 of your possessions, but underpins most religions.
Whether you set it up automatically or give less or more, Bach says once you give back what you have been blessed with, more abundance flows to your life.
What rings true in this chapter of the book even louder (at least for me) is that when you give, it generates the same feeling as material wealth because although money does make life easier and more comfortable, wealthy people are not necessarily always happier.
Hope you find this blog post useful. As usual, please shoot us a comment and share if you do!
Happy Shouter Baptist Liberation Day to everyone.
Until next time…
Keep Trucking, T&T’s Entrepreneurs Team