The Automatic Millionaire: The Latte Factor

I finished reading the book The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich(affiliate link) a few weeks ago but with trying to finish the school semester strong (which I did!) I have yet to post about it. So here it is!

The Automatic Millionaire is written by David Bach, and despite its title, is not a “get-rich-quick” scheme (trust me, if it was, I would not have wasted my time to read the entire thing.)

It’s a fairly quick read, and one I highly recommend to any person starting to pay attention to their finances and setting the goal of being well-off and worry-free one day. (Remember, the first decision is to DECIDE.)

The points David makes in the book are valid and powerful regardless of whether you choose to “automate” them or not. He is a big fan of making everything automatic–especially retirement savings (setting it to come automatically out of your paycheck into your 401(k) or IRA.) But some people do not feel comfortable setting everything up automatically so I would vary with him on that some people DO have the self-control to move the money right away on a regular basis (every paycheck.) I’m one of those people who takes great pride and joy in moving my money (manually, though still electronically) into my savings accounts.  If, however, you foresee or start to see, the problem of spending the money you are supposed to be saving, it would be best to automate it.

Besides the “automatic” side of the book, one of the major points Bach writes about is what has become known as the “Latte Factor.” How little expenditures every day add up and how that money could be adding up to wealth for retirement (or whatever other kind of goal you have!) Here’s the breakdown if you buy a latte and a muffin every morning for breakfast:

$5 average cost of a latte and muffin x 7 days = $35/week = approx. $150/month.

But if you chose to INVEST that $150 a month and happened to earn a %10 annual return, you’d wind up with:
1 year = $1,885
2 years = $3,967
5 years = $11,616
10 years = $30,727
15 years =  $62,171
30 yea rs = $339,073
40 years = $948,611

Some of you are saying, “But I have to eat breakfast,” and others are saying, “I’m not going to earn %10 every year.” Both are true but 1.) You can eat breakfast for much cheaper (at home!) and 2.) You may not, but it’s definitely possible and the idea behind it is what is important and powerful!

The point is to realize that most of us spend money like we breathe. Obviously, life requires spending money. But it doesn’t require spending ALL of it or spending it just because we HAVE it. If you have a dream that requires money (retirement, starting a business, building a house, etc.) then you need to start saving for it NOW. It won’t just magically appear whenever you’re ready to start living out the dream.

There  are definitely other principles David Bach discusses in the book, and I will address some more of them in the coming days. My hope is that when you start to think about it and see the numbers the way you view and spend money will change and your life will be better off because of it!

Do you have something that you could give up on a daily (or just regular) basis and start saving that money instead? (Mine used to be lattes but I’ve cut that out of my life since January of this year! So glad I did too.)

Awareness Saves Money: Electric Style

The more aware we are of our spending the more we may be able to save money.

I have yet to perfect the art of tracking all my spending (honestly, I think I’m just still too lazy–feel free to give me a good kick) but I have found the perfect tool to track my spending on my electric bill.

It’s a website (and also an app for certain phones) called My Usage. Not all electric companies support this tool but for those who do, it’s perfect. Just go to http://www.myusage.com and click “Sign Up Now.” It will offer you a few steps to see if your particular company is supported. If it is, you can sign up and be able to view a graph of how much electricity you are using every single day.

My graph currently looks like this:

The usage is measured in temperatures and the red graph represents the average in “my area” (not sure what the area is exactly.)

I have this app on my HTC Hero with google phone (android powered) and check it every morning. I live in a 2 bedroom, 2 bath apartment with only 1 other person so my usage may be lower than some (it is also quite perfect right now outside so now air or heat is being used) but I definitely notice a difference on days I do laundry and use the dryer.

This app has just made me a lot more aware of how much electricity I am really using and how much it’s costing me. Turning off lights and keeping the usage down to a minimum whenever possible is now a thought that actually crosses my mind whereas if I didn’t have this app I probably wouldn’t really think about  it.

Basically, it just helps me stay aware. And awareness is powerful. Because it promotes action–even more powerful!

Millions By 30

Happy Friday everyone! It’s going to be a great one–I can feel it!

Today I just want to let you know about a cool new website/blog I”m privileged to be a small part of: Millionsby30. I worked as an intern at the same organization the founder of Millionsb30 did and he’s recently invited me to help write for it.It’s a blog dedicated to helping young people realize their financial dreams and create wealth. My first post is up this morning and you can check it out here. It’s called The Starting Line and all about the beginning point of a journey toward financial independence.

There are some other great writers over there too so subscribe to the feed and keep checking it out in the future. Good things are happening!

That’s a wrap for today–hope you guys enjoy the start of your weekend!