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.)

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Put Your Money IN The Bank

I can’t tell you how many people I’ve met or heard about who, for whatever reason, don’t have an account at a financial institution. They take their paycheck every week or two, get it cashed and head on their merry way.

Of course it’s no wonder they’re probably living paycheck to paycheck.

I’m not trying to dog on anyone. And to most it seems like common sense. But if you don’t have a bank (or credit union) account you need to go out tomorrow and GET ONE. And put your money in it. And keep it there. 😉 It’s much safer there than in your house anyway. Every financial institution is backed by the FDIC or NCUA for up to $250,000. This means that if for whatever reason the institution that has all your money goes under, you will still get all your money back up to a quarter of a million dollars.

But that is truly besides the point because the people who don’t have accounts at a financial institution are, more than likely, not the ones saving up wads of it in their home somewhere. They are the people who spend all their money and sit around miserable until the next paycheck comes (if the next one comes!)

If you’re just getting out on your own or are finally starting to make some kind of income (even an allowance!) search out the best financial institution in your area and open up at least a basic savings account and a checking account. Savings can be for your growing emergency fund and your checking account, well, it’s to live out of. Get a debit card and then just watch your spending (make sure to sign up for access to your accounts through your institution’s website so you can view balances and such 24/7.)

I’m not sure why some people are opposed to keeping their money at a financial institution. Do you have any ideas?

Mother’s Day is Sunday

Don’t forget that Mother’s Day is this Sunday, May 9. Regardless of our age or dependency status on our parents, our mom’s deserve all our love and appreciation until our last day. They gave up more for us than we’ll ever be able to thank them for.

Whatever your relationship with your mom, take time to tell her, “Thanks” for the years of wisdom, care and provision she gave you. Whether it’s a card, flowers, chocolates, some other gift or just a hand-written note or letter, she’ll be so blessed to know that you are grateful for all she’s done for you.

I can’t say enough about my mom. She is the most loving, thoughtful person I know. She is gentle and kind and compassionate and is constantly going out of her way to serve her family and loved ones. She puts others above herself and shows honor on a daily basis. A perfect example of a wonderful wife, mother and lover of Jesus. She is slow to speak, quick to listen and slow to become angry. I just love her to death! =)

What are some things you are grateful for your mom exhibits?

P.S. It’s already Wednesday! Don’t forget. 😉

Stupid Mistakes Will Cost You

I have 2 checking accounts. One I use to pay bills out of (reoccurring, monthly ones basically) and the other to “live” out of (daily expenses.)

I keep only what I need to in my bills checking account–though I know I need to put a few hundred in there as a cushion, I just haven’t got that far yet.

So this past week I deposited money into the account through the “night drop” at my credit union thinking it would get posted on Saturday (because they are open.) Of course, it didn’t get deposited till Monday but I knew there was that risk.

In the mean time I was charged rent. It was the one weekend I wasn’t paying very close attention to my finances since I had taken cash out to spend while on a mini-vacation to Dallas, and I didn’t think there was any reason to really check up on it.

Wrong.

My stupid (little) mistake cost me a $22.50 non-sufficient fund fee plus a little bit of hassle with the management of my apartment (though they were very understanding since I went to them the day of instead of later.)

Thankfully, since I have a good track record the (awesome) credit union I am a member of refunded it for me, no questions asked. But it does show that regardless of how “automated” your finances are you still need to keep an eye on it.

Wisdom: I have now set up overdraft protection from another account of mine just in case. I should have done this when I opened the account but it goes to show we all can make mistakes sometimes. 😉 I was tempted to get stressed over the whole ordeal but I knew it would work out, and I’d just have to be patient. So I did. And it all paid off. All stress does it make you miserable. It doesn’t help your finances. So next time, just take a deep breath, plan how to fix the problem, then go fix it.

It will all be over soon. 🙂

WE Bring the Value

I’ve been thinking a lot lately about how we perceive ourselves and how that affects the way we make decisions, the way we think and even the way we interact with other people. It’s important that we have the understanding of who we are and what value we carry within.

As a young person, starting life out and trying to “get out there” can carry a lot of weight. We want to perform well at work and have solid relationships. We want to handle our money right and make it work for us instead of us just working for it. We want to not just take advantage of opportunities but actually create those opportunities. And if we’re not careful the tendency would be to find our value in how well we’re doing in those areas.

But here’s the thing: Our work does not give us value. We give value to our work.

We are running our lives. God granted us intrinsic value that sticks with us regardless of what kind of decisions we make or how well we perform on the job or managing our finances. We get to take that value within ourselves and willingly offer it to a task. Or not offer it . It’s our choice. The job, relationships, spiritual life, money and health we have are, mainly, not forced upon us. They are things we willingly engage in.

They do not own us. We own them.
They do not give us value. Instead, we give value to them. (With the exception perhaps of a spiritual life…but even then, it is nothing without our interaction!)

Until we realize this, until we realize that inside of us is a greater potential for good works and connection, we will be run over by the things in our daily lives. We’ll feel bound by what is.

But the truth is that your finances are ultimately going to end up however you’d like them to be because you’re going to work (or not) work at it. Positive thinking won’t do. The job or career you have is going to be the one you pick, not the one that picked you. Your relationships will be great or terrible based upon the value you willingly add to them.

So today, as you go through the day, think about all the things you are involved in and what you are doing. Look at the details and the big picture. And decide whether or not you want to be a part of it. Do you want to add your value to it? If so, do it! Add all the value you can to whatever is at hand. But if you don’t want to add value to it, stop faking it and move on to something you DO want to add value to.

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!

How to Start Off and STAY on the Right Course

We all know the saying, “Practice makes perfect.” But really, it’s only the “right” kind of practice that makes perfect. I can practice wrong over and over and I’ll be, well, perfectly wrong.

It doesn’t have to be that way.

When we start off on a new goal, whether it’s a new career path, a new financial goal, a new way of living, a new relationship, trying to better a relationship, or just starting “life” out right in general, it’s imperative we not start off in the wrong direction. If we do start off wrong, we’ll have to back-track which leads to waste of time and other valuable resources.

So what do we do? How do we start off right?

1. Take your time and count the cost.
Don’t jump to a conclusion about where you’d like to be without giving it some time. Consider it much like a large purchase. A large purchase will take a significant amount of money. And a big “goal” will also require a significant amount of resources. It’s not something to decide on a whim. If you do, it will probably fade quickly cause you haven’t counted the cost.

2. Write it down.
Okay, I’m sure you’re tired of reading it but it’s so true. There is so much power in writing things down. First write down the goal or end-product you’d like to see and then take the time to write down  the specific steps it will take to get there. Those steps will probably be certain actions you need to take with due dates. This will give you a clear blueprint of how to get and stay on the right course all the way to the fulfillment of your dream.

3. Invite the help of others.
Start off right by having some support. And keep the support all the way through. Friends who hear your passion about something will help remind you when the passion is running dry later on.

4. Take frequent pit stops.
Some people say that if you ever take a break from working toward your goal you’ll give it up all together. I disagree. Sometimes you need to step back and take an honest look at the situation. Take a rest and look over your blueprint again and see the big picture. Find yourself in it and remind yourself why you’re working toward it. You’ll feel refreshed and energized and ready to get back to work to reaching it.

That’s just a few things I thought of on how to start and stay on course toward any kind of goal you’d like to reach.

What do you guys think? Any other tips on starting and staying on the right course?