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.)

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.

The Point is Be YOU

This is almost a little bit of an embarrassing post. But I have something to confess…

But sometimes I do things just cause everyone else does them. And really, there’s nothing wrong with that in theory. If it’s working for others, then maybe it’s worth a shot! But it’s definitely not worth sticking with if it’s not working for YOU.

Cause the point is to be YOU. Not them. Maybe your mentor is awesome but you’re not supposed to be them. You’re supposed to be you. Seth Godin is cool and has a lot of good information but you’re not him and never will be. You’re you.

For example, I started drinking coffee because I thought it was cool. I saw people I wanted to be like drinking coffee so I picked up the habit. I didn’t particularly like the taste so I covered it up with cream and sugar. And then started buying cappuccinos and lattes and expensive drinks at Starbucks. Not because I needed it. But because I convinced myself I did. And who with any sense of style would buy a coffee drink from anywhere other than Starbucks??

Now that I have decided a few things about my own life (forgetting what others think about me) I’ve decided for the most part I’d rather sit at the bar in my kitchen with a glass of water (saving time and money. 😉

I also think it used to be cool to get little sleep and push myself to the max because that’s the only way you’d ever be productive (I’d heard that from someone “successful.”) But now I see that sleep and productivity actually go hand in hand (for me anyway.)

It’s always nice to look at other people who are where we’d like to be one day and then try to implement everything they do in their lives into our own. But more than likely we have an entirely different path to take. Learning from others is powerful. My last blog post was even on how Knowledge is Power, but there’s a fine line from learning from others and then trying to be others.

Find what works for you and run with it. Be open to making mistakes and be willing to give it a go again. You can be just as successful as the guy who pays $4 for his latte and stays up all night supposedly “working” if you really want to. It’s just up to you. =)

The Bad Decision Mud Slide

Sometimes one bad decision leads to another.
Or…
Most of the time.

It’s an unfortunate scenario but I think it’s true. Do you agree?

I try to not eat sugar and on the third day I eat sugar and instead of continuing on with not eating sugar I choose to eat sugar…and lots of it.
I say I’m going to work out 4 times a week, but by Tuesday I’m tired of being away from home and skip “workout Wednesday” and instead of 4 times I’ve only worked out twice. And then why even go back the next Monday?
I make a decision to not take any money–EVER–out of my emergency fund (um, unless it’s an emergency) and put my tax refund money in there so I don’t touch it but after a hard first of the week at work I’m ready for a pedicure. And of course I wasn’t planning that in my spending money for that week so where did it come from? Oh yeah…my emergency fund. Thankfully that’s the only mistake I’ve made with this one but the opportunity to make another and another and another until I’m in a mud slide of bad decisions is definitely there.

Sound familiar? Maybe not. But it’s pretty familiar to me.

And it has to STOP.

And it can stop. It’s all about thinking rationally and being at peace and stepping away from the situation. Let me think about today…

I should have worked out but I didn’t. How do I stop the bad decision mud slide here and now? Go the gym tomorrow.
I shouldn’t have eaten 7 packets of ‘fun-sized’ m&ms. And the bowl of cereal. And the piece of chocolate pie. What now? I go cut carrots right after typing this and put them in a sandwich bag to munch on tomorrow.
I had planned to finish at least 1/2 of my biology homework for the week but I only finished about 1/4 of it because I got distracted by American Idol and Facebook and the internet in general. And now….Take a deep breath and realize I still have the rest of the week to do it. No biggy.

Sometimes we get to worked up about things we didn’t do or we messed up on it only prohibits us from moving forward. And instead of making the right decision the next time we make another bad decision because…well, heck, I messed up last time.

But take heart, the bad decision mud slide can actually be reversed and instead of going down the mountain you can make right decisions and it have the same effect but going UP the mountain. Generally, good decisions lead to more good decisions. And that’s when life get’s exciting.

Follow peace. And if you don’t have it–go find it. I promise it’s there. But you might have to step way back from your situation. Get outside. Go to a place you don’t go to often. Get away. Good things are waiting.