When planning for retirement, the general goal most people start with is to have a millionaire dollars by the time they retire.
Playing on that theme, David Bach wrote a book a while back entitled The Automatic Millionaire. When I first saw the title, I thought it had something to do with building wealth quickly – not get-rich-quick necessarily, but the secrets of investing or something like that.
Truth be told, that’s what made me pick the book up from the library. When I got into it, though, I realized the book was not about building wealth quickly, but slowly over time with consistency.
The phrase “automatic millionaire” refers to growing wealth by having all your retirement deposits and all your bill payments being automatic. His reasoning is that if you have bills automatically withdrawn from bank accounts, and retirement deposits automatically paid into your investments, you won’t overspend and will be sure to have enough money when you retired.
So, how do you become an Automatic Millionaire? There are five basic principles:
- Stay out of debt. If you have any, pay it off as quickly as you can. When you have no debt payments, you have that much more to put toward retirement savings.
- Be frugal at some level. In other words, be conscientious enough about your spending so that you have at least a couple hundred dollars a month to invest.
- Have a goal. If you know what you’re working toward – whether it be half a million, a million, two million or more – you will be more likely to stick to your plan.
- Be consistent. Invest every month. The only exception should be if you encounter an emergency, such as an expensive medical treatment or job loss.
- Be automatic. Every single one of your household bills – including the mortgage payment – should be set up as an automatic draft. If you have an charities to which you give monthly, set those up on automatic drafts as well. Your retirement investments should be automatically drafted either from your paycheck or from your checking account every month.
Want to be a millionaire by the time you retire? Become automatic!