The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich (Canadian Edition) - Hardcover

Bach, David

Hardcover

ISBN 10: 0385660243 ISBN 13: 9780385660242

Publisher: Doubleday Canada, 2003

Synopsis

Bestselling financial advisor David Bach brings us his proven, revolutionary system that in one hour will make readers -- even those not smart about money, not disciplined or budget-minded -- rich.

The Automatic Millionaire shows readers how to change financial practices and financial lives, beginning with a powerful story of an average Canadian couple -- he’s a low-level manager, she’s a teacher -- whose joint income never exceeds $55,000 a year, yet who somehow manage to own two homes debt-free, put two kids through college, and retire at 55 with more than $1 million in savings. The incredible message Bach delivers is that the key to getting rich is by “automating” the way to wealth “by paying yourself first,” using automatic funded retirement accounts and money market accounts to secure the future and pay for the present.

In a short book destined for bestseller lists, The Automatic Millionaire introduces readers to a system that is powerfully simple, and automatically effective, a life-changing system that delivers. Do it once, the rest is automatic.

About this title

About the Author

David Bach is the author of the national bestsellers Smart Women Finish Rich and Smart Couples Finish Rich and The Finish Rich Workbook, and the host of his own PBS special, Smart Women Finish Rich. Bach’s Finish Rich Seminars are now the leading financial seminars in North America, having been taught in over 1700 cities by thousands of financial advisors. He is a Money Coach on America Online (AOL Keyword: David Bach) and the host of his own nationally syndicated radio show Live Rich with David Bach.

Excerpt. © Reprinted by permission. All rights reserved.

The Single Biggest Investment Mistake You Can Make

The single most important investment decision you ever make may well be how much to automatically Pay Yourself First into your retirement plan. With this in mind, it shouldn’t be hard to figure out the single biggest mistake you can make: Not using your pre-tax retirement plans and not maxing them out.

People who aren’t serious about being rich say this:

• “I can’t afford to save more than 4 percent of my income."
• "My spouse is enrolled in his/her plan, so I don’t need to enroll in mine.”
• “Our plan isn’t any good, so it’s not worth using.”
• “ My company doesn’t match retirement contributions, so signing up for the plan isn’t worth it.”
• “Investing in stocks is foolish.”
• “I’ll save more later.”

-- excerpt from page 94 of The Automatic Millionaire

* * * * * * * * * * * * * * *

I’ll never forget when I met my first Automatic Millionaire. I was in my mid-twenties and was teaching an investment class at a local adult-education program. Jim McIntyre, a middle-aged, middle manager for a local utility company, was one of my students. He and I hadn’t spoken much until one day when he came up after class to ask if he could make an appointment with me to review his and his wife’s financial situation.

The request surprised me. Though I felt strongly (and still do) that just about everyone could benefit from the advice of a qualified financial planner, Jim didn’t strike me as the type who would seek it out.

I told him I’d be happy to set up a meeting, but if he wanted my help, his wife would have to come too, as my group managed money only for couples who worked on their finances together.

Jim smiled. “No problem,” he said. “Sue’s the reason I’m here. She took your ‘Smart Women Finish Rich’ seminar and told me I should sign up for your course. I’ve liked what you’ve had to say, and we both figure it’s time to do some financial planning. You see, I’m planning to retire next month.”

Now I was really surprised. I didn’t say anything, but as I looked Jim up and down, I doubted he could be in a position to retire. From the few comments he had made in class, I knew he was in his early fifties and had worked for the same company for thirty years, never earning much more than $40,000 a year, and didn’t believe in budgets. I also knew that he considered himself to be “ultraconservative,” so I figured he couldn’t have made a fortune in the stock market.

My Grandma Rose Bach had taught me never to judge a book by its cover. But something didn’t add up. Maybe Jim had just inherited a lot of money. For his sake, I hoped so.

“WHAT AM I MISSING HERE?”

When the McIntyres came into my office a few days later, they looked exactly like what they were: hard-working, “average Joe” Canadians. What stuck in my mind about Jim was that he was wearing a short-sleeved dress shirt with a plastic pocket protector in his breast pocket. His wife, Sue, had a little more flair, with some seriously blond highlights. She was a beautician, a couple of years younger than Jim.

The thing was, they didn’t act like middle-aged people. They were holding hands like two high school kids on a first date, literally bubbling with excitement. Before I could ask how I could help them, Jim started talking about his plans and what he would do with his free time. As he did, Sue kept exclaiming, “Isn’t it great he can retire so young! Most people can’t retire until they reach sixty-five, if then, and here’s Jim able to do it at fifty-two!”

“LET’S NOT GET AHEAD OF OURSELVES.”

After ten minutes of this, I had to interrupt. “Guys, your enthusiasm is contagious, but let’s not get ahead of ourselves here. I’ve met with literally hundreds of potential retirees over the last few years and I have to tell you–hardly any of them have been able to retire in their early fifties.” I looked Jim in the eye. “Usually people come to my office to find out if they can retire,” I said. “You already seem to be sure you can. What makes you so certain you can afford to?”

Jim and Sue exchanged a look. Then Jim turned back to me. “You don’t think we’re rich enough,” he said. “Do you?” The way Jim put it, it wasn’t exactly a question.

“Well, that’s not the way I would have phrased it,” I replied, “but yes, it takes a fair amount of money to fund an early retirement, and most people your age aren’t even close to having saved enough. Knowing what I do about your background, I’m truthfully curious about how you could possibly have enough money.” I looked him in the eye. He gazed back at me serenely.

“Jim, you’re only fifty-two,” I said. “Considering that only about one in ten people can barely afford to retire at age sixty-five with a lifestyle equal to what they had when they worked, you have to admit that retiring at your age with your income would be a pretty big feat.”

Jim nodded. “Fair enough,” he said and handed me a sheaf of documents. They included his and Sue’s tax returns as well as financial statements that listed exactly what they owned and owed.
I looked first at their tax returns. The previous year, Jim and Sue had earned a total of $53,946. Not bad. Not rich, to be sure, but a decent income.

Okay, next. How much did they owe?

I scanned their financial statements. I couldn’t find any outstanding debts listed. “Hmm,” I said, raising an eyebrow. “You have no debt?”

“THE MCINTYRES DON’T DO DEBT.”

They exchanged another smile and Sue squeezed Jim’s hand. “The McIntyres don’t do debt,” she said with a chuckle.

“What about your kids?” I asked.

“What about them?” Jim answered. “They’re both out of university, on their own, and God bless ’em.”

“Well, all right then,” I said, “let’s see what you own.”

I turned back to the financial statement. There were two homes listed: the house where they lived (valued at $450,000) and a rental property (a second house valued at $325,000).

“Wow,” I said. “Two houses and no mortgage on either?”

“Nope,” Jim replied. “No mortgage.”

Next came the retirement accounts. Jim’s RRSP and company pension plan combined currently amounted to $610,000. And there was more. Sue had an RRSP of her own that totalled $72,000. In addition, they owned $160,000 in provincial bonds and had $62,500 in cash in a bank savings account.

Talk about a substantial asset base. Add in some personal property (including a boat and three cars -- all fully paid for) and they had a net worth approaching $2 million!

By any standard, the McIntyres were rich. It wasn’t simply that they owned a lot of assets free and clear (though that in itself was pretty impressive), they also had a continuing income stream in the form of interest and dividends from their investments and $26,000 a year in rent generated by their second house. On top of that, Jim qualified for a small pension and Sue liked being a beautician so much that she planned to keep working until she was sixty (even though she didn’t need to). Suddenly, Jim’s plan to retire at fifty-two didn’t seem so crazy. In fact, it was completely realistic. More than realistic -- it was exciting!

“WE INHERITED KNOWLEDGE.”

Normally, I don’t get wide-eyed about people’s wealth. But there was something about the McIntyres that impressed me. They didn’t look rich. And they didn’t seem terribly special. To the contrary, they seemed perfectly ordinary -- your average, nice, hard-working couple. How could they have possibly amassed such wealth at such a relatively young age?

To put it mildly, I was confused. But I was also hooked. I was in my mid-twenties at the time, and even though I was making good money, I was still basically living paycheque to paycheque. Some months I did manage to save a little, but more often then not I’d get busy or spend too much the next month and not save a dime. Many months it seemed that instead of getting ahead, I was falling behind, working harder and harder to make ends meet.

It was embarrassing, really, and frustrating. Here I was, a financial advisor teaching others how to invest, and I was often struggling myself. Even worse, here were the McIntyres, who probably in their best year barely made half of what I was making, and yet they were millionaires, while I was falling further and further into debt.

Clearly, they knew something about taking action with their money that I needed to learn. And I was determined to find out what it was. How could such regular people have amassed such wealth? Eager to know their secret but not knowing where to begin, I finally asked them, “Did you
inherit any of this?”

Jim broke out in a deep belly laugh. “Inherit?” he repeated, shaking his head. “The only thing we inherited was knowledge. Our parents taught us a few common-sense rules about handling money. We just did what they said and, sure enough, it worked. The same is true for a lot of people we know. In fact, in our neighbourhood, about half our friends are going to retire this year, and many of them are even better off then we are.”

At this point, I was hooked. The McIntyres had come to interview me about ho...

Edition details

• Publisher: Doubleday Canada
• Publication date: 2003
• ISBN 10: 0385660243
• ISBN 13: 9780385660242
• Binding: Hardcover
• Language: English
• Edition number: 4
• Number of pages: 240