The Automatic Millionaire Summary And Review


The Automatic Millionaire by David Bach discusses how you can be rich enough to not worry about money by following a simple, robust plan and retire rich.

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The Automatic Millionaire, Expanded and Updated: A Powerful One-Step Plan to Live and Finish Rich
  • Bach, David (Author)
  • English (Publication Language)
  • 288 Pages – 12/27/2016 (Publication Date) – Crown Currency (Publisher)

Last update on 2024-05-17 / Affiliate links / Images from Amazon

The Automatic Millionaire Summary [PDF]

What if I tell you that you can become a millionaire without learning technical terms in Finance? Would you believe me?

Probably not.

The truth is:

You don’t need a lot of money to be a millionaire by the time you’d retire.

You don’t need to do a lot of budgeting and get frustrated.

You don’t need to win a lottery or a reality show and depend on your luck.

What you need is a simple system based on common sense or principles that align with your basic tendencies.

And in this book summary, I’ll share with you all those lessons that will help you build such a system.

Here is a little disclaimer: I’m not an expert in Finance. I’ve learned all these lessons from the books. And I recommend you read the book after you finish reading this summary.

By the end of this book summary, you will have clarity about what you should do with your money and how to spend it wisely.

Without any more delay, let’s dive right in!

Lesson #1: Not everybody who looks rich is wealthy.

Nowadays, everybody wants to look rich.

You can confirm this by checking people on social media showing their Lamborghinis or expensive wedding ceremonies.

Sometimes, it even results in an inferiority complex. We start feeling as if we are the only ones poor.

But, wait.

Reality is entirely different.

The author says that he meets many rich-looking people, but he finds that they only look rich when he checks their balance sheets.

So yeah, all the so-called rich people you see on the Internet, who claim to be living a dream life, might not be that rich. They only look rich.

The question is:

What do rich people look like?

Most rich people like Bill Gates or Elon Musk don’t have to pretend how rich they are.

So if you find someone trying super hard to prove how rich he is, immediately realize that he might not be rich.

You might see a person driving Ferrari and still be poor.

It’s hard to digest, isn’t it?

You might say, “How could a person be not rich if he is driving an expensive car?”

It might sound weird, but it happens a lot. People rent or buy these things on EMIs to get acknowledged by their peers.

Unless you analyze their income statements, you can’t say anything about a person, whether wealthy or not.

We judge too quickly and make assumptions about people.

The author was shocked when he met a couple who didn’t look rich but had retired in their fifties and made millions through an automatic system.

Here is a disclaimer: there is no secret trick or get-rich-quick scheme.

The author’s system in the book is based on common sense that anybody can learn and implement to become wealthy over time.

Must read: Millionaire Teacher (Book Summary)

Lesson #2: There are no ninja techniques to become f*king rich.

Most people get stuck paying debts as they fall into the trap of get-rich-quick schemes.

Let’s be honest: We all want to become a millionaire, don’t we?

But how many of us are?

Many people buy those shiny schemes because they believe that there is some secret system out there that has made people billionaires.

The truth is: Most of us don’t know step-by-step what we need to do to become rich.

So we trust people who claim to know the secret of success.

They sell us our own dreams.

We all know that we have to save more money and invest in high-income assets to become rich. But it’s boring, isn’t it?

We want an easy system or hack to get rich quickly.

Sadly, it doesn’t exist. If it does, it’s not healthy in the long term.

You can hijack trends and make a lot of money. But trends come and go.

Instead of wasting time looking out for those “secret Ponzi schemes,” the author suggests that you learn about building intelligent systems that will help you manage money.

Lesson #3: More income doesn’t guarantee more wealth.

Another misconception that people hold is:

If they get more money, they will be rich.

The thing is:

You can’t become rich without changing your spending habits.

If you earn $50000/month and your expenses are around $49000/month, you are not rich.

It’s more about how much you spend.

You can find many people bankrupt as they could not clear their debt.

Many people buy expensive items on credit cards to fulfill their desires.

Banks also promote credit cards as their interest rate is very high.

Sure, you need a good salary or income source, but thinking that adding more of such income sources would make you rich without changing your habits, is a bad idea.

You should ask questions like:

“How much money do I need at the time of retirement?”

“How can I make my budgeting simple?”

“Where should I invest my money?”

“How much money can I save by cutting out unnecessary expenditures?”

The author says that many people don’t spend time answering these things, so they often feel the need to have additional sources of income.

Lesson #4: Pay yourself first before you pay others.

The first rule of better financing is to start paying yourself.

As soon as they receive their first paycheck, many people spend their money on bills, taxes, etc.

And ultimately, whatever is left goes to their savings account.

This might look normal. But it’s not.

You are losing money when you pay yourself last.

The key here is to do the opposite.

“Pay yourself first.”

David Bach

Take a percentage of your salary and put it in a different account.

There are two advantages of doing this.

First, you spend less money on shiny objects.

Second, your money compounds with time and helps you become rich.

The catch is:

You have to do it consistently every single month without fail.

Think about how much you should be paid per hour.

Most people never pay themselves.

They pay everyone else but forget themselves.

And it’s not just about money.

Most people never spend even a few minutes alone with themselves.

When you unconsciously spend money buying things hoping they will satisfy your desires, you are not helping yourself. You are helping the company that built that product.

The author wants you to think about yourself first.

Forget about your travel plans. Forget about your subscriptions. They are not going anywhere.

Forget about everything for a moment and think about how much time and money you invested in yourself.

How many hours did you give to yourself today?

And how much would you charge per hour if you provide any service?

When you pay yourself first, you start investing in your future.

Initially, you might feel that you are depriving yourself, but trust me, you are preparing for a better future.

Although the future is highly unpredictable, by saving a small percentage of your money every hour and getting around a 10% annual return on it, you can make millions of dollars by the time you retire.

The author says:

“Save $10 a day at 10% interest, and in 40 years you’ll have $1,897,244.”

David Bach

If you want to dig deeper and learn how this works, I highly recommend you purchase this book and look at the charts or balance sheets that show precisely how much you earn based on the number of years.

Also read: Bach Wisdom – 16 Timeless Truths.

Lesson #5: What you can’t see, you can’t spend.

Also, the higher your income, the more you spend on luxuries.

Not all of us are highly disciplined people.

As soon as we get our first paycheck, we start buying stuff.

It’s difficult to suppress our impulses, isn’t it?

The author provides a tricky solution to fix this problem.

Set up an automatic debit system.

When you get your first payment, it should go automatically to a different account.

That way, you won’t be able to spend it.

Most people mix their ‘emergency fund’ with ‘savings fund.’

They both should be in different accounts.

If they are in the same account, you might spend more than is needed.

It would require quite a willpower not to spend money on leisure. Only a person with tremendous willpower will be able to do so.

But why make things harder?

Instead of worrying about willpower, make the process simple.

Set up your account such that a small percentage is debited every time you get a paycheck and deposited in a separate account.

The author also recommends that you don’t put your money in a savings account.

Saving accounts don’t even beat inflation these days.

You should put money in a place where you get at least a 10% annual return. This way, your money will keep growing with time.

“What if it is less than 10%?”

Well, you don’t have to worry about the percentage here.

As long as it’s more than inflation, you should be fine.

The point is: It should be not less than or equal to inflation.

You can invest in mutual funds or SIPs instead of putting that money into Savings or FD.

Lesson #6: Don’t spend your entire life paying debt or rent.

The author recommends that you buy a house.

There are many advantages of buying real estate.

It has provided excellent returns over the decades to so many people.

Also, there is less risk compared to other things like Cryptocurrency, NFT, etc.

You can resale the property as well, which is another business model.

The problem with renting is that you make the landlord richer without him doing any work.

Your work hard at your job, finally get a paycheck, and then you have to give a small percentage of your income to your landlord just because you have rented his house.

The moment you stop paying rent, your landlord will show no mercy, and you will have to find another house.

As the population is increasing rapidly, rents are getting higher and higher.

You don’t have to pay any rent when you own a house.

It might sound unreal, but you will see how much money you lose by renting if you do a little math.

If you are living on rent and not thinking about buying a house, you should start thinking about it.

Imagine how much the landlord will be earning by renting his house for 30 years without doing any work.

It’s not wrong if you have to buy a house on a mortgage. You can get it clear after a few years systematically and finally own a house.

You might have heard that debt is bad, right?

The trick here is to be innovative.

If you pay your debt biweekly instead of monthly, you will pay less interest.

Don’t worry if it doesn’t make sense. We will discuss more about it in the next lesson.

The author talks about how most Americans, on average, have only about three months of savings in their bank accounts.

If that’s true, you need to first ensure that you have at least 10-12 months of emergency funds in your account.

If something terrible happens to the market or something unexpected happens, you should be able to sleep soundly.

An emergency fund should be accessible and large enough so that you don’t have any tension about the next month.

That’s also why real estate is the best.

You can rent a home, ensuring that you get paid even if you have no work or job.

Whether you do a job or have a business, you need a worst-case plan.

If you have 2-3 houses each paying rent, you won’t need to bother about your current paychecks.

But remember, your house must be clear of debt as soon as possible.

Let’s discuss why…

Lesson #7: The quicker you pay your debt, the less you end up paying.

To become rich, you should avoid debts.

Avoid using credit cards if you don’t understand how to use them smartly.

The author recommends not buying anything if you don’t have money for it.

Buying property is the only exception here.

If you buy anything on a mortgage, try to clear the debt quickly.

The reason is that the longer you take, the more you pay in the long term.

Let’s say you bought something for $100,000 on the mortgage.

If you take 30 years to pay it back, you would be paying more than what you would pay if you paid the same amount in 10 years.

It involves mathematics to understand how much you will pay exactly.

But you don’t need to bother about it.

Remember that if you have any debt, clear it as soon as possible.

But the question is: How to do it when you have a fixed income every month?

The author has come up with a brilliant solution for this.

He says that if you pay biweekly installments instead of monthly and split that amount in half, you would be saving a lot of money.

That means: If you pay $1000 per month installment to pay back your mortgage, you have to pay $500 every two weeks.

How does this help you save money?

When you pay quickly, you pay less interest on the principal amount. Every time you pay, the principal amount decreases.

It might not look much, but when you calculate in an excel sheet, you realize that it’s quite a significant amount that banks charge from you in the name of “interest.”

You see, banks keep this a secret. The longer you take to clear the loan, the more the banks earn.

So no doubt, they are so eager to give you loans.

Sadly, many banks don’t allow you to pay biweekly installments unless you ask them specially.

Therefore, before taking any home loan, call your bank executives and clear all your doubts.

And yes, don’t take unnecessary debts to buy things you don’t need.

The goal is to live a stress-free life. It’s hard to sleep when you have troublesome thoughts about paying your debt.

Lesson #8: Don’t hide your emergency fund in your basement or backyard.

You have to be ready to face any situation.

Some situations badly affect our finances.

That’s why you need an emergency fund to ensure that you don’t go crazy when you need urgent money in case of any emergency.

Got it why it’s called an emergency fund? Great.

The author says that it’s your cushion that will protect you if you fall on a rainy day.

Most people keep a portion of their savings as cash and hide it somewhere.

Some hide it in their basement. Some dig a pit in the backyard and bury it there.

But it’s a lousy strategy, according to the author.


Because when you put your money where it is not growing, your money starts decreasing.

You have to ensure that you put it in a place where it grows over the years.

Definitely, you need to have some cash put aside for use.

But don’t put all your emergency funds in a place where it has no scope for growth.

The author recommends putting it in a money market account. You will have to do some research as there are many options.

Deposit your money in a place where it’s safe.

In the classic book Rich Dad Poor Dad, Robert Kiyosaki explains that rich people make money work for themselves.

An emergency fund differs from the other funds you usually invest in buying assets.

Remember, your emergency fund should be accessible. You have to ensure that you can retrieve it in time of emergency.

Some people avoid keeping emergency funds out of their ignorance. And when an emergency strikes, they find themselves in a miserable situation.

They think, “Why to bother about something that hasn’t happened yet or might not even happen?”

It might sound logical at first, but money is not something you can generate quickly, right?

So you need a backup or emergency fund to deal with those exceptional cases.

Otherwise, you will have to take a loan, only increasing your debt.

Sure, you can always buy using credit cards, but their interest rates are higher and cost you more money in the long term.

It’s better to avoid them if you don’t have some expertise in Finance.

Smart Tip: If you are a beginner and don’t want to face ruthless jargon in Finance, simply read these two books: The Parable Of The Pipeline & The Automatic Millionaire. I believe that these two books are enough and simple to clear the fundamentals of Personal Finance.

Lesson #9: Keep things simple and automate them.

If something seems too complicated, we tend to avoid it at all costs.

That’s human nature.

It’s essential to keep your personal finance as simple as possible.

You don’t need a degree in Finance to do that.

Don’t get afraid of the terms like “assets,” “bonds,” “cash-flows,” “mutual funds,” “stocks,” etc.

Although they sound intimidating and important, believe me, you don’t need to know about all of them when you are just starting.

If you can pay yourself, buy some assets, and keep emergency funds, you are in a better position than an average person.

In fact, you can retire early if you keep these basic concepts in mind and use the power of compounding in your favor.

The only thing you have to avoid is Debt.

Stay far away and clear from it.

Don’t buy anything you can’t afford.

You might feel a strong urge to use your emergency fund to buy shiny products, but remember, they are for emergencies.

As soon as you feel that impulse to buy extravagantly, imagine the worst scenario and start thinking about what you will do on a rainy day.

But the problem is: It won’t help in the long term. Willpower is a limited entity.

That’s the reason why the author recommends automating the entire system.

When you automate everything, you don’t have to worry about maintaining your funds and keeping them in the right place.

Besides that, I recommend that you keep educating yourself by reading more books on Finance.

Lesson #10: Money is not larger than life.

This may sound weird, especially when we are talking about money.

But the author says that you give at least 1 percent of your income to charity.

It’s okay if you don’t have enough money.

But once you have enough, start thinking about giving it back.

Let me explain.

When you donate money, you feel amazing because every time you do something for a noble cause, you help humanity grow.

You contribute to making this world a better place.

The question is:

Where should you donate?

There have been many scams when people donated money in the faith that it would be put to good use. Unfortunately, it wasn’t used appropriately.

The author highly recommends that you always do thorough research before you donate in the name of charity.

Giving charitable donations also helps you save some tax.

But you have to be careful about who you are donating money.

Many organizations are not qualified, and thus income tax department doesn’t provide any tax deductions if you donate money to those entities.

Whatever you give back to the world comes back to you.

If you are adding value to the world, you will reap its benefits in the future as you share the same world, don’t you?

That’s why many billionaires donate a lot of money to charitable organizations that work for human welfare. This not only makes them feel good about themselves but also helps them save taxes.

Always remember that money is not larger than life.

LIFE is more important than anything material in this universe.

The Automatic Millionaire Review

The Automatic Millionaire, Expanded and Updated: A Powerful One-Step Plan to Live and Finish Rich
  • Bach, David (Author)
  • English (Publication Language)
  • 288 Pages – 12/27/2016 (Publication Date) – Crown Currency (Publisher)

Last update on 2024-05-17 / Affiliate links / Images from Amazon

I highly recommend this book to anyone who wants to be rich by the time of retirement.

Also, if you are struggling to manage money and have tried all those budgeting techniques that gurus talk about on Youtube, you should give this book a shot.

Trust me. You won’t be disappointed.

This is one of the best books on financing.

Why am I saying this? It’s because it’s straightforward to implement.

The framework provided by the author is easy to understand. You don’t need technical knowledge to do so.

Sure, it’s helpful. But this book makes life easier for people who don’t have any background in finance and are afraid of losing their money.

I’m not saying that you will get rich if you read this book.

There are many things that the book doesn’t talk about in detail.

For example, the author doesn’t explain which ‘money market accounts’ you should open. He has listed some websites. But it’s on the reader to do research and not deposit money in the wrong companies.

Also, in the world of finance, things change rapidly.

The market is changing all the time.

What used to work 20 years ago doesn’t work that effectively today.

I’d say it’s best to keep learning as much as possible and invest after doing critical analysis.

My rating of this book: 8/10.

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Want to learn more?

If you want in-depth knowledge of finance, I highly recommend doing this course on Coursera.

Enroll here: Finance for Non-Finance Professionals

This course is free, but I suggest that you purchase the certificate as Coursera also provides financial aid. You can do graded assignments and showcase your certificate on your Linkedin profile.

You can also try Linkedin Premium and get instant access to more than 16000+ courses on diverse topics, including finance.

Claim here: Get 1-Month Free On LinkedIn Learning

Now it’s your turn

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Shami Manohar

The Brain Behind

I am Shami Manohar, the founder of WizBuskOut. My obsession with non-fiction books has fueled me with the energy to create this website. I read at least one book every week on topics such as business, critical thinking, mindset, psychology, and more.

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