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"Automatic Millionaire" and finally getting ahead

February 22nd, 2008 at 12:23 pm

I'm a financial journalist, so I think I do a decent job managing my finances. But, every week at the library I load up on 4 or 5 personal finance books and read them all just in case. I call it job research, and usually it's no big deal.

But last night, I read the Automatic Millionaire by David Bach. It was great. So simple. And,even though I do a good job staying on top of the cash as family CFO, it made me realize we weren't paying ourselves first and we could do so much better.

We hadn't "paid ourselves first" since Hurricane Katrina threw a wrench in our plans. But that was almost three years ago. I guess that kind of financial/emotional stress makes you even more conservative, to your own detriment.

So, this morning, I hit the computer and automated our savings.

I set up bimonthly transfers to our stock brokerage account, my hubby's Roth IRA, the high-interest online savings account, and the 529 college savings plan for our soon-to-be-born baby.

The money will be taken out on the Monday after each payday and will be enough to max out our personal savings goals for 2008, and then some.

I hope it will also instill more discipline because now we REALLY only have what's left over to spend.

Today was also great because my hubby's annual bonus finally came through. Although taxes cut it in half (love those taxes), it allowed us to pay off the new windows we just had installed. I had used the credit card as no-interest loan for them, so that's now paid (And I get rewards on top of that...)

I also socked away the "monthly payments" I should have made to the above accounts in January and February, so we will be on track for the year.

I boosted the reserve in our checking account, too. I had run the balance razor thin since Christmas, in part because of the holidays and the window expense. I wanted to pay for all of that with normal cash flow, not savings, even though they were larger, partly unplanned expenses.

And we still have a little left over. I think what's left will (hopefully) be enough to cover any out of pocket expenses we'll have to pay the hospital when our baby is born this Spring. Of course, it's nigh impossible to read the mind of the insurance company...

8 Responses to “"Automatic Millionaire" and finally getting ahead”

  1. Broken Arrow Says:

    David Bach....

    You know, I like him overall because his ideas are in fact so simple, and yet are quite effectively. Just like Dave Ramsey.

    However....

    Like Dave Ramsey, there are also places where I take exception. Because the advice it gives IS simple... TOO simple, when in real life, there are so many things that can factor into an issue and change the outcome.

    For example, if your mortgage has a low interest rate, you may actually be better off investing any extra money you have rather than to take his simple advice to pay down the mortgage. Even if your goal IS to pay off the mortgage early. Plus, keeping the money "liquid" in investments could also help you cope with any large emergencies.

    Still, I can't say I have as many gripes about David Bach compared to some others.

    Congrats with your hubby's bonus!

  2. chosenbliss Says:

    Thanks so much for this idea. As a couple we are both self-employed so our money is always going back into one of our businesses. This would help shift our paradigm very quickly! Love it!

  3. thriftorama Says:

    Arrow... You're right. All financial advice should be taken with a grain of salt. It simply doesn't apply to everyone.

    For instance, Bach's Latte factor. Please! Like one less coffee could really solve most people's financial problems? Most people I know have problems because they pay too much for their car(s) or their houses, not because they spend too much on tchotchkes.

    But for us, automating our savings made sense. I was trying to do it all manually before but either never got around to it or lost the discipline to keep it up.

    I always managed to talk myself out of making the deposits or waited until the end of the year and just hoped I had enough of a lump sum to cover it. Automating will stop me from getting in my own way. Plus, it's one less thing to think about.

  4. Aleta Says:

    I think the point that David Bach is trying to make is to make one see how even cutting out a Latte a day can build savings. Sometimes these coffee shops are just habits and we really don't realize how much we're spending. I'm a firm believer in the everyday expenses needing to be dealth with and lessened.

    A couple of years ago, I picked up his EAudio Books in the Library. There are quite a few and it makes it easier when you have long drives to listen to them.

  5. luxlivingfrugalis Says:

    I liked his Automatic Millionaire because it 'finally' explained 401-K's in such a way that I could really grasp that it meant we'd have more money not less and it was a good enough explanation that I was able to read it to Hubster (who hates to read himself) and get him to the point where he finally said yes to at least trying 401-K contributions. No turning back now as we are doing well with it.

    Ms.Tikibarwannabee - I re-ran across a place yesterday that you might be interested in called orientaltrading.com - they've got lots of things for tiki-parties that could be used to decorate a real tiki bar CHEAP. CHEAP. CHEAP. I looked yesterday for your blog and couldn't find it - now here you are. They've got all kinds of matting, fans, floral stuff, tiki goodies that you MIGHT want at a really affordable price. Hope this helps you achieve your dream.

  6. luxlivingfrugalis Says:

    Don't forget to look under laua & tropical in the search feature.

  7. thriftorama Says:

    Thanks for the tip! Myriahs' Polynesia bizarre is also fun...

  8. merch Says:

    BA,

    Dave Ramsey's point is that extra money invested will be diverted to other things (vacation, cars, new addition, big tv, etc.). So those extra payments in truth are not long term investments.

    With Dave Ramsey, his advise is slated more towards behavior modification rather then pure math.

    Of course, I am paying off debt and saving in my 401k. Dave would not be to happy with me.

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