Now I Can Buy Beer

Book Review: Automatic Millionaire

Posted on 22. Apr, 2009 by MJay in Investing, Product Reviews

My first post on Now I Can Buy Beer was an easy choice.  It’s part of any gift I give to any new college grad entering the world of life after school.  As far as putting the financial side of life in perspective, nothing does a better job than reading The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich.  I can’t even begin to talk about how important this book is.  There’s a lot of money to be made through various markets, investments, business ventures, etc., but nothing is more sure than the investment strategies discussed in this book.

The basic premise of this book is not just saving money, but doing it automatically.  Through payroll deductions, small amounts of money are automatically deducted and then, when invested conservatively, can turn into huge sums of money in the future.  The big kicker to all of this is that it’s quite easy, requires little effort, and is essentially self-sustaining.  Even at our age, a conservative investment scheme done for as little as 5 or 6 years can reap massive rewards.  The idea of financial security is something that every college grad dreams of and smart financial planning is paramount to doing this.

Anyone can personally relate to this strategy!

While in school, at my part-time job here in Athens, I enrolled in a 401k program the day I started employment.  I only put in 8%, which was enough to get the company match (our company match is 150% on the first $1000 contributed and 100% thereafter).  This is a no brainer; where else can you instantly get 150% return?! (If you know, shoot me an email!)  Shockingly, I’m in the MINORITY of people at the office taking advantage of this!

This deal is awesome.  Even on my small bi-weekly paycheck, I managed to put away $6,000 into this 401k in a little less than two years… off of a meager $14 an hour wage with my deductions amounting to no more than $50 a paycheck.

If I don’t touch this money until my retirement (which I am hoping will be around 55 and assuming an 8% return rate), my account would be worth almost $70,000… off of an initial investment of $2,500 (+$3500 in company matches)!  That’s $50 dollars a paycheck for only two years turning into 70k.  That’ll be my yacht.  Ha!

Anyway, after reading this book, I upped my salary contribution to 16%.  And if I continue to contribute 16% off of a $40,000 yearly salary (very conservative I know, but just work with me!), this 401k will be worth $963k at my hopeful retirement age of 55.  At that point, the 401k would be generating almost $90,000 dollars a year of income.  Without the guarantee of Social Security still being there, I can assure myself a solid retirement, millionare status, and a worry-free lifestyle.

I realize that I won’t be able to withdraw any of this money until 60, but this simple demonstration shows how much money you can make by saving with little to no discipline.  Everything is automatically deducted and this money is hard to get to, meaning I won’t be able to easily deduct any for my mid-life-crisis-sportscar.  

Even people that don’t make a lot of money can become automatic millionaires!

Anyway, what steps are you taking to plan for your retirement?  Post them in the comments.

Like this post? Click here to subscribe via Email or subscribe via RSS

Tags: 401k, Book, finance, life, Retirement