The classical error that most people make is that if you want to become a millionaire, you've got to earn a lot of money. And of course, that's not true. I used to be that way, just wandering through life, And I thought, if I have more money, I will have a better plan. Until I met this dude, Jim Rohn, he told me “if you had a better plan, you would have more money.” And I remember thinking to myself, what if that is true? So I started searching for better plans and I found this book, Automatic Millionaire. This book clearly shows how you can become a millionaire very easily, automatically, without even needing to make lots of money. This is one of the most practical books I've come across, and it gives you a very clear action plan. It even gives you the phone numbers you need to call. Let's look at the three main lessons that I learned from the book.
Lesson #1: Pay yourself first
Before you pay anyone else for things like taxes, rent, and insurance, you should pay yourself first. You may say that I first pay these costs and then I set aside whatever is left for myself. But the problem with that is that after paying all these costs, usually nothing is left. Remember, you want to support the well-being of yourself and your family, not other people and their businesses. So the first person you should really be giving money to is yourself. A very practical way to do this is to have a pre-tax retirement account so you pay yourself even before the government takes its share. A good rule of thumb here is that you should pay 10 percent of your pre-tax income to yourself. Then the government is left with only 90 percent of your income to tax. So you pay fewer taxes. Very smart. But you should not wait until the end of the year to pay yourself. And that brings us to the second lesson.
Lesson #2: Make it automatic
The key to being an automatic millionaire is to set up automatic payments for yourself. People usually try to budget their income and save some. But the problem with that is that it goes against human nature that is designed to crave instant gratification. Instead of fighting your nature, you can set up automatic systems that get you paid without you having to decide on it every month. You just set that up once and the only decision you have to make is what percentage of your income you want to save and set up automatic payment for your saving account. It's easy to see why this works. If the money doesn't show up in your checking account, you won't be tempted to spend it and again, make sure to use pre-tax benefits that the government has put there to help you become a millionaire.
Lesson #3: Own your house
Renters end up usually paying the same amount of money in rent as someone who pays the monthly installment on a homeownership mortgage. But in the end, renters have no house. When you decide to go this route, make sure you choose the right kind of mortgage and come up with a way to pay it off quickly. For example, instead of making 12 payments of the monthly fee, you pay half the monthly amount every two weeks. So at the end of the year, you make 13 full payments instead of 12. Paying your mortgage as quickly as possible means you'll pay less interest, like if you have a 30-year 250,000$ mortgage, using the biweekly payment plan will save you more than 100,000$. Wow. Simple idea, but wow.
Now you may say I am not making a lot of money to become a millionaire. I'm going to suggest you already make enough to become a millionaire unless you are homeless or something. There is a principle called the latte factor, which is the idea of getting rich over time by regularly putting aside a small amount, like if you go to a Starbucks and spend three dollars every day on coffee, which can easily add up to a thousand dollars a year. Let's say you manage to put aside ten dollars every day simply by cutting unnecessary expenses like your daily Starbucks coffee. With an annual return of just 14 percent, which is very realistic. You will have 1,391,000$ in 30 years and more than 5,000,000$ in 40 years. Isn't that amazing? And all you have done is to set aside only ten dollars every day. So, even if you work at McDonald's, you can become a millionaire. Now if you make that ten-dollar payment automatic. Congratulations. Then you've joined the family of automatic millionaires.
So you don't need to make lots of money to become a millionaire. All you need is a good plan and this book will help you do that. Good luck becoming a millionaire.