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January 09, 2006


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While overall I agree with this advice, it's always important to remember that $1M in 35 years isn't a "pot of gold". I wrote a little about this:

One thing I've found useful in the vein of "Paying Yourself First" is actually _really_ "Paying Yourself".. I.e. deposit all your income into a "slush fund", and automatically transfer enough to cover your monthly expenses to your checking account each month. See:

1. It's $1.7 million in the example above, not $1 MM.

2. While $1 million might not be a "pot of gold", it's more than most people have (or will ever see) at retirement.

3. Don't get stuck on $1MM. Apply the information and you can have much, much more than that (per the example above).

4. Careful on the linkfest. I'll let it go this time, but please try to keep it in check. If you write a great comment, people will click through to your site based on that alone (hyperlinked from your name) -- you don't need to call special attention to yourself. Thanks.

Sorry -- didn't mean to call any attention to myself, the thoughts seemed germane to this article and it would be a lot to retype.

I think ultimately a lot of people will have $1M or more at retirement, again keeping in mind that $1M may not be all that much when we retire.. "Pot of gold" wasn't my quote, it was the author's, and I think it's true only if one fails to include inflation.

What I'm concerned about is the "easy way to a million" type articles that imply that wealth awaits those who save $14/day. So long as the future millionairs remember to increase their savings rate along with the salary increases!

No problem.

Generally, I agree -- in concept. However, most people are so far from $1 million, if I can help to just get them up to that point, I'd be happy! ;-)


Your article is very interesting and attention grabbing when you mentioned David Bach's "Automatic millionaire" book.

That book is one of the most eye-opening books about personal money management and all those who have read it have very glowing report about how it changed their financial situations for the better.

Ikey Benney

This is great advice straight from the book. It should be recommended reading for all. However there is a couple of things David Bach fails to discuss. In certain areas of the country his example of buying a home does not hold water. Given that the national median is over $200,000, there are many areas on the coastal regions where prices are commanding over $500,000 for a starter home and millions of folks live there.

He also quotes a stat that homeowners have a net worth of over $100,000 while renters have on average a net worth of $5,000. Again, regional difference are the caveat emptor. I think it is important regardless of where you live to save 10% at a minimum in pretax accounts. Yet when housing is taken into account it becomes more apparent why many have a hard time saving even this small amount.

Even in his book, he discusses a couple with a modest income of $50,000 yet their housing was low cost as well. Try saving 15% of your income in Los Angeles or Orange County where rents are $2,000 - $2,500 for modest dwellings and your PITI would run about $3,000.

Dr. Housing Bubble

Pay yourself first is the Midas touch that can make one a rich person without which we only exists to satisfy our instant gratifications. Paying your self first is adhering to what the Richest Man in Babylon advocates; " Part of what you earn is yours to keep." Paying yourself first by having 10% automatic deductions in your income or salary would afford one to invest and make his money work wonders for him. Spending money indiscriminately is definitely a sure formula to become poor. Save first with what you earn and the rest you can think of overheads like the payment of taxes. The rule of the thumb is make your money first then save 10% of your income or salary and the rest think of expenses. Remember, the seeds of greatness is not in you if you cannot save money as one author would recant.

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