Book Review: Automatic Millionaire, by David Bach

Well, I didn't actually read the book.  I picked it up on CD at my local library.  Another admission, I began this a little bit biased.  I think I have seen enough of David Bach on Oprah, read enough from his Yahoo Finance columns and gotten enough of his "buy a home now or perish" mantra to know that I'm wasn't going to be a huge fan of his books.

I'm still waiting for the Automatic Millionaire Homeowner to become available on CD at my library.  I'm really curious what six hours of "you're a loser if you don't buy a home today" sounds like.

So, as for this book.  Well, as always there were some thing that I liked and didn't like.

By the way, before I get started, Mapgirl actually read the book and did a much better review.  So, check her's out.  It's a two parter:  I and II.

Things I didn't like:

• It was kind of boring.  I couldn't imagine actually reading this book.  He is very redundant and spends half of his time rattling off web sites and phone numbers.  What's worse about the audio version, you get David himself reading, "HTTP, Triple W, E-Loan dot com" but he doesn't tell you about the "colon, forward slash, forward slash"  I mean if you're going to tell us "http," go all the way.
• Admittedly, he calls it his "powerful one step plan," and one step it was.  "Pay yourself first, and make it automatic."  Don't get me wrong, it's a good message, but we already heard it from the Richest Man in Babylon and the Wealthy Barber.
• I've already addressed his, "buy a home at all cost, or be banished to a life of poverty" kick.  He uses stats like, "Renter's average net worth is $4000, while the average homeowner's net worth is $130,000"  I don't doubt the stat, but it obviously brings up more questions than answers.  For example, what is the average income disparity between renters and homeowners?  What is the average age difference between renters and homeowners.  Do homeowners already have a high propensity to save, and that is why they bought a home, not that a home caused them to become rich?  Likewise, do lifelong renters have a high propensity to spend, and that is why they never bought, not that never buying is what kept them poor?
• My biggest beef with the "you must buy a house" kick is that he fails to mention any of the potential risks or ongoing costs, such as property tax, maintenance, insurance, possibly PMI, or the potential for real estate prices (especially in certain regions) to actually go down for a period after a bubblicious run up.
• He also fails to mention any of the risks associated with investing in stocks or mutual funds.  He tells the reader (or listener in my case), that stocks average 10%, so if you save X amount per month you'll have...  That's fine to do the time value math, and it is powerful for people who have never seen that, but I think he has a responsibility to mention that, "hey, things don't always go as planned."

Things I liked:

• For newbie savers, its a great and time tested method.  Pay yourself first, make it automatic.  It doesn't get any more simple than that.  I know from my own experience, I wasn't a very good saver until I made everything automatic.
• The Latte Factor.  This is a great way to force people to think twice about all the little ways that they can save money every day.
• It's a good start for beginners to help them find a few resources on the internet, learn about different types of savings accounts, retirement accounts, and mutual funds.

Overall Impression:

Overall, I would recommend it to beginners.  It's probably best for someone right out of college.  However, there are other books that I think do a better job for this age group, and are much easier to read.  Books I would recommend instead:  Getting Loaded, by Peter  Bielagus, or Debt Free by 30, by Jason Anthony.

Comments

[mapgirl]

Thanks for the link repost! Did you know we're being picked up by Yahoo Blogs? Pretty neat!

I totally agree that he doesn't talk about all the risks associated with investing and the extra costs of buying a home. For a certified planner, I don't know where he thinks his fiduciary responsibility is, but I think he's irresponsible sometimes because of his lack of warnings. Not even a 'Caveat Emptor.'

I think anyone who thinks they can afford a home should tack on an extra 10-15% on their estimated mortgage payment to see if they can afford that price every month. Escrow changes, PMI, homeowners insurance, maintenance all cost money!

[Cram]

True about presenting biased statistics; I just checked a mutual fund I purchased because some guru said you can't go wrong with Janus funds. -including
JANSX
which increased about 25% in 10 years, that's about 2% a year compunded!!

[mbt shoes clearance]

nice to have you do all of the research for us. It makes our decision making so much easi

[cheap jordan 1]

Thanks for sharing. This website is to I too have to help. Very good.

[Columbia Jackets]

A good amount of time I find myself chucking a long, which is a perfect way to start Columbia 2011 my morning and Mens Columbia Interchange Jacket a great way to unwind at the end of the day.

[Belstaff Jackets]

For any folks invested in more and better resident contribution, that is a knock back, i believe.

[Canada Goose Jacket]

a lot of editors have started to understand more about alternate options, they will obtained a little cameras, spend some money to hire nearby residents and individuals across the actors within the facilities

[Mulberry Purses]

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

[Spyder Ski Jackets]

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.