Last night I was re-reading the book Automatic Millionaire by David Bach. I think this is a great book and a must read for everyone because it has really sound advice and makes you think about the relationship we have with money. He has a lot of insight and gives really good advice. The main theme throughout the book is to pay yourself first and make it automatic. He goes on to say that if you only take one piece of advice from the book take the pay yourself first and make it automatic.
To pay yourself first is to have a portion of your paycheck go directly into an account that you don’t touch or see (he recommends a 401(k) or 403(b) because of the tax benefit). It is amazing how little people actually pay themselves for working. If you think about it, when we get our paychecks the first thing we do is pay our rent/mortgage, credit cards, utilities, food, etc. and then after all is said and done if anything is leftover (and more often than not nothing is) that goes into our savings. He Recommends putting at least 10% of your paycheck into your retirement plan (that is working for yourself for 4 hours a week), if you do that and compounded the interest (8% is the historical return for the stock market but I would go with a conservative 5%) over 35 years that will be over a Million dollars (close to it with 5%)!
I am so glad that I am enrolled in my company’s 401(k) plan when I did 3 years ago. I can defiantly see the results of compounding and after reading that I am also glad that I am paying myself first. After a while, you get use to not having the money around and you don't even missit. I am thinking of increasing my contribution percentage so that I could possibly retire even earlier!
In the book Automatic Millionaire, David Bach says that one should write down a promise to themselves in order for you to follow through so here is my promise to myself:
I promise that by the end of the day today, I will email Human Resources and inquire about how to change my 401(k) deduction percentage and actually change it by Wednesday 2/16/11.
