The Latte Factor In David Bach's The Automatic Millionaire

Wealth is one of the most significant factors in American society that contributes to happiness because it allows us to live comfortably, and worry free. Thus in order to achieve financial independence we must make enough money to accomplish these goals. In David Bach’s book, The Automatic Millionaire, he highlights proven ways to accomplish this goal that are guaranteed to succeed if you follow them consistently and correctly. Some of the most significant ways to generate this amount of wealth is through the ideas of paying yourself first, making it automatic, and the latte factor which are not only great at generating money but are extremely realistic.

Retirement is one of the stages in life everyone looks forward to, however, most people

have nothing saved for it. The concept of paying yourself first will improve your retirement situation many fold. Paying yourself first means to simply to contribute a percentage of your paycheck to your retirement account, preferably a 401 (K), before the government takes taxes out of it. When you do this, let's say you make $50,000 a year, at a 10% annual contribution rate you will lose $5,000 a year; however, you now don't have $5,000 less of what you previously had but instead will have $3,750 less. Since the government is taxing your money after you contribute your 10%, they are taxing $45,000 instead of $50,000. This is important because when you finally enter retirement you will be left with millions of dollars or more, depending on your percent contributed, the amount of time you have been contributing, and the rate of return your money generates. In the automatic millionaire it says “If you invested just $200 every two weeks for 35 years in a retirement account that earned an annual return of 10 percent, what would you have?” the answer is exactly $1,678,293.78. In my opinion, this is a completely viable way to generate wealth massive amounts of wealth depending on the factors listed above. Additionally, you can adjust these factors to make sure that the amount you are contributing is suitable to every person in every situation making it extremely realistic.
However, one the excuse people have to the pay yourself first concept is that they don't have the money to spare because they are living paycheck to paycheck.

This is where the concept of the latte factor comes in. The idea of latte factor is to just simply eliminate everyday expenses that are not necessary like a latte, which you can make at home, or a pack of cigarettes. This concept is important to becoming an automatic millionaire because it eliminates excuses and provides you with extra money a day that you can then contribute to your retirement account which will in turn make you a automatic millionaire. An example of the latte factor in David Bach's, The Automatic Millionaire, is Kim. Kim is of the common mindset that she does have extra money to contribute to a retirement account but through a detailed breakdown of her daily expenses David found that on average she spends $11.20 a day, not counting after lunch, on food that doesn't make her full. If she were to simply cut $5.00 from this i.e. her latte from starbucks and contributed it to a retirement account she would have roughly 1.2 million dollars. In my opinion, the use of the latte factor is something that we can all relate to because we all have things we spend money on that we do not need to daily. Thus the principle of saving even as little as $5.00 a day and contributing it toward our future is not only extremely plausible but will lead us to a future of wealth through a retirement

account.
Although paying yourself first and the latte factor are good concepts to generating wealth there is one thing that can prevent them from happening no matter what; that something is discipline.

If you are not disciplined in your pay yourself first contributions they will never accumulate; if you are not disciplined in your elimination of the latte factor you will never reap the benefits. Due to the basic human nature of instant gratification and its effect on preventing you to be wealthy the concept of making it automatic is the most important because it eliminates basic human instinct. To make something automatic is to simply automate the process. This is important because through automation it makes the pain of those unnecessary monthly contributions pain free, in terms of pay yourself money, by doing it automatically. Since it is done automatically you subsequently do not need to think about it and since you are not thinking about it, the discipline that would normally be associated with making consistent monthly payments is circumvented. This gives you the ability to contribute money without being tempted to stop ,thus eventually leading you to millions of dollars in wealth through a retirement account. An example in the book The Automatic Millionaire of someone employing this method is the McIntyre’s who only made about $50,000 maximum throughout their lifetime. But through their method of making it automatic they were not tempted to spend what little they had left over

because it was out of their daily handling leading them to become millionaires later in life. In my opinion, the process of making it automatic is the most important aspect of becoming wealthy because it eliminates basic human desire which will ultimately lend itself to great amounts of wealth.
My personal take on the book the automatic millionaire is a good one. I believe that most if not all of the concepts of the book make sense logically, in terms of handling money, and are justified in terms of their assumptions on basic human actions. For example, most people want instant gratification and thus the process of making it automatic negates this; subsequently making the other concepts in the book much more realistic and plausible. Before reading this book I did not imagine myself as becoming a millionaire but a billionaire because, in my opinion, if you do not believe that you can become something you will never try and are thus doomed to fail. However, although I believe this my view of creating wealth has changed as a result of reading this book by causing me to learn the importance of reliable ways to make money so that if I do perhaps fail on my quest to becoming a billionaire, I will atleast have the security of becoming a millionaire through reliable concepts.
In conclusion, becoming a millionaire is realistic goal for anyone of any background because they can employ the concepts of paying yourself first, making it automatic, and the latte factor. Additionally, these concepts are realistic ways to generating wealth and also, are very reliable. Generating wealth is important because it allows us to to live comfortably, and worry free which ultimately lends itself to being happy. Since most people want to become happy a reliable way of achieving wealth is thus a reliable way to achieve happiness due to the benefits wealth provides.