In these difficult economic times, there seems to be financial advice everywhere you turn. “Buy low.” “Don’t buy at all.” “Get a house.” “Don’t get a house.” With the myriad of available choices and suggestions, it can be difficult to separate fact, fiction and fancy. As more and more people struggle with lost jobs, decreased wages or frozen bonuses, you have to wonder: “isn’t there something simple but effective that can help me figure out what I need to do?” Thanks to this book, the answer is yes.
Enter David Bach, who has talked the talk then walked the walk. The author of “The Automatic Millionaire” wrote this book in 2005, before everything got so bad in the economy, but the advice is just as useful today as it was four years ago. Bach’s credentials are impressive: he is a money-savvy man who has become an “automatic millionaire” already and then some. In this book, he addresses the growing number of people who are in their 30’s, 40’s or even 50’s who have little or nothing saved and tells them what they need to do to find financial freedom and ease the fears of having enough money to live on after retirement. And by following his plan, it isn’t that difficult to do, regardless of income level.
In the first part of the book, Bach tells you to stop “beating yourself up!” over not starting to save sooner. It doesn’t do any good. You need to move on from your past mistakes and take charge of the present before it turns into the future. Your goal is a future where you do not have to worry about money. As he says early on: “Money may not make you happy, but LACK OF MONEY can certainly make you miserable.” So stop lamenting and start saving! He gives real-life examples of people of different ages who followed their plans and freed themselves from the money trap, people who had nothing or next to nothing when they started, so you can see that it can be done.
The next section covers the important topic of where to find the money you need to get started. Bach lays a shocking piece of information down here: what you spend is what makes a difference, not what you earn. When people have money, they fall into what he calls the “Never Get Ahead Race:” you spend more as you make more and don’t even notice that you’re doing it. So how do you break this cycle? You start off by identifying what he calls the “Latte Factor.” The Latte Factor is something that you spend money on-such as a daily latte-that takes away from what money you have to give towards your future. Bach doesn’t suggest everyone go live in a cave and never spend a dime: he knows that would only make you feel angry and deprived. What he does suggest is that you at least cut down these expenditures, to half or more. One woman in the book was astounded to learn that if she cut her massage/manicure Latte Factor down by half, in 30 years she would have $282,000 just from that!
Not everyone has the same Latte Factor, but the idea is universal. Find what you could do without or cut back on, and do it. Take that money and put it towards retirement and being rich. You have to take a good hard look at where your money goes to do this, and you have to be ready not only to face the facts, but to change them. And even a small change will add up over time. A dollar a day five days a week for bottled water doesn’t seem like a big deal, until Bach shows that over 20 years that’s $20,000 lost. His main idea in this section: start looking and start cutting. Money is there somewhere.
Part three covers how to save more, instead of just spending less. The combination of the two is how you make your savings really add up. Pay yourself first, to make sure you save the money. Don’t use a budget. Yes, Bach goes against what most all other finance gurus tell you: get rid of your budget. No one likes them, almost no one can stick to them, and they cause you to feel resentful. Toss it out along with the latte habit.
So, now that you are saving all this money, what are you supposed to do with it? Again, Bach has simple, straightforward answers. Invest it, either in a 401 K or an IRA. Bach discusses the pros and cons of both types of IRA’s so you can decide which you think is best. Once you have one of these, start putting in the most money you can afford to. As for what types of investments you should make, Bach sums it up in one word: boring. Hold steady with a diverse portfolio and don’t try to play the Wall Street game for a quick fortune. Slow and steady wins the race, he reminds you. Just ask the tortoise.
But what if you really are struggling to find money, even after cutting down the Latte Factor? In part four, Bach comes to the rescue there as well by giving you ways to earn extra money. This section covers everything from making a case to ask for a raise to selling on eBay. If those things don’t work or appeal to you, there are other ways of making the money. Bach suggests direct selling (Avon, anyone)? or franchising. He carefully discusses the good and bad sides to each, including going over start-up costs, amount of work involved and what to avoid when choosing them. By the end you’ll have an idea of what you’d like to do and how to start doing it.
Start Late, Finish Rich is well-written, in simple language that anyone can understand. It guides you through the process in small steps: you won’t feel overwhelmed or hopeless reading it. Even if you think you can’t possibly save a dime, Bach will help you see that you can. He shows you not only how to find it, but what to do with it. If you dream of having a financially secure future, retiring before you’re of age or having peace of mind over money, this book is definitely for you.
“Start Late, Finish Rich” by David Bach
Copyright 2005, Broadway Books, 347 pages.