How David Bach Became a Millionaire (and the Rest of Us Can, Too)
Jennifer Barrett
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What’s the fastest way to $1 million? David Bach ought to know. He reached the milestone by his 30th birthday and went on to write several bestsellers about how others could “finish rich,” too, along with “The Automatic Millionaire,” which he has just updated.

We talked to him about how he hit that milestone, the most important step to building wealth—and the beliefs that hold so many of us back.

You became a millionaire by 30. What did you do to get there so quickly?

I paid myself first. And right out of college, I bought a home with my best friend. We put down $10,000 and rented out the bedrooms to cover our mortgage.

I also worked my butt off in my 20s, first in commercial real estate and then at [what is now] Morgan Stanley. Not all my friends were doing that, but when I look at my friends now who are the most successful, it’s those who were busting their butts in their 20s, too.

You’ve said paying yourself first is the most important step to building wealth. How much should you keep for yourself, and what should you do with it?

Ideally, you want to keep at least one hour a day of your income, which works out to about 12.5 percent of your pretax income…and save and invest it, automatically.

What’s the simplest way to do that?

There’s a blueprint in the book. But, basically, you want to automate your paycheck being deposited. It’s shocking how many people don’t! Then sign up for a 401(k) or open up an IRA. Have money automatically moved into those accounts and into savings for emergency purposes and then into a ‘dream’ account, which is money to pay for your dreams.

You should also automate your credit card bills and other regular bills like your car, rent, mortgage, phone bills, gym. And tithe (or donate) automatically.  

final-headshot-david_bach_e_142-copyWhen did you first become interested in investing?

My family talked about investing all the time. My dad was a stockbroker and financial advisor. But my grandma helped me buy first stock at 7 years old. It was a transformative experience.

What did you buy?

We were eating at McDonald’s and she said to me: There are three types of people. There are those like you who come eat here, those who work here for minimum wage and those who own this place. If you want to be wealthy, she said, you want to be an owner… She said to me, you’re going to save money from your allowance and from Hanukkah gifts. And I’m going to help you buy this [stock].

That was a major lesson at a very young age.

I can imagine. You write that ‘regardless of the size of your paycheck, you probably already make enough to become rich.’ So, what’s holding so many of us back?

I truly believe the biggest thing that hurts people financially is a lack of financial education. This stuff has not been taught in school. If it was, I deeply believe most people would do better. When you know better, you do better.

What do you say to people who say they don’t have enough money to save?

People say, if I make more money, then I’ll save. Or they say, I can’t afford to save. [But] it’s about saying, over and over again: You can’t afford not to.

You don’t go from not running to running a marathon. You work your way up. Savings is very similar. You probably do have enough money. You just have a Latte Factor. It’s not really about giving up coffees or something [else], but looking at where your money is going and realizing, I may actually have enough to save.

There’s an enormous disconnect between people’s values and how they spend their money. It’s about getting total clarity around your values and making sure the way you spend and invest aligns with that.

This interview has been edited and condensed.



    Inspiring story! Wondering, is there any Acorns success story I can read of people who made money on the app? I just downloaded it, have always been interested in stocks, but don’t have time to research which one I should invest in (which probably cringing to hear for some). Acorns has lots of good reviews, but I can’t seem to find any success stories or case studies for Acorns. Anyone made money off it, or it is just a really good savings app?

    Acorns is pretty new to the finance investing world. I would give success stories from it a few years and then you have to take into account the amount invested versus what you are willing to invest.

    Hi Cyrene, I agree with Carol below in saying that the app is a little too new for any real “success stories,” but what I can say is that in the year and a half since I’ve downloaded the app, I’ve invested around $1,125 and made about $75 (I’m in the most aggressive portfolio). That doesn’t seem like a ton of money, but it’s a solid 6% return, which is waaay more than the typical savings account. And the savings component is all automatic, so I don’t think about it at all. I’m actually really impressed by how much I was able to save (and earn) without ever really needing to put any brainpower into it.

    And of course, as your balance grows, so will your potential returns.

    ))) he saved his money from renting out their house, then was hired by Morgan Stanley, received annual bonuses couple of years – voila, another millionaire) wrote a book about it – additional money. It looks this way from reading article.
    How can financial adviser recommend you to invest everything into pension plan? I’m studying CFA 3 level with no practical experience, and can understand that this approach won’t help you to earn money. Saving is not equal to earning.

    @Evgeny I can agree that this does sound basically like the guy became a millionaire because of what he does/did, and not solely because of savings (30 is basically impossibly young for the average person to be a millionaire based solely on savings). That said, I disagree with your theory about saving. For one, even never taking a college course on the subject, I can tell you that what David is talking about is not a pension. A 401K is very different from a pension. Secondly, investing into a 401K (in diversified mutual funds, for example) is a strategy for earning. With compound interest, your savings will turn into earnings. Over the course of time what you earn in interest should outpace what you contribute into the accounts. For instance, the market has historically returned 8%-12%. Assuming the low end… if the market continues to return 8% yearly average, then if you invest 10K into your 401K every year, after 28 years you should have 1 Million dollars. If you max out a 401k and an IRA every year (23,500 as of 2017), after 19 years you should have 1 million dollars.

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