Author David Bach reveals how you become a millionaire.webp
It’s been two decades since the movie Automatic Millionaire sparked droves of ordinary people to put down their drinks and prepare for their hopeful journey into the world of millionaire.
Now David Bach, author of this best-selling book, returns with an updated 20th anniversary edition.
Below are edited excerpts from our recent conversation:
Kerry Hannon:David, what hasn’t changed since the first edition came out?
Bach: The premise of “Automatic Millionaire” is that there is a way to build wealth and financial security in America on a regular income and become a millionaire. You can also go bankrupt due to unusual income.
It’s simple. Get rid of the budget and don’t rely on discipline. Pay yourself first automatically and save 1 hour a day on your income. This amounts to 12.5% of your total income.
Read more: Where do millionaires keep their money?
She coined the term “latte factor.” How important is this day?
The latte factor is as important today as ever. I used to talk about saving $5-$10 a day by not going to Starbucks and spending on those little things like a cup of coffee or two. Today, that equates to $27 per day. Today, the latte factor is a bigger sum of money, and it can really make a difference. Don’t buy stupid. Look at where you are spending small amounts on small things.
What about home ownership for those aiming to become millionaires?
You have to own a house. You can’t get rich renting. There was a batch today of people talking about the fact that renting is cheaper than owning. I completely disagree. There are two primary escalators to building wealth in America – stocks and real estate. If you don’t have both, you’ll fall behind.
Twenty years ago, people told me that real estate prices couldn’t keep going up. Their number has quadrupled in 20 years. It all depends on where you live, of course. Real estate has always been local, not national.
When you rent, no one eats the expenses you think you’re saving. The landlord who owns your property doesn’t eat the taxes, doesn’t eat the insurance, and doesn’t eat the maintenance. These expenses are passed on to you. Ultimately, rents always rise in the long run. The only person who gets rich from this deal is the person who owns the property.
Read more: How to Buy a Home: A Guide for First-Time Home Buyers in 2025
What has changed?
It has never been easier to become an automatic millionaire than it is today. The number of millionaires has increased dramatically. When I wrote the first book, there were about 8 million. Today more than 24 million. This number will double in the next ten years.
They did this by automating their savings accounts and investment accounts. They did this by automating their 401(k) plans. They did this by automating their IRA accounts.
We now have an extraordinary amount of wealth in retirement accounts. Twenty years ago, you would get a job, you would be handed 401(k) papers, and if you didn’t fill them out, you wouldn’t be enrolled.
One caveat: Although 401(k) plans have become automated, people now have to be financially literate and know what they’re automatically enrolled in — 3% of their total income. Well, that’s not enough. You need to increase it manually. You should increase it to at least 12% to 15% of your total income.
The second thing that has changed is the emergence of target-date mutual funds. It has become an automatic way to invest all your money at once in a diversified, professionally managed portfolio. People used to be skeptical about this money. I would say this is the future of investing.
For the average person, they should pick a mutual fund by a target date, and that’s it. It must be done. These mutual funds have really improved the way people invest in their retirement accounts.
Third, most mutual fund companies like Vanguard and Schwab no longer have minimum amounts required to open accounts. When I wrote the first book, most of them did. This is great for someone to get started.
Read more: How much should I put in my 401(k)?
Author David Bach reviews the keys to becoming a millionaire. Image source: Efthia Buffington ·Photo credit: Efthia Buffington, photo credit
Did I mention there are some things you wish you could change? Can you elaborate?
Seven in 10 Americans were living paycheck to paycheck 20 years ago. This is still the case. About 40% of Americans didn’t have access to $1,000 in an emergency, and that’s still the case.
I’m more concerned than ever about wealth disparity in America. There are 42 million Americans who receive Supplemental Nutrition Assistance Program (SNAP) checks. (The national average monthly benefit earlier this year was $188.45 per person and $350.89 per household.)
Read more: Living paycheck to paycheck? Here are 5 ways to break the cycle.
Why is your book relevant today?
We still don’t teach our children about money in school. It is not part of mandatory financial education. It is not part of the graduation requirements. When financial literacy is taught in school, it often takes half a day outside the curriculum.
What role does private equity play in 401(k) plans?
Ultimately, private equity is not necessary for the average retail investor. However, a small exposure to private equity in a target-date fund would not be a problem. You will see minor exposure to private equity and cryptocurrencies in these funds.
Do you have a question about retirement? Personal finances? Anything career related? Click here to drop a note by Kerry Hannon.
You’re a big fan of mini-retirement. What is all this?
A mini-retirement could be a vacation of one or two months. Save money in a micro-retirement account only, and get one account every 10 years. It can completely change your life, improve your energy, improve your health, and improve your outlook on everything.
What advice do you give people about what age to cash in on their Social Security checks?
The moment you can get Social Security, you should take it and enjoy it. When I’m 62, I’ll eat it that day. The idea that you should wait to get a little extra money is ridiculous. It’s been three years from now, so hopefully I’ll get that money. Look, if you don’t want to enjoy it, you can just reinvest the money.
Kerry Hannon is a senior columnist for Yahoo Finance. She is a career and retirement strategist and author of 14 books, including “Retirement Bites: Generation X’s Guide to Securing Your Financial Future,” “In Control at 50+: How to Succeed in the New World of Work“,” and “You’ve never been rich.” Follow her Bluesky and X.
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