The Automatic Millionaire
I finished reading ‘The Automatic Millionaire (David Bach, Broadway Books) that I borrowed from Mazrah on 13 July 2008. Parts of the book are refreshers, parts of it are new, if not an eye opener. On the whole, it helps me to reaffirm my resolution to achieve financial independence.
There are some common ideas that are found in most consumer finance book s. The main ideas in this book are
1. Pay Yourself First
2. make it automatic
3. be a home owner
4. be debt-free
5. do give back
Now, most of these ideas are oft repeated in get-rich books. I can almost hear Azizi Ali’s voice while reading David’s book. Idea number 2 is the most refreshing idea. It really convincing that you can be a millionaire WTHOUT earning a lot of money, without a budget, without willpower, and without discipline. There is an automated way to be a millionaire.
Reassuringly, as I found in chapter 3, I’ve already embarked on the automated way to pay myself first. The idea is to set aside a portion of my income for retirement i.e. making a payment for me when I am less able to do work or choose not to work. David suggested making a contribution to a 401 (k) plan. I believe, the equivalent in Malaysia is the EPF. So, without realising it – that’s why it is called ‘automatic’ – I’ve been contributing 11% of my gross income towards my retirement. In David’s scheme of things, that percentage would put me in the Middle Upper Class.
Before I get carried away congratulating myself, I have to remind myself of the unmet assumptions. First, I’m not earning 10% return on my money in the EPF. Last year, the dividend was less than 5%. So, my money would grow slower. Last time that I check, I have less than RM100,000 in my two EPF accounts. The amount would have been more if I had not withdrew some for buying an apartment. Here’s the second unmet assumption: the pay yourself money should not be used unless in an emergency. Effectively, I have accumulated less than 11% of my earnings in the fund. So, my plan of action is to top up the amount. I could save up here in the UK and pay myself first in pound sterling! Now the HSBC Amanah savings account seems more and more interesting. But, as David advised, maybe I should keep my eyes open for the money market account.
Alhamdulillah, I AM a homeowner. Part of the motivation for making my first property is to have something for Marwan. With the MRTA on the loan, Marwan would be entitled to the property if I pass away before paying off the loan completely. And, currently, the apartment is rented out. Alhamdulillah, the tenant is hyper punctual in making payment. The action that I need to take is making speed up the repayments. Last year I made one extra payment. But that was motivated by the late payment by the payroll unit. With the rental money that I receive, I can afford to pay at least RM300 extra each month. Now, I have to ask Mahadhir to email me the details of my loan account so that I can proceed with the payments. I am also on the lookout for a second property, preferably a ‘landed house’ – for October 2010.
Before coming to the UK, I made arrangements to reduce my debts. I sold my Kancil; and with it went the remaining 2 years worth of loan. Now, Eddrus have bought the car, and he promised to make monthly payment to me. With the BMW 316i bought debt-free, I’m a net lender with respect to cars. As for credit cards, the debts were taken care a few months after I set foot in the UK. I asked abah to make repayment to my Ambank and HSBC credit card accounts – using my own money, of course. Now I don’t have any credit card balances, Alhamdulillah.
During a spell of ‘credit scare’, the monthly balance on the credit card statement was big enough to make me afraid of looking at it. Alizi advised me to take a personal loan, which I acquired from Bank Islam, to lessen the severity of the situation. A month ago, the 7-year personal loan has been paid off in less than 4 years. Alhamdulillah.
As far as ‘giving back’ is concerned, I’ve been giving back through zakat payment. I have set up a monthly salary deduction for the zakat payment. So, it is automatic. Overall, I have a good foundation to be a millionaire at retirement age. To be financially independent before retirement, I have to strengthen my defence, and boost my offence.
There are some common ideas that are found in most consumer finance book s. The main ideas in this book are
1. Pay Yourself First
2. make it automatic
3. be a home owner
4. be debt-free
5. do give back
Now, most of these ideas are oft repeated in get-rich books. I can almost hear Azizi Ali’s voice while reading David’s book. Idea number 2 is the most refreshing idea. It really convincing that you can be a millionaire WTHOUT earning a lot of money, without a budget, without willpower, and without discipline. There is an automated way to be a millionaire.
Reassuringly, as I found in chapter 3, I’ve already embarked on the automated way to pay myself first. The idea is to set aside a portion of my income for retirement i.e. making a payment for me when I am less able to do work or choose not to work. David suggested making a contribution to a 401 (k) plan. I believe, the equivalent in Malaysia is the EPF. So, without realising it – that’s why it is called ‘automatic’ – I’ve been contributing 11% of my gross income towards my retirement. In David’s scheme of things, that percentage would put me in the Middle Upper Class.
Before I get carried away congratulating myself, I have to remind myself of the unmet assumptions. First, I’m not earning 10% return on my money in the EPF. Last year, the dividend was less than 5%. So, my money would grow slower. Last time that I check, I have less than RM100,000 in my two EPF accounts. The amount would have been more if I had not withdrew some for buying an apartment. Here’s the second unmet assumption: the pay yourself money should not be used unless in an emergency. Effectively, I have accumulated less than 11% of my earnings in the fund. So, my plan of action is to top up the amount. I could save up here in the UK and pay myself first in pound sterling! Now the HSBC Amanah savings account seems more and more interesting. But, as David advised, maybe I should keep my eyes open for the money market account.
Alhamdulillah, I AM a homeowner. Part of the motivation for making my first property is to have something for Marwan. With the MRTA on the loan, Marwan would be entitled to the property if I pass away before paying off the loan completely. And, currently, the apartment is rented out. Alhamdulillah, the tenant is hyper punctual in making payment. The action that I need to take is making speed up the repayments. Last year I made one extra payment. But that was motivated by the late payment by the payroll unit. With the rental money that I receive, I can afford to pay at least RM300 extra each month. Now, I have to ask Mahadhir to email me the details of my loan account so that I can proceed with the payments. I am also on the lookout for a second property, preferably a ‘landed house’ – for October 2010.
Before coming to the UK, I made arrangements to reduce my debts. I sold my Kancil; and with it went the remaining 2 years worth of loan. Now, Eddrus have bought the car, and he promised to make monthly payment to me. With the BMW 316i bought debt-free, I’m a net lender with respect to cars. As for credit cards, the debts were taken care a few months after I set foot in the UK. I asked abah to make repayment to my Ambank and HSBC credit card accounts – using my own money, of course. Now I don’t have any credit card balances, Alhamdulillah.
During a spell of ‘credit scare’, the monthly balance on the credit card statement was big enough to make me afraid of looking at it. Alizi advised me to take a personal loan, which I acquired from Bank Islam, to lessen the severity of the situation. A month ago, the 7-year personal loan has been paid off in less than 4 years. Alhamdulillah.
As far as ‘giving back’ is concerned, I’ve been giving back through zakat payment. I have set up a monthly salary deduction for the zakat payment. So, it is automatic. Overall, I have a good foundation to be a millionaire at retirement age. To be financially independent before retirement, I have to strengthen my defence, and boost my offence.
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