youngandthrifty Book Review and Giveaway: Smart Women Finish Rich by David Bach

Because this month was seemingly all about women and money (Are Financially Independent Women a turn on? drew a record 89 responses on my blog, woot!), I thought I would do a giveaway for a book tailored to women, as well.  I’m a big fan of David Bach’s books, namely The Automatic Millionaire.  He’s the one who taught me that paying yourself first is the way to go, and that if we skip daily luxuries such as that Starbucks latte, we will be on our way to financial freedom.

When I stumbled upon Smart Women Finish Rich: 9 Steps to Achieving Financial Security and Funding your Dreams at a bookstore, I had thought it might just be another spin off of his bestselling book, with a focus on women.  I was pleasantly surprised and actually think this book is better than The Automatic Millionaire.

He begins by talking about why women nowadays are taking control of their financial futures, and gives anecdotal evidence as to why this is crucial (more divorces, women are in the dark about the finances because the husband usually handles the finances).  He then goes on to explain WHY we need to do more financial planning than men- we live longer than men (sorry guys!), we earn less than men, oftentimes women are the ones let go by corporate downsizing… the list goes on.

In the next step, David asks you to re-evaluate your values, and list them.  Money is a vehicle in which we can express our values.  He says men often seek to gain money for the sake of gaining money (e.g. “I want to make $100,000 a year by the time I hit 30″) and women seek money to so they can use that money to manifest their values (be it: have more time for family life, being financially secure etc.).  I really enjoyed this chapter because it made me think hard about where my values lie- this is something I don’t do often, admittedly.

In the next few chapters, he talks about finding where your money is.  Really finding out where your money is, and how much you’re paying in commissions and fees etc.  how much is in your registered portfolios, how much is in your non-registered portfolios, how much cash you hold.  The nitty gritty.

Of course a David Bach book isn’t complete without mention of the Latte Factor, in which he explains that if you cut out your daily needs (like that daily lunch out, daily coffee and a muffin) you can amass some serious wealth.  He does use a 12% annual return, which to me sounds somewhat unrealistic, though.

David Bach’s Grandma instilled some pretty sage advice about money into little David Bach.  So much so that he writes about her advice, namely the three-basket approach to financial security.  One is your security basket, one is your retirement basket, and one is your dream basket.  Dreams are categorized into short term dreams and long term dreams.  You know which basket is my favourite! Dreams!! :)   In this section, he goes into detail about how to invest, and why you need to invest (and not just put your money in a high interest savings account earning next to nothing after inflation).  I really like how he does it “step by step” and its easy to read.

Another thing that’s different from his initial book is that David Bach talks about the major mistakes investors make and how to best avoid them, he writes about how to raise children so that they are not financially incompetent, and how to attract greater wealth.  Basically how to make sure you are getting paid for what you’re worth.  Men may make more than women because they’re not afraid to ask for a raise, they’re not afraid to quit a job and move onto another job if they aren’t getting paid well (uh, case in point: boyfriend is on his 5th or 6th job and he’s been out of school for 6 years!).

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The Financial Cleanse- Make your Savings Automatic

In Part II of the Financial Cleanse, we’ll talk about Making it Automatic.

In the Automatic Millionaire (by now, you must think I’m in love with David Bach since I mention him non-stop) he talks about making it automatic.  You pay your cell phone bill, your rent, your utilities, and then you have some money left over.  You spend like usual, and at the end of the month, you have $25 to spare, so you put it away in savings.  The next month- same thing, you have $15 to spare, so you put it away in savings.

I used to roll like this and it didn’t work.

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What’s your Latte Factor?

I know a lot of personal finance bloggers have mentioned the Latte Factor at some point or another, but I really like it- it really ‘hits home’ for me so I wanted to write about it too.  What is the Latte Factor, you ask?  The Latte Factor is a phrase coined by David Bach, the author of The Automatic Millionaire.  He says that most people have these small seemingly insignificant purchases daily (like the latte that you get at Starbucks before you head to work) that really add up.

If you spend $3.50 on a latte every day when you go to work, that adds up to be  about $17.50 a week (for a five day work week).  Multiply that by 52 weeks and you get $910 a year.  Yes, that’s almost a grand per year on coffee!

Let’s say for example you decided to sock away the $3.50 per work day into savings instead every year for 25 years.  If you compound interest that amount at a reasonable rate of 6% per year for 25 years, you’d end up with $56,827.91.  So that grand that you end up saving per year becomes 55 grand in 25 years.  Pretty crazy, huh?

If you somehow manage to cut those daily expenses out, you’re saving money big time.  I’m not saying deprive yourself of your life and its perks, like if you absolutely HAVE TO HAVE that latte, maybe you can buy one of those machines to make your own before work.  Compromise, right?

What’s MY Latte Factor?

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youngandthrifty book review: The Automatic Millionaire by David Bach

The Automatic Millionaire:

A Powerful One Step Plan to Live and Finish Rich


By: David Bach

The Automatic Millionaire was one of the first financial books I have read. David Bach is an international best seller with his books- he has multiple books that spawn off the idea of this first book (For example, Start Late Finish Rich, Smart Couples Finish Rich, The Automatic Millionaire Homeowner. The Automatic Millionaire has a simple and key message.  He says that it is human nature to screw up budgets.

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