‘Automatic Millionaire’ Author David Bach Says Budgeting Is Not a Good Long-Term Financial Solution — Here’s What To Do Instead

"Automatic Millionaire" author David Bach says budgeting isn't a good long-term financial solution—here's what to do instead

When you ask money experts about the best ways to get your financial house in order, creating a budget almost always lands at or near the top of the list. After all, accounting for your income and tracking your expenses is the only way to create a spending plan that matches your savings goals, right?Well, that depends on which money expert you ask. If this happens to be the author of Start Late, Finish Rich, David Bach, the answer might surprise you.

Bach, a member of the GOBankingRates list of 100 Most Influential Money Experts, believes that a budget will derail your financial goals rather than help you achieve them. While this is an unconventional view to say the least, Bach is a best-selling author and one of the most sought-after speakers in the world – so it's a view worth considering.

Wait. Don't have a budget?

On his website, Bach relied on the most basic conventional wisdom in personal finance when he wrote, "Don't budget—you're too busy and you'll only get frustrated and fail." That's probably welcome advice for anyone who hasn't looked forward to digging through their bank statements. statements, checking credit card accounts, finding unnecessary expenses and counting every penny.But if you're not assigning a purpose to every dollar you make, how can you track it? "Instead, automate your financial life," Bach wrote. “When it's automatic, you can't fail.

Bach's theory of monetary automation begins with an act of financial selfishness. "Pay yourself first," he wrote. “At least an hour a day of your income – you will work 90,000 hours in your lifetime. You should keep at least an hour a day of your income.”This is not a new concept for Bach. In an exclusive Q&A with GOBankingRates, he offered the same wisdom when asked about the one piece of money advice he wishes everyone would follow.

"The biggest piece of advice I give is to automatically pay yourself first [the equivalent of] one hour a day of your income," he said. "Becoming financially free is easy if you start when you're young."He offered the example of someone making $10 an hour. "Save $10 a day — $300 a month — for 40 years and earn 8% [interest] — less than a boring balanced account earned in the same amount of time — and you could have $932,603 ​​in 40 years," he told GOBankingRates. “That's $10 a day.

"What happens if you wait 10 years?" he said. “Good question—you'll have less than half the amount: $407,819. What if you wait 20 years and you can only save this amount for 20 years? Unfortunately, you will now only have $164,743.”

Investing is more important than budgetingBach believes you'll be better served by using the time and effort you'd spend budgeting to put your money to work. "Be an investor, not a borrower," he wrote on his site. "Investors get rich, borrowers stay poor."

But when you put your money on the line, stick with what you know. "Never invest in things you don't understand," wrote Bach. “If an investment can't be explained to you on one piece of paper, it's too complicated. Pass.” Another key is patience—resisting the urge to chase quick and easy gains. "Invest for the long term," wrote Bach. "Building wealth takes decades, not days."

After all, investors who jump in and out of positions in an attempt to buy on the dip and sell on the top almost always lose in the long run. "Don't try to time the market," Bach wrote. "It won't work. Investors who time the market always fail." Finally, don't bet with a broker's money. "Never invest on margin," Bach wrote. "Leverage will kill you when things go wrong."Wealth creation starts close to homeWhere and how you live will also determine your success or failure – and your home can be your best investment. "Buy a house, don't rent it," wrote Bach. "Renters remain poor - homeowners and landlords create wealth."

When you finally build wealth, you'll notice a lot of outstretched hands from people who assume you have a lot to give away. Learn to say no "Don't lend money to friends or family," wrote Bach. "You lose both - and you're not a bank."How you live will determine how you end upYour house and your relationships play a role, but your financial habits will ultimately make or break you. "Always spend less than you earn," wrote Bach. “Your life will be much easier and less stressful.

Truly successful people also tend to see charity as an investment. "Give it back," wrote Bach. "Because the more you give, the more you grow - and make the world a better place." Finally, never lose the ground you've gained. "Once you're rich, stay rich," wrote Bach. "It's better to start over (ask anyone who has had to)."But if you have to start over, do it as often as needed. "Never give up," wrote Bach. "No matter what happens, no matter how many times you fail, if you get up and try again, you haven't lost."

 When it comes to achieving financial success, the name David Bach, author of the bestseller "Automatic Millionaire", carries considerable weight. Bach's approach to personal finance has resonated with millions, driving them toward wealth building strategies. Bach, surprisingly, is not a staunch supporter of traditional budgeting as a long-term solution. In this article, we'll dive into his alternative approach and explore the key steps to financial prosperity he recommends. Let's find out how you can get the most out of your money without being stuck on a tight budget.

Key ideas and recommendations:

Pay Yourself First: One of the main tenets of the "Automatic Millionaire" philosophy is the concept of "Pay Yourself First". This means that you set aside a portion of your income for savings and investments before you even think about paying bills or discretionary spending. With automatic savings, you'll ensure consistent progress toward your financial goals. Keywords: Pay Yourself First, Automatic Savings, Financial Goals.

Automate your finances: Bach suggests automating as many aspects of your finances as possible. Set up automatic transfers to your savings accounts, pension funds and investment portfolios. This will not only ensure that you save consistently, but also reduce the temptation to overspend. Keywords: Automated Finance, Consistent Savings, Investment Automation.

Focus on the big wins: Instead of scrutinizing every small expense, focus on the big financial decisions that can have a substantial impact. Bach recommends putting energy into increasing your income, reducing your biggest expenses (like housing and transportation), and managing debt effectively. These strategies can have far-reaching effects on your financial well-being. Keywords: Increasing income, Reducing costs, Managing debt.

Harness the power of compound interest: Bach is a strong proponent of the power of compound interest. Start saving and investing early and let time work its magic. Compound interest can grow your wealth exponentially over the long term, even with modest contributions. Keywords: Compound interest, Long-term investing, Wealth growth.

Stay educated: Financial literacy is essential to making informed decisions. Bach recommends continuing to learn about personal finances, investment options and economic trends. Stay informed of opportunities that align with your goals and adjust your strategies accordingly. Keywords: Financial literacy, Investment education, Informed decisions.

In personal finance, David Bach's "Automatic Millionaire" approach provides a refreshing alternative to traditional budgeting. By focusing on automation, consistent savings, and informed decisions, you can build a solid foundation for long-term financial success. Remember, it's not about preparing yourself through a rigid budget, but rather creating a smart, automated system to help you achieve your financial aspirations. Start applying these principles today and watch your financial future flourish. Keywords: Financial Success, Automatic Millionaire, Wealth Building.