Once you became an adult, you realized there was a lot more “adulting” involved being full-time creative. If you’re asking yourself how to save for financial independence, how much money do you need to retire early, or what your spending habits compared to other industry professionals, you’re not alone.
Creative entrepreneur and financial guru David Bach has been there and done that (for the last 23 years) and knows the secret to solve our financial challenges! Here are some of our favorite lessons pulled from his 9 consecutive New York Times bestsellers including The Automatic Millionaire, Start Late and Finish Rich, Smart Women Finish Rich, and soon to release The Latte Factor: Why You Don’t Have to Be Rich to Live Rich.
1) How to Become an Automatic Millionaire:
You need to make your financial life automatic to become an automatic millionaire. You start this process by paying yourself first. Next, you set up an automatic withdrawal so that the money goes directly from wherever you’re earning it right into a retirement account.
This could be a 401(k) retirement plan, an IRA retirement account, and if you’re self employed it could be a SEP IRA or a solo 401(k) retirement plan. Increasing your savings rate by automatically investing just $10 per day (the price of a couple lattes #TheLatteFactor) into your retirement account will save you $3600 per year. By earning interest on those savings, you can achieve financial independence and potentially early retirement!
2) How to Crush Your Debt:
Debt is a part of life that many of us experience. David Bach suggests getting involved in debt counseling programs, since high interest debt can really hurt you. He states, “ It’s not like therapy, it’s just like coaching. This stuff works. Not only have I learned a lot from these nonprofit credit card counseling groups, but when I wrote Debt-Free for Life I really dug into the legitimacy of nonprofit credit card counseling. I wanted to make sure that if I recommend things, that I’m recommending things that are really safe.”
Once you achieve financial freedom, you’ll want to put your money to work for you (by getting interest on your money) instead of working against you (by paying interest for borrowed money).
3) How Smart Women Finish Rich:
According to David, “The number of millionaires has skyrocketed and 48% are women. This number within 10 to 15 years will be at least 60%. Women are going to control the bulk of the wealth in America. You’re also earning $12 trillion a year. It’s been expected that somewhere between about $20 trillion will transfer to women in the next 10 to 20 years.”
David explains how women are generally better investors in the stock market, whether in index funds or low-cost alternative investments because they are generally more attentive to detail, panic less, and are more conservative. His theory hypothesizes that women typically do more research before investing, they tend to trade less, and because of their research tend not to panic.
Creating passive income through David’s principles is important to increase your net worth, avoid a “traditional retirement”, work part-time, and be resilient to increasing living expenses, health care costs, or a market crash.