Author and financial expert David Bach says many people still don’t understand some personal finance basics.
Bach is a champion of the “pay yourself first” strategy, which prioritizes automatic savings.
He also says it’s important to understand how your money can grow in a retirement account, and that you can’t predict the stock market.
Personal finance is a complicated subject, and chances are you weren’t required to take an introductory financial literacy course in high school or college.
Perhaps you, like me, were left to school yourself on topics like investing, taxes, debt, and saving for retirement once you entered adulthood.
As commendable as that may be, David Bach, who has spent 25 years in the wealth management industry and is the author of “The Automatic Millionaire,” says there are three simple, basic money concepts that many of us are still missing.
1. You need to ‘pay yourself first’
“People still don’t grasp the fact that they need to save a dime out of every dollar,” Bach told previously Business Insider in a Facebook Live interview. He said that the average American who’s saving money is saving just 15 minutes a day of their income, when they should be saving an hour.
Bach noted troubling research from the Federal Reserve that revealed nearly half of Americans wouldn’t have enough money on hand to cover a $400 emergency. Yet, he continued, millions of those people will buy a coffee at Starbucks today and expect to buy the new $800 iPhone next year. Americans have money, he says, but we aren’t saving it.
“It’s an American crisis. That’s why I’m still doing this at 50, because there’s still so many people that aren’t getting it,” Bach said.
So get on the “pay-yourself-first plan,” as Bach calls it, and automatically save an hour a day of your income. “When that money is moved before you can touch it, that’s how real wealth is built,” Bach, who became a millionaire by age 30 by increasing his automated savings over several years, told Business Insider.
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2. You don’t ‘buy’ a retirement account
Bach says that many Americans are confused by IRAs and 401(k)s and believe that they “own” a retirement account.
In reality, he says, “the retirement account is just a bucket and their investment is put inside that bucket. It’s those investments that go inside that …read more
Source:: Business Insider