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MEETING THE AUTOMATIC MILLIONAIRE
I'll never forget when I met my first Automatic Millionaire. I was in my
mid-twenties and was teaching an investment class at a local adult-education
program. Jim McIntyre, a middle-aged middle manager for a local utility
company, was one of my students. He and I hadn't spoken much until one day when
he came up after class to ask if he could make an appointment with me to review
his and his wife's financial situation.
The request surprised me. Though I felt strongly (and still do) that just about
everyone can benefit from the advice of a qualified financial planner, Jim
didn't strike me as the type who would seek it out.
I told him I'd be happy to set up a meeting, but if he wanted my help, his wife
would have to come too, as my group managed money only for couples who worked
on their finances together.
Jim smiled. "No problem," he said. "Sue's the reason I'm here.
She took your Smart Women Finish Rich seminar and told me I should sign
up for your course. I've liked what you've had to say, and we both figure it's
time to do some financial planning. You see, I'm planning to retire next
Now I was really surprised. I didn't say anything, but as I looked Jim up and
down, I doubted he could be in a position to retire. From the few comments he
had made in class, I knew he was in his early fifties and had worked for the
same company for thirty years, never earning much more than $40,000 a year, and
didn't believe in budgets. I also knew that he considered himself to be
"ultraconservative," so I figured he couldn't have made a fortune in
the stock market.
My Grandma Rose Bach had taught me never to judge a book by its cover. But
something didn't add up. Maybe Jim had just inherited a lot of money. For his
sake, I hoped so.
"WHAT AM I MISSING HERE?"
When the McIntyres came into my office a few days later, they looked exactly
like what they were: hardworking, "average Joe" Americans. What has
stuck in my mind about Jim is that he was wearing a short-sleeved dress shirt
with a plastic pocket protector in his breast pocket. His wife, Sue, had a
little more flair, with some seriously blond highlights. She was a beautician,
a couple of years younger than Jim.
The thing was, they didn't act like middle-aged people. They were holding hands
like two high school kids on a first date, bubbling with excitement. Before I
could ask how I could help them, Jim started talking about his plans and what
he would do with his free time. As he did, Sue kept exclaiming, "Isn't it
great he can retire so young! Most people can't retire until they reach
sixty-five if then, and here's Jim able to do it at fifty-two!"
"LET'S NOT GET AHEAD OF OURSELVES."
After ten minutes of this, I had to interrupt. "Guys, your enthusiasm is
contagious, but let's not get ahead of ourselves here. I've met with literally
hundreds of potential retirees over the last few years, and I have to tell
you--hardly any of them have been able to retire in their early fifties."
I looked Jim in the eye. "Usually people come to my office to find out if
they can retire," I said. "You already seem to be sure you can. What
makes you so certain you can afford to?"
Jim and Sue exchanged a look. Then Jim turned back to me. "You don't think
we're rich enough," he said, "do you?" The way Jim put it, it
wasn't exactly a question.
"Well, that's not the way I would have phrased it," I replied,
"but yes, it takes a fair amount of money to fund an early retirement, and
most people your age aren't even close to having saved enough. Knowing what I
do about your background, I'm truthfully curious about how you could possibly
have enough money." I looked him in the eye. He gazed back at me serenely.
"Jim, you're only fifty-two." I said. "Considering that only
about one in ten people can barely afford to retire at age sixty-five with a
lifestyle equal to what they had when they worked, you have to admit that
retiring at your age with your income would be a pretty big feat."
Jim nodded. "Fair enough," he said and handed me a sheaf of
documents. They included his and Sue's tax returns as well as financial
statements that listed exactly what they owned and owed.
I looked first at their tax returns. The previous year, Jim and Sue had earned
a total of $53,946. Not bad. Not rich, to be sure, but a decent income.
Okay, next. How much did they owe?
I scanned their financial statements. I couldn't find any outstanding debts
listed. "Hmm," I said, raising an eyebrow. "You have no
"THE MCINTYRES DON'T DO DEBT."
They exchanged another smile, and Sue squeezed Jim's hand. "The McIntyres
don't do debt," she said with a chuckle.
"What about your kids?" I asked.
"What about them?" Jim answered. "They're both out of college,
on their own, and God bless 'em."
"Well, all right then," I said, "let's see what you own." I
turned back to the financial statement. There were two homes listed: the house
where they lived (valued at $450,000) and a rental property (a second house
valued at $325,000).
"Wow," I said. "Two houses and no mortgage on either?"
"Nope," Jim replied. "No mortgage."
Next came the retirement accounts. Jim's 401(k) balance currently amounted to
$610,000. And there was more. Sue had two retirement accounts of her own that
totaled $72,000. In addition, they owned $160,000 in municipal bonds and had
$62,500 in cash in a bank savings account.
Talk about a substantial asset base. Add in some personal property (including a
boat and three cars--all fully paid for) and they had a net worth approaching
By any standard, the McIntyres were rich. It wasn't simply that they owned a
lot of assets free and clear (though that in itself was pretty impressive);
they also had a continuing stream of income in the form of interest and
dividends from their investments and $26,000 a year in rent generated by their
second house. On top of that, Jim had qualified for a small pension, and Sue
liked being a beautician so much that she planned to keep working until she was
sixty (even though she didn't need to). Suddenly, Jim's plan to retire at
fifty-two didn't seem so crazy. In fact, it was completely realistic. More than
realistic--it was exciting!
"WE INHERITED KNOWLEDGE."
Normally, I don't get wide-eyed about people's wealth. But there was something
about the McIntyres that impressed me. They didn't look rich. And they didn't
seem terribly special. To the contrary, they seemed perfectly ordinary--your
average, nice, hardworking couple. How could they have possibly amassed such
wealth at such a relatively young age?
To put it mildly, I was confused. But I was also hooked. I was in my
mid-twenties at the time, and even though I was making good money, I was still
basically living paycheck to paycheck. Some months I did manage to save a
little, but more often than not I'd get busy or spend too much the next month
and not save a dime. Many months it seemed that instead of getting ahead, I was
falling behind, working harder and harder to make ends meet.
It was embarrassing, really, and frustrating. Here I was, a financial advisor
teaching others how to invest, and I was often struggling myself. Even worse,
here were the McIntyres, who probably in their best year barely made half of
what I was making, and yet they were millionaires, while I was falling further
and further into debt.
Clearly, they knew something about taking action with their money that I needed
to learn. And I was determined to find out what it was. How could such regular
people have amassed such wealth? Eager to know their secret but not knowing
where to begin, I finally asked them, "Did you inherit any of this?"
Jim broke out in a deep belly laugh. "Inherit?" he repeated, shaking
his head. "The only thing we inherited was knowledge. Our parents taught
us a few commonsense rules about handling money. We just did what they said,
and sure enough it worked. The same is true for a lot of people we know. In
fact, in our neighborhood, about half our friends are going to retire this
year, and many of them are even better off then we are."
At this point, I was hooked. The McIntyres had come to interview me about how I
could help them, but now I wanted to interview them.
LOOKING RICH VS. BEING RICH
"You know," I said, "every week I meet people who take my
classes like you did but who are exactly the opposite of you. I mean, they look
rich, but when you get into the details of what they really have, it often
turns out that they are not only not rich but broke. Just this morning,
I met with a man who drove up in a brand-new Porsche, wearing a gold Rolex
watch. He looked loaded, but when I went through his statements I found he was
actually leveraged to the hilt. A guy in his mid-fifties, living in a
million-dollar home with an $800,000 mortgage. Less than $100,000 in savings,
more than $75,000 in credit card debt, and he was leasing the Porsche! Plus he
was paying alimony to two ex-wives."
At this point, the three of us couldn't help ourselves. We all began to laugh.
"I know it's not funny," I said, "but here was this guy, looking
rich and successful, and actually he's a financial and emotional wreck. He
handled his finances just like he drove his Porsche: redlining all the way.
Then you guys come in. You drive up in a Ford Taurus. Jim here is wearing a
"Nope," Jim interrupted with a smile. "It's an eighteen-year-old
"Exactly!" I said. "An eighteen-year-old Timex. And you're rich.
You guys are happy as clams, still married, two great kids you put through
college, and you're retiring in your mid-fifties. So please tell me--what was
your secret? You must have one, right?"
Sue looked me straight in the eye. "You really want to know?" she
I nodded wordlessly. Sue looked at Jim. "You think we can spare an extra
fifteen minutes to explain it to him?"
"Sure," Jim said. "What's fifteen minutes?" He turned to
me. "You know, David, you already know this stuff. You teach it every day.
We just lived it."
Excerpted from The Automatic
Millionaire by David Bach Copyright© 2003 by David Bach. Excerpted by
permission of Broadway, a division of Random House, Inc. All rights reserved.
No part of this excerpt may be reproduced or reprinted without permission in
writing from the publisher.