Ready to not only get rich, but build financial security for life? David Bach, self-made author and automatic millionaire, wrote on his blog that you can become rich if you pay yourself first and save an hour of your earned salary every day.
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According to Bach, most Americans will work 90,000 hours in their lifetime. They should be able to keep at least an hour a day of their income. Let’s see how the one-hour savings rule formula works.
The three rules to becoming an automatic millionaire
Technically, there are three rules to becoming an automatic millionaire. Bach describes the three-step process as follows on YouTube:
Pay yourself first.
First pay yourself an hour a day from your income.
Make it automatic.
When you pay yourself first, Bach said the first person to get paid when you earn a dollar is you. As simple as this concept may seem, most people pay the U.S. government first rather than themselves.
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The one-hour saving rule
Bach’s video breaks down the average eight-hour workday. A person’s salary goes toward taxes, paying rent or a mortgage, paying for transportation, and everything else, which can include health care, food, and credit card debt. After paying all these expenses, most people don’t have enough money left to save.
In a year, Bach said the average American will work 1,960 hours. This equates to approximately 78,400 to 90,000 hours over their lifetime. Bach wants you to answer this question: How many of these hours will you dedicate to your work?
Millionaire’s power hour
Bach said he learned the power of the millionaire within an hour of working as a financial advisor to clients who became millionaires. These clients kept the first paid hours of the day for themselves: legally and without paying taxes.
How did they do it? Bach said they signed up for their company’s retirement plan. They opened an account, which could be a 401(k) or an IRA, and automatically invested in that pay-first account, every day, for life.
Bach cited a study of 401(k) participants and tens of thousands of 401(k) millionaires. According to the study, 72,000 millionaires participated in the scheme. These millionaires saved 14%, or about an hour per day of their income.
Best of all, you can follow in their footsteps whether you make $10 or $100 an hour. The secret to success, Bach said, lies in your state of mind.
He uses the example of someone who saves $10 a day for 25 days a month. At an interest rate of 8%, this amount will be $539,089 in 35 years. In 45 years, it will be $1,209,173. If your business reaches this amount, it will become even bigger. Compound interest allows you to automatically reach millionaire status!
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This article originally appeared on GOBankingRates.com: The One-Hour Savings Rule: David Bach Says It’s the Only Simple, Proven Way to Get Rich.
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