David Bach anyone?

[riverwed070707]

The retirement post earlier today got me thinking about this. So I just started reading Smart Couples Finish Rich with the hubby. We're still in chapter 1. When he was discussing the part about $1 a day to become a millionaire, how much you could have if you put away X per day/month, blah blah blah I couldn't help second guess his whole book based on the fact that he was making his calculations based on a 15% return. I realize the book is a few years old, but doesn't this seem like a completely unrealistic return to count on, especially given that his advice talks about starting to invest at age 7 -- what 7 year old is going to earn that kind of interest??

Whose read it? Worthwhile?

[LuckyRobin]

I liked the David Bach books when I first read them in 2006, but they are close to a decade out of date. You can't get returns like that in this market, so while his advice used to make a lot of sense, a lot of it is obsolete now.

[DaveInPgh]

I read the Automatic Millionaire several years ago and it was a huge wakeup call. I have never been a huge spender or a latte drinker, but the book did make me put more thought into how I spend my money.

I haven't read the book mentioned in your post.

[LMA]

If his message resonates with you then more power to him and his materials. I just found his advice very generic and theoretical instead of practical. The whole approach of saving your way to millions is correct in theory but in practice...let's just say it does not resonate with me.

I am a believer that any effort to create wealth and achieve financial independence has to include both savings and increasing your income and your capacity to produce income.

[Petunia 100]

I've read some of David Bach's books and didn't find them helpful, but didn't find them to be bad advice either. Watching your expenses and putting saving/investing on automatic are very sound principals. If David Bach motivate you, then go right ahead and read him.

Yes, 15% is very unrealistic. It was unrealistic when David Bach wrote it, and it is unrealistic today. Over time, you can expect to earn the long-term average of any asset class. There will exceptionally great years, and there will be exceptionally awful years. Neither is permanent.

[Nightfly]

Many of the "gurus" (David Bach, Suze Orman, Dave Ramsay) are great for beginners who know little or nothing about personal finance. After a while, you can take the training wheels off and pay less attention to them. Bach seems pretty reasonable - I like some of his stuff but I'm not giving up my fine coffee any time soon and don't think doing so is going to make anyone a millionaire in this lifetime. Increasing income will be a better option. Learn from Bach, sure - but find a way to bump up your income if possible.

[Andrew Jackson]

I started a very similar thread about 6 months ago. Besides the 15% return, I also thought he was being unrealistic in telling people to get 10% raises at work every year. Now many are just happy to not lose their job.

[disneysteve]

he was making his calculations based on a 15% return. I realize the book is a few years old, but doesn't this seem like a completely unrealistic return to count on

It is absolutely unrealistic, as is Dave Ramsey doing all of his calculations based on a 12% return. Yes, there are funds out there with long term track records of 12% or more but they are few and far between and not enough to make a well-diversified portfolio. Plus, past returns are no guarantee of future returns. Also, that only applies if you invest 100% in stocks. Even if your funds earn 12%, if you are only 70% in stocks, your overall return would be less than 12%.

I think most of us do our planning based on about 7% returns.