9-time New York Times best-selling author, David Bach, joins us to share the secrets of financial freedom from his new book, The Latte Factor. This show is made possible by FinancialFreedomTool.com.
Today’s show is part of our special podcast series for Money Smart Week – coordinated by the Federal Reserve Bank of Chicago to help individuals and families better manage their personal finances. Learn more at MoneySmartWeek.org.
Today, on The BIGG Success Show, we’re thrilled to talk with David Bach, one of the most trusted authors of our time. He’s written nine consecutive New York Times bestsellers, including two that hit #1.
David joins us today to share the secrets to financial freedom from his new book, The Latte Factor: Why You Don’t Have to Be Rich to Live Rich*. Here’s a summary of our discussion…
Why did you write this book as a parable?
David says he’s wanted to write this parable since 2004. He was on Oprah, talking about The Automatic Millionaire*, his most popular book at that time. It’s about an ordinary couple who achieve total financial freedom at the age of 52, having never earned over $52,000 a year.
It shows, he explains, that you don’t have to be rich to invest. You don’t have to make a lot of money to retire early.
As the book became more and more popular, David realized that one of the best ways to reach people is by telling stories. His favorite books – The Alchemist* by Paulo Coelho and Who Moved My Cheese* by Spencer Johnson – were stories.
He adds: The truth is 98% of the people are never going to buy a financial book. But they’ll buy a story book. So I thought I could reach more people by putting this into a parable. But the story didn’t end there…
David is a BIGG fan of Paulo Coelho, author of The Alchemist. He spent a delightful evening with him back in 2012. As the time to retire neared, Paulo turned to David and said, “What is the book that your soul desires to write, that you have not yet written?”
David replied, “I want to write this book called The Latte Factor, that could inspire tens of millions of young people all over the world to realize that their dreams are closer than they think, that small amounts of money could change everything in their life. I have a son. He’s a teenager. I can’t get them to read my books yet.”
Paulo put his hand on David’s arm and said, “Then David, you must write that book.”
So David wrote The Latte Factor. And his son read it…and immediately acted upon it.
Want to know what George said to give David chills? Then listen to the show. Simply click the PLAY button above.
What is “the latte factor”?
David says the latte factor came about when he taught a class years ago. One of his students said she couldn’t afford to save. She was drinking a latte at the time.
He ran the numbers. He showed her that, if she skipped the latte, she would save $5 a day. In 5 years – with a 10% return – her $5 a day investment would be worth $11,616. In 30 years, it’s worth more than $339,000. And in 40 years, it’s worth over $948,000 – with any kind of employer match.
She came to see that her lattes were costing her over $1,000,000.
But David says the latte factor was never about coffee. Or money, for that matter. Hear what it is about by listening to the show. Just click the PLAY button above.
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What is the first secret of financial freedom?
David says, Pay yourself first. Whether you’re an entrepreneur or an employee, decide to make you the first person who get paid.
He points out – Most people pay themselves last.
They work all morning to pay state income tax, federal income tax, and Social Security. They go to lunch. When they get back, they pay their mortgage or rent. Then they still have health care, insurance, their car, food, and maybe debt. If they have any money left over, they save it for themselves. It just doesn’t work.
Ordinary people, who have built wealth themselves, pay themselves first for decades.
What does David think is a “complete game changer” when it comes to building a nest egg of $1,000,000 or more? Listen to the show to find out. Just click the PLAY button above.
You won’t believe David’s second secret of financial freedom!
It doesn’t work. Everybody tells you to budget. They’re all wrong, David says.
We didn’t think we’d ever a financial expert say that!
He defends his position: People hates budgets. They’re like a diet. You may go on a budget, but most will fall off it within a few weeks.
Budgets take time. They’re super-difficult to do in the real world. Most people are not wired to budget.
So don’t budget. That’s Part A of Secret #2. Part B is automate! Pay yourself first automatically.
David explains: People who pay for their kid’s college without loans are able to do so because they automatically set money aside since the kid was born. People who have no outstanding mortgage on their home got there by automatically extra payments on their mortgage every month.
He concludes: Automation is almost always the key to fixing any financial problem you have. The more you can automate your financial life, the better off you are.
The government practices this secret of automation in YOUR finances! Want to know how? Then listen to the show by clicking the PLAY button above.
Live rich now – David’s third secret of financial freedom
David says that money is a tool to free you to live your best life. A financial plan can help you know when you can afford to spend more money. But, most things in life that bring real happiness and peace don’t come down to money.
In addition, he notes, your dreams may cost less than you think. For example, Zoey – the main character in The Latte Factor – wants to be a photographer. She convinces her boss to let her live abroad for six weeks and year, and to make it part of her career as a travel editor. Lots of people these days are doing something similar.
David says he’s a BIGG proponent of the F.I.R.E. (Financial Independence Retire Early) movement. Retirement doesn’t have to be permanent. It can be a temporary break.
Don’t wait for that magic age of 62…or 65…or 70. Be clear about what you want to do that you’re not doing. Then figure out how to get there sooner.
What keeps people from enjoying retirement? Listen to the show to find out. Click the PLAY button above.
What is your “something special”?
David really touched us several times in this book. He touched us when he talked about his son making choices with no regrets. He touched us when he shared the advice he got from his grandmother on her deathbed. And he touches us with this passage…
“I believe that each one of us was put here on this earth, in this life, to do something, something special. Something no one else can do. And most of us aren’t doing it — because we’re too busy paying everyone else first.”
Pay yourself first…automatically. And live rich now! That’s BIGG success!
We’re BIGG fans of David’s and we think you’ll soon see this book on the list of New York Times best sellers. Learn more about his book at TheLatteFactor.com. We highly recommend it to you!
Join us next time as we wrap up this special podcast series with highlights from our three interviews as well as our favorite moments.
Here’s to your BIGG success!
George “The Professor” & Mary-Lynn
Co-Founders, BIGG Success
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