THE AUTOMATIC MILLIONAIRE
An author on the ‘Today Show’ Saturday was talking about his new best-seller, The Automatic Millionaire, and said that if you saved $5 a day – perhaps by foregoing a latte at Starbucks – you’d have $948,000 after 40 years. Which is pretty close to $1 million, but misleading.
Not that I don’t fully subscribe to the slow-but-steady School of Universal Frugality. It’s what, scrimping and saving for years, has put me in the now enviable position to buy lattes without a second thought; even to buy a flat screen TV someday soon. (I am teasing myself with anticipation.)
But is this really a ‘revolutionary system that in one hour will make readers rich,’ as the publisher proclaims? According to the publisher, the revolutionary principle here is to ‘pay yourself first’ by having your employer automatically deduct a retirement-plan contribution from each paycheck – a principle I subscribe to.
Still, I was struck by that $948,000. For $5 a day to amount to $948,000 in 40 years requires an after-tax return of 10.4%. And for it to be a real $948,000, it has to be an after-tax, after-inflation 10.4% return.
Trust me: you are not going to get this from your 401(k).
If your 401(k) can grow 6% a year faster than inflation for 40 years, after the various expenses of the mutual funds it is invested in, that would be pretty darn good. But that amounts to $291,000, not $948,000, and it is $291,000 that will be subject to income tax when you withdraw it, so it might be more like $200,000 or $250,000.
But that’s a lot better than nothing, and the book does seem to be motivating people to save and get out of credit card debt, which is always good (if not necessarily good for Starbucks).
A MORE IMPORTANT BOOK
Did you see ’60 Minutes’ last night? Here’s the link to the book that’s making all the headlines. What’s now pretty hard to dispute is that – even as Governor Bush was telling America he planned to conduct a humble foreign policy and eschew nation-building – it was his intention to invade and then rebuild Iraq.
Whatever you may think about our being in Iraq today, which some applaud and others decry . . . whatever you may think of the way we went in, which some believe needlessly alienated so much of the rest of the world and made our mission so much more costly and difficult . . . whatever you may think of all that, there’s a bone to pick here simply about the lack of candor. Presumably, Governor Bush didn’t disclose his intention to go to war before the election for fear fewer people would vote for him.
It’s the same way he looked into the camera and insisted that ‘by far the vast majority’ of his proposed tax cut would ‘go to people at the bottom end of the economic ladder’ – when he surely knew that in fact by far the vast majority would go to people at the top.
War . . . peace . . . top . . . bottom . . . call me a stickler, but these are pretty big distinctions. If the 50,456,169 people who voted for Governor Bush (very nearly 48% of all the votes cast) had known it was his intention to take us to war . . . and to tilt the domestic playing field sharply in favor of the already best off . . . he might not today be the most powerful man on Earth.
YOUR MONDAY MORNING MOVIE
Thanks to the estimable (and carnivorous) Marc Fest for this three-minute modern-day This Little Piggy Went To Market.
Tomorrow: You Need a Blimp Like You Need a Whole in the Head
Quote of the Day
The key to having more tomorrow is: spending less today.~.
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