Ready to not only become rich but build financial security for life? Self-made millionaire and “Automatic Millionaire” author David Bach wrote on his blog that you can become rich if you pay yourself first and save one hour of your earned wages each day.
According to Bach, most Americans will work 90,000 hours over the course of their lifetime. They should be able to keep at least an hour a day of their income. Let’s look at how the formula for the “one hour” savings rule works.
The Three Rules of Becoming an Automatic Millionaire
Technically, there are three rules for becoming an automatic millionaire. Bach outlines the three-step process as follows on YouTube:
Pay yourself first.
Pay yourself first one hour a day of your income.
Make it automatic.
When you pay yourself first, Bach said the first person who gets paid when you earn a dollar is you. As simple as this concept may sound, most people pay the U.S. government first instead of themselves.
The ‘One Hour’ Savings Rule
Bach’s video breaks down the average eight-hour workday. A person’s earned wages go to taxes, paying for rent or a mortgage, paying for transportation and “everything else,” which can include healthcare, food and credit card debt. After paying for all these expenses, most people don’t have enough money left for savings.
In a year, Bach said the average American will work 1,960 hours. This equates to roughly 78,400 to 90,000 hours in their lifetime. Bach wants you to answer this question: How many of these hours will you keep to work for you?
The Millionaire Power Hour
Bach said he learned the millionaire power hour after his time as a financial advisor working with clients who became millionaires. These clients kept the first hour’s pay for the day to 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 invested in this pay yourself first account automatically every day for life.
Bach cited a study about 401(k) participants and tens of thousands of 401(k) millionaires. According to the study, there were 72,000 millionaires in the plan. These millionaires saved 14%: roughly an hour a day of their income.
Best of all, you can follow in their footsteps whether you earn $10 or $100 an hour. The secret to succeeding, Bach said, is all in your mindset.
He uses the example of someone who saves $10 a day for 25 days a month. At 8% interest, this amount will be $539,089 in 35 years. In 45 years, it will be $1,209,173. If your company matches this amount, it will grow to be even bigger. Compound interest allows you to reach automatic 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 ‘Proven, Easy Way To Get Rich’