Podcast 106: The Automatic Millionaire in an Automated World with David Bach

Steve Chen (00:04):

All right. Hi folks. Welcome to Boldin Your Money. Today I’m joined by David Bach, founder of FinRish Media and co-founder of AE Wealth Management. And he’s a ten-time New York Times bestselling author, mainly known for The Automatic Millionaire. So David has spent decades helping people simplify their money and find best practices. Today we’re going to talk about one of his big new ideas that he’s promoting. So we’ll jump into that in a second. And David is joining us from Florence, Italy. And he is originally though from the East Bay, so near where I am in Marine, California. So with that, David, welcome to our show. Well,

David Bach (00:41):

Steven, thank you. It’s great to be with you. It’s a true pleasure.

Steve Chen (00:45):

Yeah, I appreciate you making the time. But I’d love to learn actually first why you’re in Florence, Italy. That sounds pretty cool.

David Bach (00:51):

Well, it’s funny when talking here in the Bay Area, because I’m a Bay Area kid. So I’ve come from, grew up in California. I moved to New York for nearly 20 years. I moved to New York, so I literally could go and teach millions of people to be smarter with their money because all the … Back in the day, you really need to be on national television.

(01:09):

And so moving to New York allowed me to be on all the major shows, the Today Show, CBS Early Shows, CNBC. And that’s what really helped my career take off. I had been working at Morgan Stanley in the Bay Area. My office was in Orenda. Then I moved to New York, spent 18 years there, wrote, as you said, 10 New York Times bestselling book. And the Automatic Millionaire was really a big book that I put out 20 years ago after moving to New York. And so I spent 18 years there. And then my last book was a book called The Latte Factor. And in that book, the main character takes a sabbatical. And so I decided as I was writing that book, well, I want to take a sabbatical. And so I wanted to take my family to live abroad for a year. And it was really a very intentional decision.

(01:55):

I wanted to move to somewhere abroad so that my kids could get an international experience before they went to college. And so we chose Florence because, well, it’s Italy and Florence is one of the greatest cities in the world and it’s gorgeous. And I thought it’d be really fun to move here for nine months. And we came here when my oldest son was in 10th grade. His name’s Jack. And then everybody fell in love with it and nobody wanted to leave. So we stayed. Now I’ve been here six years. He’s back in the States. He’s just finishing college. But my younger son and my wife and I have been here now since 2019.

Steve Chen (02:28):

Oh, that’s incredible. Yeah. I actually worked in Italy for a little while early in my career as a consultant. We did some work in Mestre outside of Venice and outside of Milan. But unfortunately I dn’t pick up Italian. One of my friends actually ended up marrying an Italian and staying there. But how’s your Italian?

David Bach (02:42):

That’s what happens. My kids have picked up Italian. I’ve barely picked up Italian because you end up living … Well, at least in our case, you live in a city like Florence, everyone speaks English. But that’s my excuse at least. Florence is an incredible city living in. If you like Italy, it’s so well located. You’re in the middle of everything. So it’s just been a really fun lifestyle. So it kind of has led me to a slower pace of life after Manhattan for 18 years.

Steve Chen (03:13):

Yeah. I can imagine that’s got to be such a gear shift for you. Do you think you’re going to end up staying there?

David Bach (03:18):

Yeah. It’s the question that everybody asks when you’re an expat. When are you coming back? My family still lives in the Bay Areas. My mom’s there and my sister’s there. So I come back about every 90 days and visit family. And my son’s in Chicago, but we like living in Europe. It’s a great lifestyle. And I like skiing. So I’m a big skier. I ski in Europe. I’m going to leave here in two weeks and go ski in Switzerland for the ski season in Verbier. Nice. Yeah. But I’ll come through the States. I come through the States about every two to three months.

Steve Chen (03:44):

Yeah. Well, a couple days ago I was up in Tahoe trying to get a couple days in before my youngest had to go back to school on Wednesday. So we were skiing up at Alpine. And I’ve actually been to the … It’s like Cortina, right? They’re going to have the Olympics in Cortina, aren’t they? Yeah.

David Bach (03:59):

Exactly. Yeah. The first place after ski was Alpine. I learned how to ski at Alpine. I was in Mogul Ski Club.

(04:07):

I know Tahoe finally got some snow because it has been pretty bare lately, but you guys just got dumped on.

Steve Chen (04:14):

Yeah. A little bit of a Christmas miracle. So we can riff on all kinds stuff. All right. Well, anyway, look, I’d love to get into your first big idea though, like this IRA flat tax idea that I know we’ll link to your site at davidbach.com, but I know you have a whole IRA flat tax kind of discussion there. We’d love to learn more about that idea and why you’re so enthusiastic about it.

David Bach (04:32):

Yeah. Well, so Steven, in updating the Automatic Millionaire book, which I know you got to hear me talk about at FinCon back in 2017, this is the fifth time I’ve updated the book. In updating the book, it hit me looking at all the statistics. Wow. We got a lot of money in retirement accounts. We’ve got $45 trillion in retirement accounts. And having spent my entire life in financial services, being a financial planner, being a co-founder of a registered investment advisor, I know firsthand that when you run financial plans, all financial planning software defaults to take retirement money last. So people who have money, who have saved and invested, they are advised and they’re told, “Take your retirement dollars as late as you can. Take them at RMD age, which is age 73 or 75.” And so I had a thought in my mind, which was, I wonder what percentage of people are waiting to take money out.

(05:30):

And when the new AI engines came out and all the ability to ask questions of ChatGPT and Gemini and Perplexity, I was able to get the answers to all my questions. What I was able to find out is 83% of retirees won’t take a dollar out of the retirement account until the RMD age, until the required minimum distribution age. So that’s eight out of 10 retirees not taking money out and they’re taking it out age 73 or now it’ll be 75 depending on your age. And it hit me, that’s about $20 trillion right now that’s in baby boomer retirement accounts just sitting there that if it was able to come out of these retirement accounts, could do a lot of good. It could help you if you’re retired, it could help the economy where you live. It could help your kids buy homes. It could help your grandchildren.

(06:22):

It could pay down debt. There’s just so much good this money could do or it could just stay in investments, but it could be moved from your retirement account to a taxable account. Well, how would you pull that off? You would give retirees a huge carrot. You’d say, instead of paying ordinary income tax, we have a special deal for you. It would take somebody like Trump to do this. We have a special, and I recommended it as an eight year tax law. We have an eight year window here where for eight years you can take money out of your retirement account before RMD age and you can pay a flat tax. And so we use the AI engines and we ran it at 10% flat tax, 12% flat tax or 15% flat tax. And for the sake of the argument, we wrote a white paper showing what would happen if you took it out at 12%, how much money would come out, basically.

(07:13):

And it could be trillions of dollars. It could increase the GDP of America by a quarter of 1% to 1% annually.

(07:22):

It could pull forward up to a trillion dollars in tax revenue. And the more important thing is, honestly, what it would do is recirculate the money and start to move all this money around. So it would really give the economy a huge boost and most importantly for retirees could make the retirement a whole lot better. I say there’s two stages, save and invest and spend and enjoy. And we have spent the last 40 years on saving and invest and we have not spent enough time on spend and enjoy. And so we’re at a point now where people have got a lot of money put aside and they’re not using it. And it’s great the stock market’s gone up and it’s great that real estate’s gone up. But man, what’s the point of having saved all this money if you can’t actually put it to some use and have some fund before you pass away or you’re too old to use it?

(08:08):

And so my idea was if we had a flat tax, an eight year tax window, we’d incentivize baby boomers to start moving money out of these accounts and it would encourage people in their 50s to save more money for retirement. So on IRAflattax.com now there’s a whole website with podcasts and white papers and a Google Notebook LM where all this stuff’s been put there to open source this idea. Because what I’m doing now is I’m talking about it on podcasts, talking about the media and starting to talk about it with senators and congressmen to try to get this idea populated and ideally in front of the president. I don’t have a personal relationship with president, but it will take … If anybody could get this done, it would be Donald Trump because Donald Trump, somebody said, “Hey, why do we have to pay taxes on tips?” And he was like, “It’s a great question.

(08:58):

You should get rid of that. Hey, why don’t you pay taxes on social security?” That’s a great question too. Now we’re almost writ of taxes on social security. So a lot of these ideas that seem like, well, that could never happen. I don’t know. I think anything’s possible right now. I think America needs some big ideas.

Steve Chen (09:12):

Yeah. Are you getting traction with people in Congress and-

David Bach (09:15):

I had calls last week with senators. So the fact that senators would get on a call with me to discuss this idea was

(09:23):

Actually before the holidays, two weeks now, very encouraging. And the conversation was very interesting too because they all agreed the idea that it needs to be bipartisan and I said it also needs the president to want it. It’s not this president, it could be the next president because this is a big, big, big idea. One of the things I said to this senator, who I won’t say who it is, so nobody’s put on the spot, but I said on this call, the largest sovereign wealth funds in the world are in the Middle East. If you add up every sovereign wealth fund in the Middle East and you combine them, it’s $7 trillion.

(09:58):

If you take all the sovereign wealth funds in the world, it’s $12 trillion. I said to the Senator, “You have more money in baby boomer retirement accounts right now than all the sovereign wealth funds in the world, and that money is not leaving until it is forced to leave at 73 or 75.” And then it’s just leaving in dribs and drabs. People take out the absolute minimum. So if someone’s take out 4%, that’s all they’re taking out. And these accounts are going to just keep growing. We’re going to end up with a hundred trillion dollars in these retirement accounts unless we come up with creative ideas to incentivize people to take the money out.

Steve Chen (10:39):

100%. We see this in our data too. I mean, like Michael Kitzes did some work as well and he’s like, people that retire with money, and that’s like our audience, our typical user has a few million bucks. They’re kind of 50 to 60 year olds, 401k millionaires, and they’ve done a good job saving. They keep saving and they keep building wealth. They do this. They’re not die with zero enthusiasts. Have you read die with zero?

David Bach (11:05):

Yes. In fact, I gave them a testimony for that book, but most people aren’t die with zero enthusiastic because it’s a very hard thing to pull off. And he, by the way, is worth a fortune. So it’s easy to tell people to go spend a bunch of money when you have endless amounts of money. But when someone’s got a million or $2 million, they have a hard time decumulating. They’ve spent their whole life accumulating, but they’re also sold a myth that they’re going to not only live forever, but that their health’s going to stay good forever. And the thing is, when you do financial planning, you actually see in real terms, your 60s look a lot better than your 70s, especially for men. So the time to enjoy your wealth is when you have your health. And in the United States, the average health expectancy, the age that which you will have a health issue that affects the rest of your life is 63.

(11:56):

So when people talk about living longer, first of all, they’re not living longer in the United States. Now for men, it’s 73 and for women, I think it’s 78. And my dad passed away recently. My mom’s in a senior living community in Livermore, Pleasanton area, beautiful place. Just try me out on this. Go to any nice high-end senior senior living community, go to one of the dinners or the lunches, look around the room, and 80% of the people in the room are women, and that’s because we don’t make it to the 80s, typically. And so we need to be having more conversations around how to really enjoy your wealth during retirement. And that’s why I tell everybody you need to get a financial planner, because what a good financial planner can do is give you permission to spend more money, which when people actually understand that they can afford to spend more money, then often they will spend a little bit more.

(12:51):

They don’t go crazy, but they’ll spend a little bit more.

Steve Chen (12:55):

Yep. I totally agree that you need to be intentional about this. I mean, one of the big things that we see in our platform is people are like, they have this aha moment where they’re like, oh, I could retire or yeah, I get more confidence. So I feel that I have the permission to spend. And totally agree with you. One of my good friends here, he’s in his mid 60s and he’s like, look, he’s looking at his parents and they’ve been robust, but then they start to decline. He’s like, “I really only think he has like 10 or 15 years, 10 years, and he’s a super healthy Bay Area person to really use my human capital.” And so he’s super intentional about starting to spend money, even though for many of these 401k millionaires, they basically have been trained over decades of saving and being disciplined to accumulate.

(13:41):

So it is really hard to get that mind shift going. And it is important for people to recognize though that they have limited human capital and they need to spend their money if they want to enjoy it. Otherwise, they’re going to pass away at like in their 80s or maybe 90s, but with maximum money, but who cares? They can’t enjoy it.

David Bach (13:54):

Maximum money without getting to have had maximum retirement. And I really think the whole purpose of money is that money’s just a tool to live your best life. And there are so many ways to live your best life. But look, I’m the guy that spent 33 years of my life teaching people how to save and invest in retirement. And the automatic mailer’s now for 20 years now. I updated it for another generation so that we could reach young people one more time so that we could create more automatic millionaires. I think it’s important to build wealth and be financially secure. And then I think it’s important to use your wealth to live your best life. And the financial service industry, this will be our next evolution will be how do people get … I was just on a podcast with Gene Chatsky. We’re talking about how do people get forever paychecks.

(14:41):

People want these revenues, the revenue to come in even if they’re not working. And when so many people are waiting too long, even Social Security, the bulk of the industry tells people to wait to take Social Security. I tell people, if you don’t need the money, take Social Security as early as you can. Why would you wait? Take the money and enjoy it. We’ll have fun with it.

Steve Chen (15:03):

Right. If you don’t need to hedge it. Do you know Azul Wells ever heard of that guy? He’s a YouTuber, YouTube influencer, former advisor, and he talks a lot about this, the age 63 kind of like health thing that happens for men that it’s a big risk and most people don’t think about it.

David Bach (15:17):

I don’t know him and I will tell you, so my thing is skiing. When I’m not doing financial education, I lived a skiing. I’m very aware of the fact that now when I go skiing with those friends of mine who still ski, because people stop skiing when they get to … I’m 59. Usually you’ll see a lot of people on the mountain in their 60s. And we were on the mountain two or three weeks ago. I was in Verbia and my friend said, “How many people do you think ski over 65? What percentage of skiers are over 65?” And now you can just turn around and ask ChatGPT. So he asked ChatGPT on the lift and the answer was 3%. And I was like, “Whoa, that’s an eye-opener.” And that’s because people, you were not always in shape to do these things. So I’m very focused on how can I be as healthy as possible so that I can be as active as possible.

(16:10):

It’s not just living long, it’s living healthy long, as long as possible.

Steve Chen (16:15):

I think more people are reading up on Peter Attia and just getting super thoughtful about their … Not everybody, but definitely in the Bay Area. And I like you, I’m a skier. And it’s interesting that you do see … I was skiing midweek and there are a bunch of retired people that are super active, but yeah.

David Bach (16:33):

That’s because the retired people can ski midweek.

Steve Chen (16:36):

Yeah, exactly. They can do it. But yeah, you have to be super intentional about staying strong. The similar stat, I remember someone told me that the number of people that ever sprint after age 35 is like 2% or 1%. It’s like you don’t realize it, but these things that you did when you’re a kid, like you’re running full out, that stops in your early … You just never do it again. And you don’t think about it, but that’s the same thing. Yeah. At 65, 3% of people are skiing or whatever. It’s like it just happens and people don’t notice it. All right, cool. Well, look, I’d love to shift gears and talk a little bit more about the automatic millionaire. Why did you originally write that book? What motivated that?

David Bach (17:12):

So I’ve always gotten my book … So the first book I wrote was Smart Women Finish Rich. I started teaching a class in Lafayette, California for my clients, for my women clients on money. This is in the ’90s. There were no classes on women and money. There were no books on women and money. I got asked in my first class, the Lafayette Park Hotel, what’s a good book for women and money? And I said, “I don’t know if there is one. I’ll go to the library and I’ll look.” And there wasn’t one. And so I ultimately would teach that class over and over and over again. And then I got invited to do a speech at the Moscone Center. And I had this big venue and I was going against John Gray, men are from Mars, women are from Venus Fame, and everyone stood in line waiting for my book and I didn’t have my book.

(17:57):

And so I finally wrote the book that was what I had been teaching, which was Smart Couples, which was Smart Women Finish Rich. And that was what I had done for my clients. Then all these women came back to me and said, “Now I need a book to do this with my husband.” That led to Smart Couples Finish Rich.

(18:14):

The Automatic Millionaire came to be because as I went around the world teaching these principles, people would come up to me at the end of my events and say, “David, I got your book here. I just want you to tell me what’s the one thing I need to do. Just give me the secret to being a millionaire. There must be one thing I need to do. ” And I would find myself answering over and over again, “Well, the secret is you have to pay yourself first automatically.” And then somebody’s like, “Well, why don’t you write that book?” And so the automatic million really came me like, “You know what? This is what I need to teach. I need to simplify this. ” People don’t want always the full blown financial planning guide. How could I write the who moved my cheese of money? That was my goal,

(18:58):

A really short, simple, easy book that anyone could read on any income to build financial freedom for life. And I based it on a ordinary couple. You were talking about how you have all these ordinary 401k millionaires. I was at Morgan Stanley and I had those clients too. And I had a client come into my office. They weren’t a client actually. We call them a prospect. They had come to a seminar and they came in my office and they were able to retire in their early 50s with a very ordinary income. Jim and Sue McIntyre, they had made a little over $50,000 a year. And when they came to my office in his early 50s, he had a net worth of $1.8 million. And I was so blown away by this that I started interviewing him and going, “How did you do this? How did you do this on such an ordinary income?” And the automatic millionaire book tells his story in the beginning of the book, how him and his wife, what they did.

(19:55):

And it was really, for me, the turning point in my own life too, because I was making that point over $100,000 a year and I was still living paycheck to paycheck.

(20:05):

And so I had this moment of realization of like, if I don’t change, nothing’s going to change. I’m under this mistaken belief that if I make more money, then I’ll start saving investing. And I need to look at what my clients have done who have saved on ordinary incomes because I had clients that were from PG&E, Pacific Bell, Safeway, all these local companies that you know, right? All these barrier companies, AT&T, Chevron, and they had built, they had paid their home down with no debt, they had put their kids through college and they had built up these 401k plans that were half a million to a million, maybe a million five. I mean, these accounts are bigger now, but they did it on an ordinary income and they did it automatically.

(20:49):

So I worked on that book. It was the hardest book I ever wrote because it’s very hard to make financial planning simple. When you’re in the industry and you know so much, it takes a lot of work to take it all the way down to the bare bones. And that’s what I did with the automatic millionaire. And then I launched the book on Oprah and then as they say the rest is history, that book took off and it became the number one best signed book of the year and nonfiction. It’s been out now for 20 years. It’s got, this is its fifth version, fifth update, and over two million copies have already been sold. So I just wanted to put it out one more time to reach the next generation. And also things have changed. Technology’s changed.

Steve Chen (21:27):

It’s an awesome story and it’s definitely influenced so many lives and people talk about the latte factor. And what’s interesting to me is just like the people that learn this stuff, if they’re raised in households that are financially literate or now there’s more people that are being taught in high schools, but it’s still the exception. I think in our generation it’s people like they weren’t taught this stuff. You kind of had to learn on your own. And so it’s really the people that took advantage of time while they were … I guess it’s like, hey, they learned to pay themselves first, they learned to invest and start capturing returns on the market and they just kept doing it. That’s who has won. But if there’s still so many people … Do you feel like the curve has bent? Are more people taking advantage of this now?

David Bach (22:07):

Well, they are. More people taking advantage of this because 20 years ago we didn’t have automatic enrollment and 401k plans and that didn’t exist, right? It wasn’t easy to automate paying yourself first 20 years ago. When you came into my office at Morgan Stanley back in the day in the 90s, I would tell you, if you have $50 a month that you can save and invest, I’ll help you. And I would. I’d sit down with you and go through it. And when I did that, the paperwork to set up what they called them a systematic investment plan was six pages long and it took 45 minute meeting and took three weeks to set it up with a bank. It was ridiculous and people didn’t trust it, right? Today people go on there, you can open your phone and you can click on an app and you can automate your financial life in less than 10 minutes.

(22:54):

You can automate everything. You can automate saving in a retirement account, you can automate an emergency account, you can automate a dream account. And so it’s much, much easier today. However, it’s also easier to separate you from your money. You used to have to get in your car, drive down to a store, think about what you were buying. Today, everything’s on your phone, click, click, click, you’re signed up for life. Everybody’s taking your money from you automatically. And so you have to realize if you don’t have a plan for your money, someone else has a plan for your money. And most people don’t have plans for their money. They should, but they don’t. They have what I call the no plan plan. And the no plan plan leads to a very different place than the person who has a plan. And the thing is, when I was young, the one thing that had a huge impact on me is one of the oldest, older financial advisors came in and talked to the trainees and he was in his 60s, like a little bit older than I am right now.

(23:54):

And he was getting ready to retire and we’re all in our 20s. And he took actually the chart in the automatic millionaire book, one of the original charts that he showed the power of compound interest with an IRA account.

(24:08):

And at the end of his talk, he said, “At a minimum, you guys, do for yourself what you do for your clients. At least make sure you’ve got these IRA accounts set up or you’re using the 401k plan.” He goes, “Because this office is filled with broke financial advisors.” And we were like, “What?” We were shocked because financial advisors are driving a fancy car, they’ve got a country club membership, they’re wearing nice suits, they’ve got attitudes and he’s like, “Most of these guys don’t have any money.” And he was right actually and it stuck with me and what he said, because I remember this like it was yesterday, his name was Jack Saunders, he said, “You’re going to blink your eyes.” And he went like this, he snapped his fingers and he goes, “You’re going to blink your eyes and you’re going to be my age and you won’t want to work anymore and you’ll either have money or you won’t, but if you start at your age, it’s easy.” And I was like, “Whoa, okay, well that’s a wake up call.” And he was right, by the way, because I blinked my eyes and I’m now 33 years later, kind of wrapping up my career here, it’s gone by fast.

(25:14):

I mean, I still feel like the kid in my 20s, but I’m not the same kid in my 20s. It went by really quickly. So I’m glad I did all these things.

Steve Chen (25:21):

Yeah. I think it’s hard for people to get that sense. Same thing, I’m in my 50s and it’s like it goes by quick and everyone tells you it goes by quick and it accelerates and it’s true. And yeah, no, I also get the … We build financial planning software. I didn’t have a plan for a long time. Now I have a plan. Now I’ve actually talked to one of our advisors and I’ve automated most of my life and it has been game changing, but you have to do it. And then you start to, I think you have these aha moments in your life. One, you start to save and it starts to build, but at a certain point you hit escape velocity where you’re like generating more returns on your capital than you’re saving. And then you’re like, “Oh, wait a sec, this compounding thing is very real and it’s accelerating.”

David Bach (26:05):

My son who’s 15 was downstairs doing math homework and he had a chart, looks like a classic stock chart, like a compound interest chart. And I go, “What are you doing?” Because he’s doing math work. He’s like, “Well, we’re studying exponential growth.” I go, “That’s just like compound interest.” And he goes, “Yeah, that’s kind of what we’re studying.” And what’s interesting about what you just said, nobody really fully explains this when you’re young, is that the first 10 years when you save and invest, it’s like watching paint dry because not a lot happens in the first decade. Then in the second decade, it starts to grow more, but in the third decade, it just starts to take off. And then before you know it, the money’s really … Everything you’ve been told, have your money work for you so that your money makes money happens.

(26:53):

And I think the thing that … There’s 24 million millionaires in America now when I updated the book. There’s 16 million more people than there were 20 years ago when I wrote the book. I think the thing that I worry about is that those who aren’t saving and investing are getting left behind, just left behind. Because if you don’t own stocks and you haven’t owned real estate,

(27:13):

You’re just falling further and further behind. Everything’s getting more and more expensive and you just aren’t able … It’s hard and harder to catch up. And I worry about that for our country.

Steve Chen (27:21):

Yeah. One of the things that I saw at Stat that jumps out, we’re kind of hitting peak 65 right now, where there’s like 10, I think now it’s like 12,000 people a day are turning 65. So they’re hitting that point where many that are forced to retire. And there’s also, for people who have been saving there, I think there’s a thousand new millionaire households a day that are being minted. So there are these households that are really winning and I mean, a million dollars isn’t what it used to be, but it’s still pretty meaningful number. But then what about everybody else? Half this country has like close to zero or negative net worth, which is a big problem. And 25% has kind of zero to $650,000 and the top 25% has 650,000 or more in net worth. So there’s still lots of room to lift up and help many more people get there.

David Bach (28:09):

I just did a keynote. You saw me speak on stage at FinCon. I did this talk recently in Arizona at a very high end group called Genius Network and I talked about all these ideas and I said, basically four out of 10 Americans can’t get their hands on $400 in case of emergency. Six out of 10 Americans can’t get their hands on $1,000 in case of emergency. Now, this talk was when the government was still shut down and I said, “I don’t think a lot of people realize how hard this is for people to shut the government down because they hadn’t gotten paychecks for three paycheck cycles.” So if you live paycheck to paycheck, it means you’ve got one paycheck of savings. Well, there are one out of three American families who make $150,000 a year are still living paycheck to paycheck.

(28:58):

So it’s not just people with low incomes that are living paycheck to paycheck, it’s also people with high incomes that are living paycheck to paycheck. And the only way you fix that is to actually, for yourself, fix it. The only economy that matters is your own economy. And the Automatic Millionaire book is a roadmap for anyone at any income level to automate their financial life, put it on autopilot, not need a budget, not need discipline. And today I used to say set and forget it. Now I say set it and review it. But I think if you have young people … The Automatic Miller is a great book to give out as a gift. Come on over to our website, which is davidboch.com and you can read about the book. We have an insider team. I don’t know when this podcast will launch, but we’ve got a live event that I’ll be doing on Zoom.

(29:47):

They can find out about it on the website. And I think financial education shouldn’t be a nice to, it should be a must to. We don’t have mandatory financial education school When we should. And it leaves people at a huge disadvantage if they’re not taught about money at a young age.

Steve Chen (30:07):

Yeah. There’s a guy, Tim Ranzetta. I talked about him a lot. He’s out here. He’s actually East Bay. He’s actually East Palo Alto guy. He’s an entrepreneur in the Valley and he created next generation personal finance. And that is a group, you might want to talk with him, that has trained 50,000 teachers at this point on how to teach the teachers. They do two things. They teach teachers how to do financial literacy in high schools and they push for legislation. And it’s now in like half the states. So they just passed in California to require personal finance to graduate from high school, which is a huge thing that started to happen. So now those 50,000 teachers teach five million kids a year.

David Bach (30:49):

Please introduce me to him. I think what you just told me, and I talk about this in the automatic owner book to how many states are creating programs or 27 states so far that have created some kind of a program. The key to what you just told me though is what I’ve been talking about for a long time is it’s mandatory and you need to pass some kind of a test to graduate. Because if you make it a one day or a half a day event, people aren’t really paying attention, but if they have to learn something to graduate. By the way, it’s not complicated stuff that you have to learn to graduate. If you just teach people the miracle of compound interest, teach people what happens with interest rates when interest rates go up or down or what happens with credit card debt. None of this stuff’s really that complicated.

(31:34):

When I was on Oprah with the Automatic Millionaire and she turned to me at the end of the show and she’s like, they should teach this stuff in school. And I said, “Oprah, I know they should.” I said, “This book shouldn’t be needed. Automatic million book shouldn’t be needed. You should graduate from high school and know everything that’s inside this book.”

Steve Chen (31:48):

Yep. 100%. What do you teach? I love the idea of how do you make it simple. I mean, for what it’s worth, we’ve built this platform that people use instead of their spreadsheets to build their own plans. And so they’re enthusiasts and they’re really into it and they’re prolonging these levers. But we see to change the world, it does have to get way simpler. For your own kids, what are the simple lessons that you’ve taught them?

David Bach (32:11):

Oh, I can give you three simple lessons for children. Well, maybe four or five actually. Lesson number one is I teach my kids about investing the same way my grandmother taught me. So my grandmother, when I was really little, she took me to McDonald’s and she said, “David, I’m going to teach today how to become a millionaire.” Because I used to like to play Monopoly. She’s like, “I’m going to teach her how to play Monopoly in the real world.” So she took me to McDonald’s. I was seven years old. She said there’s three types of people who come to McDonald’s. Those who eat here, those are the ones who like you right now you’re eating. Yurkwit’s called a consumer and you spend money. The second type of person is somebody who works here. All these people you see working here, they have a job and they’re being paid minimum wage and that’s a hard way to make a living.

(32:53):

The third type of person is the person who owns this place. They’re called an investor and they own stock in McDonald’s. And when you own stock at McDonald’s, you then will make money off of every single person that comes in here to eat just like you. And that was my first lesson. And so she taught me how to find out about McDonald’s being public and she taught me how to look it up back in the day in the newspaper. And she took me down to a brokerage firm and I bought my first stock. I did that with my kids. They bought Shake Shack.

(33:21):

So that was my first lesson for them because I wanted them to think about being an investor the same way I was taught. Now, things that I’ve done for my kids since then is my kids have Roth IRAs. So I’ve started my kids with Roth IRAs because I’ve been pounding on them the importance of starting young. And so I’ve got a 15 year old who’s now funding his Roth IRA because I put them on the payroll. We basically been paid for three years and we fully fund his Roth IRA. And my older son, they’ve each got matching Roth IRAs. And I’ve shown my kids, I go to investor.gov or maybe they can use your software. But investor.gov, you can go there and you can go compound interest calculator, takes you to investor.gov, it’s free. And I’ve run the numbers for my kids. And in fact, it’s funny because for Christmas, they got a copy of the Automatic Millionaire and they were laughing, but I was like, “You got to read the update.” And inside the book was a printout of their IRA accounts, what the compound could look like.

(34:18):

And so I showed them like, “Here’s how much money you have saved and here’s what it will be worth at 60 if you fund it every year at the same dollar amount and you earn.” And I told them 8% and I showed them 8% or 9% or 10%. And in their case, they’ll have eight figure retirement accounts,

(34:37):

Like specifically over $11 million. If they fund just $20 a day for the rest of their life. Now, I’m going to help them for a period of time. I’m fishing for them right now and I hope that they will then fish for themselves, but I’m teaching them at the young age these really critical ideas. So that’s what I would start with.

Steve Chen (35:01):

Yeah. I love your grandmother’s story and I love the fact that you’re teaching your kids this. Any other top ideas for like automating, saving, I think obviously watching money being taken away, I do agree with that. There’s lots of ways you can lose your money and also there’s scams and stuff like that. Any huge mistakes that you see people that read your book make?

David Bach (35:25):

Well, I don’t know if they- Or

Steve Chen (35:27):

Maybe they haven’t read it.

David Bach (35:29):

Well, actually, I’ll tell you mistakes that people make, I see all the time. And it pains me, which is why I like to talk about it, not because it pains me, because I don’t want people to make this mistake. I will meet people who come up to me and they will say, “I read the Automatic Millionaire book. I want you to know I’m paying myself first. I opened up a retirement account.” And I will ask questions, “So Steve, that’s great. Where’d you open up your retirement account?” “I opened it up at Vanguard. “”Oh, that’s fantastic.What’s it in? What’d you invest in? ” And they go, “I’m in the Vanguard IRA account.” I go, “No, no, no. Remember in the book I told you you have to put the money inside an investment.” And now they won’t remember what they put it in. So then I’ll go, “Well, let’s open up your phone.

(36:10):

Let’s look.” So the biggest mistake I see people make is they often open up retirement accounts and they don’t actually invest the money. There are billions and billions of dollars in retirement accounts sitting in cash or nothing, not invested. So it’s really important to get it into at least a target dated mutual fund, which I talk about in the automatic millionaire. It needs to be invested 60%, 70% stock, 30% bonds. I believe in balanced portfolios. So that would be the one mistake, but the mistake I see people making who don’t read my book is young people are taking a lot of risk with their money because it’s never looked sexier and easier to get rich quick.

(36:53):

And all I can tell anyone who’s young or old is I don’t know anybody who’s gotten rich quick. And now I’m 59. So my son, my younger son got super into trading meme coins. There’s always something, right? There was NFTs, now there are meme stocks and my 15 year old was trading meme coins. And this was before the Trump meme coin came out, but he had taken like $400 and I let him do this even though it was totally against what I believe in. It was his own money and I know it’s stupid and totally ridiculous and risky, but he had all his trading systems in place and he’s getting on investor calls and he’s making money and his $400 had grown to like 8,000 and we’re skiing in Ruby and he’s like, “You know, dad, you’re trying to make 10% a year. I’m trying to make 10% a day.” And I was like, “James, I know this is looking good right now, but I promise you, I don’t want you to lose this money, but there’s these things called rug pulls and you’re going to wake up and the thing’s going to go to zero and there’s going to be no money there.

(37:56):

You don’t know what you’re talking about. ” Well, literally within days it went from $8,000 and he was in multiple coins and he went from being up 8,000 to being all gone. And that’s a good lesson for him to learn at young age, but it’s tragic to learn it with significant amounts of money. A lot of young people are losing significant amount of money, taking way too much risk on things that aren’t real.

Steve Chen (38:19):

Yeah. I’ve seen this. I’ve seen this movie with my oldest son, same thing, like he was in crypto with all his fraternity brothers. They basically cornered the market, they owned everything and they were driving it up themselves and then like, “We have $10 million of this coin.” I’m like, “What’s the intrinsic value here?” I told them my stories about like I owned e-trade. I once took e-trade. I had like $400,000 in e-trade from like 20 during the dotcom glory days. And I was like, I remember asking about, “Should I like diversify?” We’re like, “No, we’re up to huge. Let’s kill that ride.” And then wrote it right back down to like 40 grand or something like that.

David Bach (38:54):

Do you remember, they used to have those E-trade ads and they used to, the e-trade ad was like, “We don’t have an old brokerage firm, go to e-trade and you can have an island.” And I’m from the dotcom days too, right? They used to call them at Schwab Cisco Ants. That was the phrase that they used inside the Schwab branches. All these people coming over to Schwab to buy Cisco stock today would be Nvidia. Everybody likes a stock until they don’t like a stock, right? Great book to read right now. Have you read 1929 by Andrew Sorkin? No.

Steve Chen (39:30):

All right. I’ll have to check it out.

David Bach (39:32):

Go read that book because it’s a page turner and it’s good to have a lesson and a reminder of what it was like during the Great Depression when the market crashed. But being from the dot com community of the Bay Area, I had a lot of young people coming off with so much money and exactly what you’re talking about. It’s like, “I know you have $10 million right now in ALL stock. Let’s sell at least half of it and buy you a house.”

Steve Chen (39:55):

Right.

David Bach (39:55):

No, no, no, no. It’s going to be worth $20 million.” And then the stock just went off and the people that didn’t diversify were sad.

Steve Chen (40:06):

I think that’s the big thing. I think diversification, continuous diversification, that’s like rebalancing makes a huge difference because you end up, say you own NVIDIA or something, right? Okay, boom, suddenly it’s a massive part of your portfolio and obviously the survivor bias of like people don’t own Apple. It’s like, “Okay, I’ve owned Apple, I’ve owned it for 30 years.” They never want to sell Apple. It’s a tough argument because they’re like, “Well, it’s been enormous, but at the same time, at some point, everything, I think if you look back and you say, Hey, who was part of the Fortune 100 30 years ago that’s still around? It’s like nobody. It’s like these companies, or 40 years ago, they all roll over at some point. So diversification and kind of continually rebalancing is an important part of this exercise as well.

David Bach (40:54):

Completely 100% agree with you. Rebalancing should almost be automated, but people, everyone gets brave when the markets go up. Markets are up now for three years. I mean, we’ve actually had an unbelievable 20 year run. Since I wrote the automatic millionaire, the markets have gone up 600% and the real estate markets have gone up 400%. That’s average, right? So like in the Bay Area, home prices didn’t go up 400%. They went up way more than 400% in 20 years. So if you’ve been using your 401 plan, investing automatically and you bought a house, you’re a multimillionaire probably and certainly a millionaire. So part of building wealth, you got to build it and you got to enjoy it, but you also have to protect it. 100%. And I think doing the plan’s a big part of that.

Steve Chen (41:41):

I want to shift gears to the last topic really quick and just kind of talk about the future. I mean, let’s open with … So if I zoom way out and you just think about the history of humans and like what we’ve accomplished, we have accomplished a lot in the last 150 years and it does feel like it’s really accelerating. And people look at like, so next year, 2026 or this year, right? I think a lot of people are thinking famous last words, they’re pretty bullish. They’re like, okay, inflation seems like it’s leveling out a bit. AI is here. It feels like it’s impacting things. It does feel to me like this continues being in tech and especially in Silicon Valley, it just feels like it’s always accelerating. And so it does make you bullish about the future that, hey, and the market is a great place to capture those returns.

(42:35):

So that’s the upside. And then the other side is, well, nothing goes up forever. You’re going to have these lumps and whatnot. And do you have a perspective on how you think the economy should unrolls here over the next five years, 10 years?

David Bach (42:49):

See, that’s really the interesting question, right? Because I don’t know what the economy’s going to do in the next 12 months. And I think there’s been a lot of great quotes about the fact that if you believe anybody who tells you to know what’s going to happen the next 12 months, then you’ve believed an idiot. I was reading there’s 700 … I’m on Bloomberg and there’s an analysis of 720 economists and chief investment officers of all the financial service companies. You can go on Bloomberg and you can read this. And the consensus among them, it doesn’t even matter what the consensus is, but the fact that the consensus is all the same. I literally read hundreds of these. I’m like, where’s the guy that doesn’t think it’s going to be okay? So the consensus tends to be almost always wrong. They just say the same thing.

(43:34):

I don’t know what’s going to happen this year. I don’t know. I mean, I don’t. Nobody knows. Did you know we were going to go onto Venezuela? Do you know what China’s going to do with Taiwan? I have no idea. We didn’t know COVID was coming. All I know is if you ask me what the next 10 years are going to look like, what I think is going to happen next 10 years,

(43:51):

I think the next 10 years is going to be the greatest opportunity to build wealth in our lifetime, like nothing we’ve ever seen before because AI is changing everything and it’s going to create enormous levels of productivity and profitability. Now there will be economic consequences to all this. There will be people who lose jobs, a lot of people. The world’s going to look very different, but I’m personally very optimistic about where things head in the next 10 years. It doesn’t mean I’m not … There aren’t things I worry about. If we were to sit down and have coffee and you’re like, “What do you worry about? ” I’m like, “I think our deficit’s a serious problem. I think our country’s got $38 trillion and that’s actually underestimated how big our deficit is. ” I think the fact that GDP, the interest on our debt is greater than GDP, that’s frightening.

(44:43):

I think our entitlement programs that are getting ready to buckle. I think California’s got all kinds of issues, but these are things that we can’t control. X, Y, I always go back to the only economy that really matters is the one that you’ve developed for yourself and your family. So that’s the economy that you can control.

Steve Chen (45:01):

What do you think people can … Well, in the age of AI, so we agree planning is important, literacy’s important, right? Automating money is important. How do you see AI affecting financial services? How do you think it’s going to be very different in five years and in what timeframe as well? I’d be curious your take on that.

David Bach (45:23):

You almost have to go back 10 years to think about how much has things already changed. I’ll give you perspective here. I had a Blackberry, I had the AOL Blackberry, the actual pager, right? Do you remember the page? I don’t think most people listening … You have to be our age to remember what that was, but in order to have an email, you had to have a Blackberry and now you had to have AOL.

(45:48):

When I worked at Morgan Stanley and I was using that Blackberry, we got a memo telling us that we were never going to have email in the office. I wish I kept that memo because the memo is we’re never going to use email because email, you can’t compliance approve it and it’s not necessary. So think about how much things have changed. You used to, as a financial advisor, have to have a nice office because people come to your office. The people don’t come to your office. I have a financial advisor using Kansas. I’ve never been to his office.

(46:22):

The whole thing’s been done over Zoom. You and I are not in a studio together. We’re doing this over a Zoom system. We’re doing it on Zencastr right now. So everything has changed. So financial planning, you go in, you meet with an advisor, they run your numbers, they create the plan. Now plans are designed where you can start to use them yourself. AI is going to mean that you can talk to the phone or talk to the screen and you can just tell it and then it can come back and spit back all information. In five years, the question is, will people still sit down with an advisor and want the plan? They want somebody to talk to? That will be the question. I think the answer is yes. I think in financial planning services, there will be more need for help, not less because of what you said earlier, which is we have so many people hitting age 65.

(47:15):

And the truth is as you get older, your financial life becomes way more complicated for so many reasons. And then you start to have death and then you have to deal with all that. And you’re not going to just go to your phone and be like, “Okay, my husband’s died. No, switch everything over.” The system’s still set up to bring in a death certificate, repaper everything. You got to find all the assets, transfer the assets, pay the taxes, settle the estate. I don’t know that that friction completely goes away in the next 10 years. I think that will still require people to help you.

Steve Chen (47:52):

I agree that I don’t think human advisors and coaches are going anywhere. I do think they’re going to have to get more productive, but there’s also just this huge demand for people to do better. And it is way more complicated. Accumulation is relatively simple. It’s simple, but not easy. Decumulation isn’t simple and there’s a lot of moving parts. And as you have resources, a lot of our folks are super interested in tax efficiency, lifetime income. And not even tax efficiency in just their lives. It’s like a lot of our customers, our users are now like intergenerational planning. You’re probably doing this with your kids. It’s like, okay, get them in a Roth, maybe get your own assets on a Roth so they can go figure out the estate limitations and stuff like that. It really matters a lot for a lot of these folks.

David Bach (48:37):

Well, I’ll tell you, I also tell young people, financial service industry is a great industry to go into. I don’t think AI takes this industry away. I think the AI makes this industry better and more productive, allows you to help people more intentionally and easier than before.

Steve Chen (48:55):

For sure. How are you using … Well, I saw you did Notebook LM to kind of compile all your thoughts about your IRA flat tax idea. Are you using AI in other ways in your life? I

David Bach (49:06):

Am, but if you think about what we did with the IRA flat tax concept, I’ve had this idea for five years. The amount of money I would have had to spend to hire a consulting firm to put together this white paper and create this thesis for me that we could beta test would have been millions of dollars. Would have taken at least six months to a year worth of consultants working on that. I was able to hire one AI consultant and work on this with her and then run this through all the different AI engines, have them compete against each other because they don’t all agree. And when you use AI, that’s really interesting too, right? Because what ChatGPT thinks versus what Gemini thinks versus perplexity versus a international language model, they’re programmed by people. And then you also have to know, like I learned, because I know, you have to know what’s good data and bad data, right?

(50:04):

You can’t just look at anything that comes back from a language model and assume it’s correct

(50:10):

Because it would show me things that I would know were wrong and I go, “Well, that can’t be. ” And I’d ask it. And then they go, “Oh, you’re right. That isn’t correct.” So it was an interesting process to go through, I’m sure a year from now, if we run this all over again, it’ll be better. We’re in the beginning stages of using language models. Google Notebook LM, if you don’t know what a Google Notebook LM is, and I didn’t until I did this project, it is unbelievable. And if you go to irraflattax.com and then you read the white paper and you click into Google Notebook LM, we just took pieces of the Notebook LM and made it available because I wanted to simplify it. But for example, there are podcasts that I didn’t create that engine created. It read all the white papers and then it’s got podcasts of people talking back and forth, having a show that sounds just like a real show, so well thought through, so well discussed, and that’s just an AI engine.

(51:09):

That’s unbelievable.

Steve Chen (51:11):

It is incredible. I mean, a couple things with us. So we’ve been using AI to support our audience, our community. We have about 120,000 users a month, 5,000 people ask questions. And in the beginning of 2025, in the beginning of 2025, we had mostly humans and some AI and AI was … And then in kind of Q1, we turned this on and it started answering half the questions and getting them half right. But at the end of 2025, it’s answering 90% of the questions and 90% of it humans are like, “This is a better answer. It’s twenty four seven.” We just turned on an AI assistant in our platform.This is in beta less than 24 hours ago. We’ve already had 2000 people engage with it and ask questions. This is not announced. It’s just stealthily out there and they’re able to kind of chat with their plans.

(51:58):

It’s pretty incredible to watch what people are doing. And the last thing I’ll say is this, there’s a platform called Delphi, which lets you build a mirror of yourself. I don’t know if you’ve ever heard of this, but it’s like I uploaded all of our help, a bunch of podcasts, a bunch of our writing on our website and trained it, and you can call a version of me up and just ask questions. It’s crazy. And I did this in three hours on last Friday as just like, “What’s going to happen?” And it’s 350 bucks a month. I mean, it’s just total experiment.

David Bach (52:32):

Okay. Yeah. Send me a link. I’ll check it out because I talked to the founder of Delphi a couple years ago and then we didn’t go down that road of doing it, but maybe now is the time to do it.

Steve Chen (52:40):

Well, we’ll see if it … Yeah.

David Bach (52:42):

Your software system, is it for retail clients or for advisors who work with retail clients or both?

Steve Chen (52:48):

So think of us like TurboTax of planning. We basically are the first company … I started this company because I was helping my mom figure this out. She was approaching retirement, didn’t have that much money, like less than half a million bucks aging female and just couldn’t get the time of day from an advisor. She needed to kind of make some decisions and figure out retirement.

(53:08):

She needed help. And so my brother and I, and we both had some financial service experience. We’re like, “Okay, I guess we’re doing this ourselves.” We started building spreadsheets and then we just discovered that there’s 120 million people in this country over age 50. They have 80% of the money. Everybody’s worried about it like you’ve experienced and learned and nobody knows what to do. And that’s pretty much, I feel like still the case. And so we’re like, all right, let’s … I’d built software before, SaaS, so we’re like, let’s turn this into a company. And then we’ve … First it was Bootstrap, now our venture back company. We have a bunch of subscribers. We have 65,000 ish subscribers now. They’re managing $200 billion.

David Bach (53:49):

Wow.

Steve Chen (53:51):

We’re like creative planning, except that people are doing it on software. I’ll send you the link. You just check it out. You see what we’re up to.

David Bach (53:58):

Yeah, send me the link. I’ll totally check it out. I love Pillow to play with it. Congratulations.

Steve Chen (54:02):

Well, hey, we’re early. It’d be great to have seven million users. You’ve had seven million people buy your books.

David Bach (54:09):

What were you doing back in 2017 when we met at Fincon?

Steve Chen (54:14):

I was getting into this space. I’ve always worked on financial services. I was learning about FHIR. We were early running … We were playing around with different … In my career, I came out, I was a consultant. I used to actually wrote software at Schwab in the beginning, early days, and then other places, Wells Fargo, Fidelity and places like that. And then did a startup in the dotcom glory days, raised 40 million venture capital file to go public way back when I was like early 20s or mid late 20s and also didn’t go public and so saw that whole part of it. And I’ve done various things. But I think this idea is now become my life’s work in terms of really trying to be completely aligned with the end user, transparent, equip them with literacy, technology, find super smart people like yourself to kind of share their stories and just build a community around it.

(55:02):

So that’s what’s happening.

David Bach (55:04):

Good for you. Well, I’d love to check it out. I’m glad. I think we got connected from somebody else who I did a podcast with. And I’m thrilled that I said yes to you because it’s been really fun meeting you. And this has been a super enjoyable conversation. So I hope it helps, I don’t know, your community. And obviously you have a very engaged community. If you’ve got 60,000 subscribers on software, I don’t know if software’s the right word anymore for this, but using a financial planning tool, they’re already in the small percentage of Americans. And so part of it’s like, don’t keep it a secret, right? For anybody who’s using this stuff, don’t keep them a secret. Go tell your friends, get more people doing this because more people need help.

Steve Chen (55:45):

100%. Well, look, yeah, David, I really appreciate you making the time. And we’ll definitely point people to davidbach.com and the Flat Tax IRA Flat Tax website. Any last resources that you want to suggest for our audience that you think will help them?

David Bach (56:01):

First of all, I’ve got a podcast too, the David Boch Show. So if you want to listen to the first three chapters of the book, actually there’s probably four chapters now available online for free, davidboch.com. Go check out the podcast and the show’s called the David Boch Show. So they can go listen to something out and get your hands on the automatic millionaire book. 

David Bach (56:22):

I appreciate everything being a part of this. I’ll look forward to checking out your thing too. Send it to me. I’ll play with it and then come back to you.

Steve Chen (56:28):

For sure. All right. Well, David, really appreciate it. And for all the folks listening, thanks for your time and hopefully you found this thing helpful and we’ll see you on the next episode of Boldin Your Money podcast. I loveIt. Happy Skiing. 

David Bach (56:37):

High five.

Steve Chen (56:38):

High five.

The post Podcast 106: The Automatic Millionaire in an Automated World with David Bach appeared first on Boldin.

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