The Power of Defaults
Make decisions automatic
The Power of Defaults is a principle that involves making decisions automatic to avoid inaction and take advantage of default options, such as 401(k) matches.
- Making decisions automatic can lead to better financial outcomes.
- Default options can be used to advantage, such as 401(k) matches.
- Inaction can lead to wasted opportunities and lost money.
- Set up automatic investmentsSet up automatic investments, such as 401(k) contributions, to take advantage of default options.Pro tipUse a tool like a 401(k) calculator to determine the optimal contribution amount.WarningMake sure to review and adjust the investment strategy regularly to ensure it is working correctly.
David Bach's example
David Bach cites the example of 401(k) matches and how people often lose thousands of dollars per year by not taking advantage of them.
OutcomeDavid Bach recommends automating investments to take advantage of default options and build wealth over time.
Not taking advantage of default options
Not taking advantage of default options, such as 401(k) matches, can lead to lost money and wasted opportunities.
The author introduces this principle as a way to automate investments, citing the example of 401(k) matches and how people often lose thousands of dollars per year by not taking advantage of them.
Source · BOOK
I Will Teach You to Be Rich, Second Edition: No Guilt. No Excuses. No B.S. Just a 6-Week Program That Works.