8 Money Secrets From Warren Buffett
Written on August 28, 2007 by Tezza
Tuesday’s weekly guide to Personal Finance from 4EvaYoung.com
We all have someone whom we admire and respect. For me one person on my shortlist is Warren Buffett who is sometimes referred to as the “Sage of Omaha”. I first heard about Buffett back in 2001 when I first started getting serious about investing and so I started reading all the titles with his name on it. Off course Buffett hasn’t actually written any of them but they were priceless none the less.
If you have never heard of Buffett, Forbes currently ranks him as the third richest man in the world and he is arguably the world’s greatest investor. He has amassed his fortune by making astute investment decisions and investing in businesses. Here is what I have learnt from Buffett:
1. Rich Is A State Of Mind
“I always knew I was going to be rich. I don’t think I ever doubted it for a minute.” - Warren Buffett
The difference between being poor and being rich is really just a state of mind. Poor people think thoughts of poverty and lack, rich people think thoughts of abundance and prosperity. Your beliefs are going to determine the way you perceive wealth, the decisions you make and the way you act towards it.
2. Success Is More Than About Your Bank Balance
When asked by CNBC what is the secret to success, Buffett replied “If people get to my age and they have the people love them that they want to have love them, they’re successful. It doesn’t make any difference if they’ve got a thousand dollars in the bank or a billion dollars in the bank… Success is really doing what you love and doing it well. It’s as simple as that. I’ve never met anyone doing that who doesn’t feel like a success. And I’ve met plenty of people who have not achieved that and whose lives are miserable.”
3. Spend Less Than You Earn
“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” -Warren Buffett
It seems like common sense advice and you’ve no doubt heard financial experts preaching about it for years. You can’t possibly get ahead financially if you’re spending more than your paycheck. Buffett is famous for living a simple and frugal lifestyle. He is the only billionaire I know that still lives in the same house he bought back in 1958 for $31,500. He drove a 2001 Lincoln Town Car for years which he bought second hand. Buffett has a net worth in excess of $52 billion and yet lives off an annual salary of $100,000. The relative percentage of his spending based on his overall net worth is minuscule.
4. Avoid Consumer Debt
The sooner we realize that consumerism is a social plague that has been propagated by billion dollar marketing machines to keep you shackled to your job, the sooner we can stop spending money on useless stuff. It is a fool’s game to spend today so that you can work tomorrow to pay it off. It is a losing proposition because one day your working days are going to be over but the debt is still going to be hanging over your head. Clever marketing has convinced our society that to be happy you have to have more, be more and do more. Buffett abhors consumer debt instead choosing to use debt wisely by leveraging it in investments. To help you deal with your debt consider reading “How To Get Yourself Out Of Debt“.
5. You Are Who You Associate With
“It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.” -Warren Buffett
If you want to succeed financially you need to associate with people who are most conducive to encouraging and cheering on your financial journey. If the people you associate with see money as evil, object to capitalism and find wealth a foreign concept then your financial health and well being is going to be influenced by their views. Whether we like it or not we are all influenced to some extent by the people we spend our primary time with. If you aspire to achieve financial security then you need to find a mastermind of people in your life whom you can all encourage and help each other.
6. Gambling Is A Fools Game
“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.” - Warren Buffett
While we are young and naive we choose to take risks with our money that are dumb and stupid. Trying to hit a home run with your money every time is a losing proposition with long term consequences. To chase investments that offer a high rate of return you must also assume that it also comes with a higher rate of risk. Bill Gates once quipped “Warren’s and my betting has always been confined to $1 bets” when talking about them paying poker together. If two billionaires take risk management this seriously, it’s time we average punters did the same thing.
7. Give Back To The Community
“Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.” - Warren Buffett
They say that to have more you need to give more. A contradiction in terms, maybe, but it’s a simple truth that is as enduring as time. As the bible says “It is more blessed to give than to receive -Acts 20:35”. Buffett has announced in 2006 that he was giving away over $30 billion to the Bill and Melinda Gates Foundation making it at the time of writing the largest charitable donation in history. He also contributes large sums to his children’s charitable foundations.
8. Generosity and Abundance Goes Hand In Hand
“Even though Ben Graham [Buffett’s mentor] had everything he needed in life, he still wanted to give something back by teaching, So just as we got it from somebody else, we don’t want it to stop with us. We want to pass it along too.” - Warren Buffett
A famous bible quote goes: “What benefit will it be to you if you gain the whole world but lose your own soul?” - Mark 8:36. The path to wealth isn’t a solo endeavor. How sad would life be if you come to the end of your life and there is no one to share it with. So as you journey on your path to financial abundance remember that there will be many people who generously helped you on your journey so it is only fitting to pay it forward when the opportunity arises. Generosity with your time, with your money, with your resources are great virtues to have. The greatest ally to building a strong friendship is to help others achieve what they want from life.
I leave you with this last quote “You only have to do a very few things right in your life so long as you don’t do too many things wrong.” - Warren Buffett
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These are definitely the best tips from Warren Buffett. I submitted your article to StumbleUpon. I believe many readers will love your site.
Hi KCLau,
Thanks for your positive comments, it was a joy to write this article as I’m such a big fan of Warren Buffett. I appreciate you Stumbling the article also.
Sometimes you have to wonder- why on earth would you need or want to have in excess of 50 billion a year and live so frugally?Success is of course to do what you want when you want to do it.While the World continues to grow at such a rate there will always be those who will make money at the expense of happiness and joy.Paul Getty was a sad lonely man that had few friends because he trusted no-one. He always wondered what strangers and friends alike wanted from him.While iIadmire Buffets generosity and philanthropy how can you spend 1 billion a week? 160 million a day? 650,000 an hour? 108, 000 a minute? What drives someone to continue with this power game other than power itself?Be sure Warren Buffet, Gates et all are rare creatures. Emulate them at your risk. Start creating so that the wrld can benefit. There is no easy money today.Copies are always second rate. Be original and creative. The money comes later thanks to your difference.Thanks for the space. The Baldchemist.
The Baldchemist, Absolutely agree with your comment: “Be sure Warren Buffet, Gates et all are rare creatures. Emulate them at your risk.” Whatever their motives were that led to their phenomenal success in their endeavors we will never know for sure. What is without doubt though is that they have been exceptionally great at their chosen vocations and have also made many people wealthy also. There will never again be another Buffett or Gates but I also believe that it would be a shame if we didn’t learn lessons about life from great men before us. We can still learn from the Getty’s of this world even it be a knowing of what we don’t want from life. I also believe we each have our own path in life and the risk is not following that path at the expense of trying to be someone else.
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Great article. Thanks for sharing.
Phil
This is a great article about living the Warren Buffett way. Everyone can adopt his techniques and live a richer life.
Great site too. Lots of good information on here about living the life you were meant to live.
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Tracey, Thanks for your kind words. Warren Buffett is one of those few men who have managed to live a life of integrity even in the face of his obscene wealth. With the rising national debt and the addiction to consumerism that many have embraced, I think Buffett has a thing or two to teach us about how to “live a richer life”.
GREAT Article. I have printed it out and hung it on my fridge. I want my husband to see it. If he implements even one technique I am forever in your and Warren Buffet debt. We do quite well financial through our own internet business but my husband does not get that what you earn you don’t automatically spend. When I talk he hears blah blah blah…hopefully Warren Buffet and your article he will see truth.
Hey I will let you know how it goes. Thanks for the info and I will be returning and looking forward to reading more from your site.
Blessings
Thanks for your kind words. I look forward to see how the article is received by your husband. Sounds like you have a spender and saver partnership. I think they have great opportunities to complement each other in so many ways. Other times it just needs a little nudge for them to see the “light” (your point of view). You’ll have to keep us up to date =)
Came here via Stumble. Excellent article, well worth a read - thanks
Welcome Dave, glad you liked the article =)
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wow thats a great read thank you Kelly Martin
http://www.livingeasyat40.com
cheers, thanks kelly. I’m glad you enjoyed reading it.
Great post - this is really inspirational stuff. Warren Buffet is a smart guy and it’s good to read about someone who gives more away to help others. You get tired of reading about these stupid celebrities who waste a ton of money on crap and wind up addicted to drugs.
Catherinel: Your right, we put way too much value on celebrities who aren’t contributing much to society yet we don’t give enough credit to those who are fighting poverty, researching a cure for desease or teaching our young.
This is a great article, I will link to it. I truly believe in living within your means but it sounds like Warren takes it to the extreme. Other than that I think everything is right on.
Ned, thanks for your kind words. I guess Warren does do it to a greater extreme than most people but the main thing is he is comfortable with his decisions. You just have to find the balance that works for your tempermant and lifestyle choices.
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Excellent article. Buffet is a true hero… he makes some of the biggest money in the world, but he is as humble as pie.