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If you’re wondering, “Who is Warren Buffett?”, here’s a brief introduction:
He is considered one of the best investors in history and is currently worth more than $96 billion, making him the eighth richest person in the world.
It’s safe to say he understands money.
Warren Buffett’s wealth management advice is well-regarded by investors all across the globe and even forms the foundation of financial management courses in some institutes.
But Warren Buffett isn't so different from the rest of us.
Warren Buffett didn't come from money and he didn't hit the lottery, either. Instead, he invested modestly over time, taking a slow and steady approach to wealth.
Here's the six strategies Warren Buffett used to grow his wealth to nearly $100 billion.
6 Money Tips From Warren Buffett
He doesn't live in a flashy, opulent way although he obviously could.
Buffett bought a 5-bedroom house in Omaha, Nebraska in 1958 for $31,000 and he still lives in it today.
At first, Warren was interested in business, but eventually ended up as an investor in stocks, real estate, and commodities.
His influence and ideas over time have changed snd stretched even beyond his niche of investing.
And today, he's one of the most profound minds of his generation, and has helped millions of everyday investors grow their wealth past seven-figures.
1. Practice Good Personal Finance Habits
The most well-known Warren Buffett money advice is to practice good personal finance habits such as creating and sticking to a budget, avoiding high-interest debt, and investing regularly.
In 2007 Buffett told a University of Florida audience, “Most behavior is habitual, and they say that the chains of habit are too light to be felt until they are too heavy to be broken.”
We are our habits, good or bad. Apart from bad health habits, bad personal finance habits are the most destructive and long-lasting.
One of the most popular Warren Buffett saving tips is to spend what’s left of your income after saving rather than save what’s left of it after spending.
Known to maintain a frugal lifestyle himself, he always advises against living beyond one’s means.
Limiting one’s expenses is one of the best ways to save money and invest and grow your wealth over the long term.
Plus it prevents paycheck-to-paycheck living which can have disastrous long term consequences and helps pre-empt the possibility of incurring debt.
2. Invest in Yourself
“Anything you invest in yourself, you get back tenfold” is probably the most well-known Warren Buffett money advice that is not directly related to money per se.
You are never guaranteed to make money when you invest. In fact, you may end up losing everything. However, investing in yourself is the only investment you can’t lose with.
One way Warren Buffett invests in his mind is by reading. No matter what you want to learn or improve on, there is a book that can help you.
Warren Buffett narrated an anecdote that dates back to his early days. In his youth, he had an extreme fear of public speaking.
He faced enormous challenges as he felt extremely nervous about addressing a crowd to the point that it would cause him panic.
He enrolled in a public speaking course at Dale Carnegie Institute but dropped out the first time as he was too terrified.
In the second instance, he successfully completed the course – an achievement he’s extremely proud of as he places an enormously high value on public speaking!
In fact, years later when he addressed a business class, he said that effective public speaking raises a person’s value by as much as 50%!
It’s worthwhile to mention that he didn’t stop there; he continued to practice perfecting the skill by conducting an investment class at a local college!
Self-investment naturally is not limited to public speaking alone.
It’s a broad area that encompasses all activities – education, reading, up-skilling, and learning new skills – that help you advance yourself personally and professionally.
Warren Buffett says he used to read between 600-1000 pages a day when he started his investing career. And he still spends most of his day reading.
When asked why he reads so much, he said, “That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.”
3. Play The Long Game
Although not the original source for the quote, Buffett has been known to use the old adage, “Someone's sitting in the shade today because someone planted a tree a long time ago.”
Growing wealth does not happen overnight. It takes time and patience.
Warren Buffett built 99% of his net worth after his 50th birthday.
One of the most important pieces of Warren Buffett's money advice is to invest for the long term. As he says, the stock market is a device to transfer money from the impatient to the patient.
Many people emotionally-invest because they see a stock soaring, and then they panic-sell when the stock comes down. Don’t do that. It’s emotional investing, and it’s a fast road to going broke.
Instead, you should buy for the long term to mitigate your risk.
Meaning, it does not matter what the market is doing in the five, ten, or even 30 years that you hold on to that asset. Whether the market goes up or down, you will continue to buy and hold.
The only thing that matters is what the market looks like in 30-40 years when you are finally ready to sell your investments.
Also, compounding is a powerful tool for growing your money. As the interest accrues every year or even month, the amount that earns an interest increases over time, resulting in a significant gain over the long haul.
So wait for your investment to grow patiently over a period of years. In fact, according to Warren Buffett, the best time to hold an investment is forever.
Good things take time, and everyone has to start somewhere.
4. Look for Value
“Price is what you pay; value is what you get.”
If you buy the cheapest vacuum cleaner available and have to replace it six months later because it crapped out, was it a good value?
Probably not. It was merely a good price.
That doesn't mean you have to have the top of the line vacuum either.
There is a happy medium between the least expensive item and the most expensive and that middle ground is often where you can find real value.
5. Keep Cash On Hand
“We (Berkshire Hathaway) always maintain at least $20 billion and usually far more in cash equivalents.” Okay, $20 billion is a lot of money. But you don’t need a billion dollars to follow this valuable Warren Buffett money advice.
What Warren is telling us is that we need an emergency fund.
An emergency fund can keep you out of the frying pan and the fire. The ideal emergency fund contains six months’ worth of expenses.
Yes, that’s a lot of money but be ready for the worst. You need an emergency fund.
Should something catastrophic happen, like a job loss, you can live off your emergency fund instead of your credit cards. Credit card interest can pile on really quickly if not paid on time.
Besides serving as a contingency fund in the event of job loss, having surplus money on hand also provides a ‘cushion’ for other sudden and unforeseen expenses like home repairs or a health insurance upgrade.
But that’s not all! It will also open up investment opportunities.
For instance, if a sound investment prospect suddenly becomes available, you can consider redirecting a part of your emergency fund to take advantage of it.
And if six months' worth of money seems like a lot right now, it's okay to start small! Save as much as you can as fast as you can until you reach around $2,000.
After that, start saving to cover all of your expenses for 3-6 months and don't stop saving until you've reached your goal!
Keep in mind thought that you don't want to save too much forever, because eventually, your money's buying power will get eaten away by inflation.
6. Be Generous
“If you're in the luckiest one percent of humanity, you owe it to the rest of humanity to think about the other 99 percent.” Warren has walked the walk in this regard.
He has given away billions of dollars’ worth of his own shares in Berkshire Hathaway to a variety of charities.
And you don’t have to be in the 1% money bracket to follow this noble Warren Buffet money advice either – help others or be generous.
Be generous with your time, your kindness, your knowledge, and your skills. There is someone out there whose life you could change.
Warren Buffett’s money advice is regarded as the Holy Grail in the financial investment sector.
Follow his tips to enjoy a life that is free of financial worries!
Making Money Like Warren Buffett Is Possible
If there's one thing that is true about all of these tips, it's this: Warren Buffett's wealth goes beyond just his money.
Warren Buffett understands that money is just a tool to get the things we want in life. It can't make us happy alone. And it can't create what wasn't already there in the first place.
In order for you to have money like him, you have to continue to grow your mind and heart.
In addition, you have to change the way you view and understand money, along with how you view time.
Because making nearly $100 billion dollars won't come overnight. It certainly didn't for Warren Buffett.
But, just because it takes a while, doesn't mean it isn't worth it.
And remember – the best things in life are worth the wait, and the things you do today can have a compounding affect on who you are in the future.