WARREN BUFFETT
WARREN BUFFETT
2 Get high value at a low price
“ Price is what you pay , value is what you get ,” Buffett wrote in the 2008 Berkshire Hathaway shareholder letter . Losing money can happen when the price you ’ re paying doesn ’ t match the value you ’ re getting , like when you ’ re paying high interest on credit card debt or spending on items you ’ ll rarely use . RCS Loan
3 Form healthy money habits
“ I think the biggest mistake is not learning the habits of saving properly early , because saving is a habit ,” Buffett said . Pay attention to money habits and work to strengthen those that help your finances , and break those that hurt your finances .
4 Avoid debt , especially credit card debt
Warren Buffett built his wealth by getting interest to work for him instead of working to pay interest , the way many people in debt do . “ I ’ ve seen more people fail because of liquor and leverage ( being borrowed money ),” Buffett said in a 1991 speech at Notre Dame . “ You really don ’ t need leverage in this world much . If you ’ re smart , you ’ re going to make a lot of money without borrowing .”
Buffett is especially wary of credit cards . His advice is to avoid them altogether . “ Interest rates are very high on credit cards ,” “ Sometimes they are 18 %. Sometimes they are more than 20 %. If I borrowed money at 18 % or 20 %, I ’ d be broke .”
5 Keep cash on hand
Another key to ensuring security is to always keep cash reserves on hand . “ We always maintain at least $ 20 billion and usually far more in cash equivalents ,” Buffett said in the 2014 Berkshire Hathaway annual report . Buffett credits these reserves with helping Berkshire Hathaway stay afloat throughout the Great Recession , even as so many other businesses floundered .
Businesses and individuals alike might get an itch to put liquid cash to work through investments . “ Cash , though , is to a business as oxygen is to an individual : never thought about when it is present , the only thing in mind when it is absent ,” Buffett said . “ When bills come due , only cash is legal tender ,” he continued . “ Don ’ t leave home without it .”
6 Invest in yourself
“ Invest in as much of yourself as you can . You are your own biggest asset by far ,” He echoed those sentiments in a CNBC interview when he said , “ Anything you do to improve your own talents and make yourself more valuable will get paid off in terms of appropriate real purchasing power .”
Those returns are big , too . “ Anything you invest in yourself , you get back tenfold ,” Buffett said . And unlike other assets and investments , “ nobody can tax it away ; they can ’ t steal it from you .”
7 Learn about money
Part of investing in yourself should be learning more about managing money . As an investor , Warren Buffett surely finds that much of his job is limiting exposure and minimizing risk . And “ risk comes from not knowing what you ’ re doing ,”
Buffett once said , according to Forbes . The more you know about personal finance , the more security you ’ ll have as you minimize risks .
The lesson from this Buffett quote , then , is to actively educate yourself about personal finance . As Buffett ’ s partner , Charlie Munger , put it , “ Go to bed smarter than when you woke up .” Buffett ’ s formula for this is simple : Read a lot . “ That ’ s how knowledge builds up , like compound interest ,” he said , according to The Week .
8 Trust a low-cost index fund for your portfolio
For the average investor , for instance , Buffett likes index funds . “ Put 10 % of the cash in short-term government bonds and 90 % in a very low-cost S & P 500 index fund ,” he wrote in his 2013 letter to Berkshire Hathaway shareholders .
This is advice Buffett has given for years . “ If you invested in a very low-cost index fund , where you don ’ t put the money in at one time but average in over 10 years , you will do better than 90 % of people who start investing at the same time .”
9 Give back
“ If you ’ re part of the luckiest 1 % of humanity , you owe it to the rest of humanity to think about the other 99 %,” Buffett said at a 2007 political fundraiser for Hillary Clinton . And as a top member of that 1 % himself , Buffett makes it a point to put his money where his mouth is .
This past July , Buffett donated $ 2.8 billion in Berkshire Hathaway stock to five charities . He is also a founder of The Giving Pledge along with Bill Gates , which is a promise that more than 130 billionaires so far have made to give their fortunes away . While you might not be a billionaire , you can still enrich your life and others ’ by giving back .
10 View money as a long-term game
Planting and nurturing the seeds of financial success now will lead to shade to enjoy later in life , like freedom from debts , a secure retirement , or the ability to cover college costs for your children .
In his 2014 letter to shareholders , he said people should remain focused on attaining significant gains in purchasing power over their investing lifetime ,” rather than on moments of stock market volatility or economic crisis .
Building true wealth and financial security takes time , and you ’ ll likely encounter financial challenges along the way . Sometimes they ’ re avoidable , other times they ’ re not . But viewing your finances as a lifelong endeavor can help you stay on course - despite those hardships - and give you a financial foundation that will last .
Make sure that you keep these 10 money lessons from Warren Buffett in mind when investing .
RESOURCES
AOL , CNBC , Property Update , Investopedia , Berkshire Hathaway , Seeking Alpha , Business Insider , Simply Safe
Dividends , USA Today , Motley Fool
12 JUNE 2017 SA Real Estate Investor www . reimag . co . za