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Managing Your Money with Warren Buffett

Updated on October 30, 2015

“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.”

This is just one of the lessons that Warren Buffett teaches to his millions of followers all over the world. Quirky as his advice would sometimes sound, the fact that he is considered as the most successful investor in the 20th century should be proof enough that his words actually make sense.

On Investing at an Early Age

“I always knew I was going to be rich. I don’t think I ever doubted it for a minute.”

Warren Buffett hails from Omaha, Nebraska and has always shown his interest in making, saving and investing money even as a child. Instead of wasting time playing, he’d rather sell magazines or chewing gum door to door. He even worked in the grocery store that his grandfather owned. When he was in high school, he took in a lot of odd jobs and made money selling stamps and golf balls and even claimed a $35 worth of deductions on his first income tax return based on the fact that he utilized his watch and his bicycle to complete his regular paper route. When he was in his sophomore year, he and his friend decided to purchase a used pinball machine for $25 and placed it strategically in a local barber shop. In a span of just a few months, they had already expanded operations and had bought several other machines which they also placed in a number of other barber shops around town.

On Spending Money Wisely

“Don’t save what is left after spending. Spend what is left after saving.”

Statistically, it is a proven fact that the bigger people earn, the more they also spend. But did you know that Warren Buffett still lives in the home that he purchased for only $31,500 in 1958? Considering that he has consistently been part of the list of the world’s richest people, he still lives a frugal life. Unlike other millionaire and billionaires who buy the most expensive cars and have the most luxurious mansions built, he believes that money should be saved and invested and should never be spent foolishly.

The urge to spend the money you have (and sometimes, the money you don’t even have) could be great. This is why people rarely have enough savings left when they need it the most. They spend first and save later, often ending up not having anything to save at all. This is why savings should always come first. Using whatever you earn, pay your bills and keep a portion of what’s left for savings. Whatever’s left of it, you can spend; or you can save it, too.

On Breaking Bad Money Habits

“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.”

You see it everywhere, and you’ve probably gone through it yourself. You get your paycheck, spend it, and end up not having enough budget to last you until the next paycheck comes along. You borrow money to sustain your lifestyle until the next payday. When the next paycheck comes, you pay what you owe and end up repeating the same cycle. One thing that Warren Buffett will tell you is this: this cycle is never going to end until you decide to break it.

Borrowing money or applying for loans is considered as a patch to those leaks. What you need is a new boat, a new outlook in life that would help you break the vicious cycle. Start by reevaluating your needs and your wants. More often than not, people spend on things that they believe they need but could actually live without. List down all your regular expenses and find ways to trim them down. Change your lifestyle and live within your means. If Warren Buffett can live in an old house and be content with a frugal lifestyle considering his billions, then you can definitely live the same way especially if you haven’t even earned your first million yet.

On Learning the Value of Patience

“No matter how great the talents or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.”

So many people have lost money in get-rich-quick schemes. A lot of people may try to invest on something a little more serious but immediately lose hope and quit when things start getting just a little bit too shaky. Thinking about Warren Buffett’s words, doing things this way will never work. Patience is definitely something that you would need to develop if you want to get more than what you currently have. You may be the best in your class, but don’t expect to become CEO the moment you step out of college. You have to trudge up the ladder the same way everyone does, regardless of how brilliant you believe yourself to be. In making investments, always think long-term. Don’t look for something that will give you your money back in a few months’ time. If you truly want to make it big, look for something that will sustain you for the next ten, twenty, or thirty years. You may stumble over a hump or two in the process, but if you play your cards right, the end results will always be worth the wait.

On Learning from the Past

“In the business world, the rearview mirror is always clearer than the windshield.”

Although it is true that dwelling in the past will not help you push ahead, it is still important to take a glance back every so often. What happened in the past has already become a reality, so make the most out of it by learning from it. Think about investments that you have made in the past and see how each of them worked out. Which ones succeeded? Which ones failed? Find out what you did wrong and do everything you can to avoid them. In the same way, remember best practices that you applied and use them for future investments.

The same thing goes for the way you handle your money. Find spending habits that have led you nowhere in the past and get rid of them for good. This way, you are able to strategize for the future more strategically. It allows you to take more calculated risks instead of going for mere market trends or decisions made on a whim.

Warren Buffett has given so many lessons on investing, saving, handling money and life in general. Thinking about how this multi-billionaire has lived his life, he is definitely someone you would want to listen to and base your life decisions on. Some of you may think that it’s too early for you to think about heavy financial stuff, while others may think that they’ve missed their chance to do it. But seeing how he has lived his life and how he has helped a lot of other people do the same thing only proves that there never is a ‘too early’ or a ‘too late’ when it comes to managing your money effectively. As almost everything that you do in your entire life involves money, this is definitely not something that you would want to delay or skip out on.

“Someone’s sitting under the shade today because someone planted a tree a long time ago.”

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  • kgmonline profile image

    Geri MIleff 3 years ago from Czech Republic

    Agreed. Buffett's principles are not something new to anybody. Most of us just tend to forget and wonder why we're not like him. Thanks for your insight, @sangre! :)

  • sangre profile image

    Sp Greaney 3 years ago from Ireland

    I think a lot of what this man says, when you think about it actually something that we know but forget. Isn't it always the case that sometimes what seems so obvious to someone else isn't as obvious to you.