5 Personal Finance Lessons I Had Picked Up From Warren Buffett That Can Help You Grow Your Wealth and Be Rich
Posted by Kagisho in Conscious LivingJan 26th, 2010 | no responses
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Warren Buffett is one of the world’s richest men and he is also one of the best investors in the world. He built up Berkshire Hathaway (a company whose share costs $100,000 per share) from scratch and he became a billionaire through investing alone.
I know that Warren Buffett is someone that I need to learn from if I want to become an excellent investor. I had read countless of his books, learning from the investment moves he made and also his yearly annual report. I had picked up valuable lessons from him and these lessons will definitely be useful to you as it can help you to grow your personal funds instead of seeing it dwindling.
So here are the 5 lessons I had picked up from him.
5 Personal Finance Lessons That Will Help You Grow Your Wealth
1. Spend wisely
Warren Buffett does not have a habit to splurge his money on toys such as big cars or fancy houses. Right now, he still lives in the same 5 bedroom apartment that he bought in 1957. He definitely has the capability (billionaire) to buy any toys he wants, but he simply chose to invest in the money instead.
He is not stingy about money, but he have the habit of thinking how much he will be losing out if he does not spend his money wisely. Because he believe in the power of investing and compounding, he knows that for every dollar spend foolishly, he will be losing the money for investment which he can make at least 20% return annually.
Lesson: Spend your money wisely and do not splurge on toys excessively.
2. No one will care about your money as much as you do.
Throughout his investing years, Warren Buffett does not let anyone handle his money. He checks up individual stocks by himself and makes the decision whether to buy or not.
If you allow other people (financial adviser, financial manager, stock broker) to handle your money, you will need to be aware of whether they are acting for your best benefit or theirs. Most of them have commissions for each investment that you made and sometimes they simply have too much customers on hand that they can’t pay attention to you.
Simply said, they don’t care about your money as much as you do.
Lessons learned: Invest in your financial education. Others do not care about your money as much as you do.
3. Know what you are doing
There are lots of financial instruments out there that promises you high returns in short period of time. Before you dive into them, ensure that you know what they are before buying. Most people trust others to make this decision (refer to point number 2) and they end up losing their money over their poor investment decision.
It is tempting to earn money in short amount of time but do put in the effort to know what you are going into before buying. There are many people who had incurred huge losses in the recent credit crisis because they do not know what they are buying and they ended up buying junks.
Lessons learned: Always know what you are doing when investing and remember to read the fine prints.
4. Risk of investing
Many people have fears that hold them back from investing. They think that it is risky to invest. Their mind is filled with the fear of risk and losing money, hence they are always on the side line while others are earning money investing.
You need to know the truth. It is riskier for you to place your money in the bank. For the measly interest rate that they are giving you, each dollar you put in is losing money immediately due to the inflation rate. Think about the price of a cup of coffee in the past and Starbucks now.
As Warren Buffett says, “Risk comes from not knowing what you are doing.”
Lesson learned: Overcome your fear of risk in investing. Investing is the only way you can beat the rate of inflation.
5. Think long term
Too many people overestimate what they can achieve in one year and underestimate what they can achieve in ten. Stop looking for ways to get rich quick and start investing now. When you are investing, always keep in mind that it pays to invest long term instead of switching around stocks.
Warren Buffett personally holds his stocks forever if he found a gem. Buying and selling stocks frequently will cost you admin charges and the commissions you have to pay to the stock broker.
“Life is like a snowball. The important thing is finding wet snow and a really long hill.” ~ Warren Buffett
I would like to change this quote a little. Investing is just like a snowball. The important thing is finding wet snow (great investments) and a really long hill (long term).
Lesson learned: It pays to invest early and holds on to your stock.
So do you have any other personal finance lessons that you want to share with me? I look forward to your comments and feedback.
Cheers,
Vincent
Post from: Health Money Success
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