A lot of people nowadays like to think that they’re experts in economics, that they can invest with the best and that there’s nothing they don’t know about financing. But few actually are. Warren Buffett is one of these few. The 86-year-old businessman has both a ton of experience and a net worth of over $66 billion. When he speaks, you better listen!
If you want to save money, you can look to Warren Buffett for help. The following ten pieces of personal finance advice are some of the best ever given.
1. Never lose money
“Never lose money” is Warren Buffetts’s number one rule. It’s followed closely by rule number two: “Never forget rule No. 1.” There’s no better way to save money than not wasting it. Do your homework before making any financial decision and you won’t regret it.
2. Try to get the highest value at the lowest price
According to Buffett, “price is what you pay, value is what you get.” Be smart about your investments and make sure that the price you pay matches the value that you get. Otherwise, you can lose money.
Always look for opportunities to get more value at a lower price.
3. Make a habit out of saving money
Warren Buffett once said that “the biggest mistake is not learning the habits of saving properly early, because saving is a habit.” Money is easy to throw away. If you turn this behaviour into a habit, you will lose. Instead, try to be smart when it comes to spending. Remember, no one ever complained about the money they saved.
4. Stay away from debt, especially credit card debt
There are two things that Buffett said that I’ll never forget. One is that “more people fail because of liquor and leverage – leverage being borrowed money.” And two, “if you’re smart, you’re going to make a lot of money without borrowing.”
It’s a well known fact that Warren Buffett stays as far away from credit cards as possible. He does this because they come with very high interest rates. Those interest can break your finances if you’re not careful.
Now, we’re not all billionaires, like Buffet. And we do need credit cards, in order to build credit scores. But even so we can avoid those very high interest rates by being responsible and making all our payments on time.
And, when you get to the point of no financial stress whatsoever, you can then move from credit to debit. It’s easy.
5. Always keep cash reserves
It’s a lot easier and safer to have your money in the bank and just use plastic to pay for everything. But what if something unexpected happens?
Buffett said that he always keeps at least $20 billion in cash equivalents and that reserves such as these helped his company, Berkshire Hathaway, stay afloat throughout the Great Recession.
6. Don’t forget to invest in yourself
“You are your own biggest asset,” Buffett said. And this is true. If you invest in your home, its value will rise. If you invest in yourself, if you improve your own talents, your personal value will rise as well. And this will pay off. Additionally, this value will stay with you forever. No one will be able to take it away from you.
7. Learn as much about money as possible
According to Buffett, “risk comes from not knowing what you’re doing.” If you’re going to invest in yourself, it’s also a good idea to try to learn more about personal finance. The more you know about this field, the more you will minimize the risks.
We live in the age of the internet, where search engines are kings. The information you’re looking for is at your fingertips.
8. Low-cost index funds are your friends
Buffett has been advising people for years to invest in very low-cost index funds. “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’ll do better than 90% of people who start investing at the same time,” he said at the 2004 Berkshire Hathaway Annual Meeting.
9. Give something back
Besides being a billionaire and a great businessman, Buffett is also an all-around good guy. In fact, he holds the record for the largest charitable donation ever made. In 2006, the stock trader donated $30 billion in the form of Berkshire Hathaway shares to the Bill and Melinda Gates foundation. As the donation was given in stock, its price could go up or down as the years pass.
10. Think long-term
“Someone’s sitting in the shade today because someone planted a tree a long time ago.” This is another one of Warren Buffett’s famous sayings and, just like many others, it happens to be true. If you want financial success, you need to think long-term.
Building true wealth and financial security takes time. And you’ll definitely encounter many challenges along the way. Having a plan and knowing exactly what to do will help you reach your goal. And it definitely won’t hurt to remember these ten money saving lessons from Warren Buffet as well.