We all have heard of Warren Buffett. Although known for his success as an investor and personal wealth (in 2008 he was listed as one of the wealthiest man in the world), he advocates the importance of saving money and philanthropic giving. He only leave $10 millions to his descendants, and the rest to the Bill and Melinda Gates charity. And he also give out his tips for success.
In 1950, at age 20, Buffett had already saved $9,800 (that’s around $94,000 today). Six years later, at age 26, that number had skyrocketed to $174,000 (which is $1.47 million today).
How did he do it? Here are a few tips to save money that he gives liberally.
- “Do what you love”. If you can make money doing something you love, you’ll be happier. This means you’ll spend less money trying to make yourself happy with things. He says if you can’t get a new job, do what you love as a hobby and try to make a little money doing it. It will still give you lots of fulfillment. This is one of his greatest advise. From a very young age, I wanted to be a healer, so I grow up getting into the healthcare profession. I get to do what I love doing, and making money along the way as healthcare professional get compensated very well.
- “Do not depend on a single income”. Create a second source of income for yourself so that you won’t be totally dependent on your job. This may be through smart investing or the side income you make from tip #1. After his early success in business – He bought a railroad company, insurance company (geiko), financial company (BAC and WFC, earlier than that was UBS and SunTrust), he has the whole mindset of diversification. He was also into silver in the 90s making boatload of money. His only regret was selling too soon. He also bought some farms in New York State recently. And don’t forget his beloved American sport, Baseball, in Omaha, he owns it too.
- “Don’t buy compulsively”. If you can’t write down an actual reason you need to buy a particular item, then you probably shouldn’t buy it. He says, “If you buy things you don’t need, you may soon have to sell things you do need.” Continue to live very modestly, when the man of his statue can have multiple mansions. If you have this problem, just go to a Buddhist monastery, and live the life there for about a week, some might take longer. Someone figure to support a monk or a nun, it only costs $435/mo. And you’ll see them smiling, very content, very peaceful. Imagine you stand to spend way more than that a month, why are you suffering? Wouldn’t it inspire you to curve some of your spending habits?
- “Do not save what is left after spending. Spend what is left after saving or investing“. Look at it as paying yourself. That can be hard to do for cash-strapped families, but in the long run it will pay off—literally. I take this advise to heart because on each pay check, before I even get to see any money, I contribute to my 401K first, then Roth IRA, then mortgage principle and interest, bills, all of that, then a dedicated portion to my investment account. Then what’s left is what I get to spend, but even with that, I’d never go over that amount. What’s left of the supposed spending money, I save that too. 😛
- “Respect all of your money as if it were the last $5 in your pocket.” This perspective will help you value your money and put more thought into how much you save, spend, and invest. When my parents took a down turn in their business, and we were going through some hardship. Then, I learned how important it is to save for rainy days. People can have the mind set that it’s only $5, it can’t do anything with it. I remember this one article Buffet was saying how to turn $40 into $10 million today by buying Coca Cola stock in 1919, and keep it until today. So yeah, saving a little here and there, but collectively, with compounded interest and dividends, it can turn into a big number. I wrote about 7-ways to invest to become a millionaire.
In conclusion, if you have an opportunity to save, and you can comfortable living in your own skins and don’t let the peer pressure get you into buying stuff just to keep up with the Jones and strong enough remove yourself from the situation or withstand the pressure of upping the lifestyle. You can save a lot more than you think, and turn all of that saving into working capital. You can reach your goals faster.