Warren Buffett is known among investors as “the oracle of Omaha”. Presidents bow to his opinion, and he comes up as a role model for the best financiers of the country. In his books, the investor has given a lot of useful tips on how to become a rich and independent man.
Instalments, credit cards, mortgage loans are bank instruments that are able to turn a free and ambitious man into a slave of the financial system. Warren Buffet recommends thinking twice before taking a debt burden. Extra loans will lead to such situation, when your loan payments exceed the actual income. Not everyone can climb out of debt.
Pay yourself first
Warren Buffett believes that the accumulation of money is the basis of financial well-being. Saving money is necessary from the moment when you receive your first monthly income. Deposit the sum, and then spend your money on daily needs.
Beginners often make the same mistake: first, pay their bills and spend the money on everything they want, and then try to save some capitals on the remaining chicken feed. This approach is fundamentally wrong. Remember, the first step is to divide the income into two parts: the one you want to save, and the other that will be taken to pay the bills. The first part is untouchable, while the second can be used at your discretion.
Abandon bad financial habits
Few people realize that their lifestyle does not conform to their life goals. Examine your own spendings. This will help you to determine how much money you actually spend, and how much remains for the future. In order to move in the right direction, learn how to set financial priorities. You will find out, that you have some spending patterns, which you can abandon without regrets.
Draw a distinction between price and value
When investing, Warren Buffett is guided by the advice of the well-known financier Benjamin Graham. He believed that the price and value are different concepts. Price is the amount of money that you pay for a product or service, and value is a set of benefits that you get in return for the money paid.
Mr. Buffett uses money rationally and never pays more than the company deserves. It is noteworthy that this rule applies both to business section, and household economics. You should not buy valuables for a jaw-dropping price and overpay. At the same time, the statement does not say that cheap goods are always good. The next time you go shopping, look for the last parameter. Is the product actually congruent to its price or you pay for a nice advertising slogan?
Investing is not as difficult as it seems
There is one simple rule, which is rarely referred to in the books on investing: after investing small amounts to a tracker fund for 10 years, you will find yourself in a better position than those investors who prefer to invest large sums at once.
Warren Buffet believes that everyone can invest. However, before the start, the newcomer should thoroughly examine the following aspects:
- Learn the terminology of investing.
- Register as a broker and open a brokerage account.
- Select VFINX as an index fund.
- Invest a sum to the fund.
Choose long-term investment
Long-term investing has always been and will be more reliable than the short-term one. The experienced investor urges newcomers to invest in a long range. It is very simple to go bust on constant share price fluctuations, while long-term investments can be properly planned.
It is necessary to distinguish traders and investors. The former seek to earn on speculative courses, the latter analyze micro- and macroeconomic factors. When buying stocks, you should be aware that they can stay in your hands for 5-10 years. If you are not ready for such a step, then do not try to invest in assets even for 10 minutes. Buy only the necessary shares, the cost of which has been growing throughout the last 10 years, analyze the share bazar news. When the investment portfolio is set, you can forget about share for some time. The course will change regularly, both for the better and for the worse, but you should not get worked up and worry about this.
Money is not a goal in itself
The billionaire urges not to reduce the meaning of life to money. The crucial things in life are not things. It is much more important to look after your health and maintain good relationships with friends. The most successful and wealthy investor in the world is guided by such principles. He believes they are the fundamentals of success.