If you’re like most people, you probably want to be rich. Unless you inherit money or win the lottery, most of us will take a slower path to wealth.
An excellent way to make sound financial decisions that lead to long-term growth can come from advice from people that have achieved it. When asked how to become rich, Warren Buffet offered advice on patience, time management, and investing in yourself.
These top ten quotes by Warren Buffet explain his principles to make wise financial decisions in pursuing wealth.
1. “Start early”
What is the essential thing that you should do to make wise financial decisions? “Start early,” Warren Buffett advised at a 1999 Berkshire Hathaway annual shareholders’ meeting.
During his years as a financial titan, Buffet has emphasized how important it is not to wait to start preparing financially for the future.
Buffet’s advice can be applied to both saving and investing. The more you save and invest early in life, the more time you have for those funds to grow. By starting early in life, you will also have time to ride out market headwinds and find yourself better placed to survive the financial downturns of a bear market.
Commit to starting your financial future as soon as possible. If you are in your thirties, forties, fifties, or sixties, you can start working towards financial goals.
Keep in mind that most investments need a minimum of five years to grow. In addition, if you withdraw retirement funds before age 59 ½ years old, you will likely face tax penalties that can erode your retirement funds.
Check out if a high interest-yielding savings account or CD, a 401k, mutual funds, ETFs, or real estate investments (or a combination of these) are the best option to invest in now for your future.
2. “The best thing I did was to choose the right heroes”
There are two ways to learn things in life: you can do it the hard way through trial and error or learn from others.
Before you jump into a major financial decision, such as putting money into real estate or investing in the stock market, find people who have done it successfully and learn from them.
If you surround yourself with people who pull you down, have negative attitudes, and have a scarcity mindset towards money, you are less likely to have a healthy perspective on wealth. It is also more challenging to break out of your comfort zone and make your dreams a reality.
Surround yourself with people who are better than you in every way. This will encourage you to grow and strive to become a holistically better person.
3. “You’ve gotta keep control of your time”
There’s more to making wise financial decisions than just starting early. Becoming financially successful takes more effort than putting money in the bank or investing in stocks.
The world’s most successful people are time-management experts. Time is your most precious commodity. Warren Buffet is someone who knows this. While you don’t have to get up at 6:45 a.m. every day as he does, you can still take a page out of the “Oracle of Omaha’s” playbook.
We all have daily responsibilities that can eat up our time and leave us too exhausted to take the steps needed to make our lives and finances better.
Figure out what goals are most important to you. Then find ways to delegate, trade, or pay someone to do the mundane tasks that will keep you from accomplishing those goals.
For instance, can you pay a neighborhood kid to mow or rake the lawn instead of spending precious hours doing these tasks? Can you set aside money for an occasional house-cleaning service or pay a friend to do it for you?
What could you accomplish in those saved hours? Could you work on your business startup plan? Launch your freelancing business? Write the first chapter of that novel that you’ve always promised yourself that you would write?
4. “Risk comes from not knowing what you are doing”
The first rule of investing is to do your research. Suppose you are making potentially big financial decisions such as investing. Buffett explained that it is risky to do this if you have no idea what you are doing.
Study the market, learn how it works, identify market trends, and choose long-term dividend stocks that will help you achieve financial success.
If you know what you are doing, you will be more equipped to make informed decisions. If you are knowledgeable and secure in that knowledge, you are less likely to make risky mistakes like day trading stocks for a loss during a market crash and then rushing to buy back the stocks at a higher price. That’s an excellent way to lose money.
Gaining knowledge and using that knowledge appropriately will help ensure that you make successful decisions.
5. “Never invest in a business you cannot understand”
Buffett famously pointed out another pitfall that can trap investors once they have some experience in an area. It’s easy to become overconfident once you have achieved some financial success. This can lead to quick assumptions and risky actions.
For instance, if you had success investing in the technology sector, it’s tempting to believe that you can quickly analyze another area that you know nothing about, such as Big Pharma.
Buffett warns to resist this urge to jump into something that you haven’t carefully investigated. It’s easy to make mistakes and lose money by investing in a sector that you do not thoroughly understand.
Figure out what you want to invest in is essential. Educate yourself. Then buy stocks that you would be content to keep long-term.
Even with many years of investing experience, Buffett has steered clear of the technology sector because it is not an area with which he is familiar.
6. “Rule No. 1: Never lose money. Rule No. 2: Never forget rule No.1”
If you want to become financially successful, it’s important to make rational decisions. For you to never lose money while investing, Buffett reminds us that the “stock market is a manic depressive.”
If you read the daily news, you know that this is true. Equity markets will swing up and down depending on political changes, news, or minor data points.
Resist the temptation to make emotional decisions based on the market’s volatility. If you have done your homework and have a solid, long-term portfolio, commit to riding out the market’s wildly temperamental swings.
Sometimes, the stock market even undervalues some great companies. This means that you can hunt for great sales. Buying low and resisting the urge to sell a good stock (usually for less than it’s worth) during a market panic or crash will help you not lose money.
7. “Price is what you pay. Value is what you get”
High prices don’t always mean that you are buying a good investment.
Just because you pay a considerable sum for an investment or something that seems like a good deal does not mean that it’s a good value.
Buffett, in contrast, knows how to choose a good value. This advice comes from a man who made his fortune by investing in explosively successful companies such as Apple, Walmart, American Express, MasterCard, Johnson & Johnson, General Motors, and UPS.
Always do your research. Don’t get lured or pushed into paying high prices for something that might not be a good deal. This will help you save money and learn how to identify actual value when you see it.
8. “Our favorite holding period is forever”
Patience is an essential characteristic in acquiring wealth. By cultivating patience, you are less likely to make snap financial decisions due to stock market panic. The ability to stay patient, keep a cool head, and stick to your portfolio plans during market downturns will likely be more financially rewarding in the end.
According to Buffett, one of the best financial decisions that you can make is to buy a good stock in a sector that you understand and then hold it forever.
Plan to make long-term investments rather than indulging in short-term ones. Don’t buy a business with the intention to sell it. Instead, act as if you only had a limited number of stocks to buy in your lifetime. Choose carefully and make sure that you love the company before investing in it.
According to Buffett, the stock market is designed to “transfer money from the active to the patient” or day traders to long-term investors.
9. “The people who are most successful are those who are doing what they love”
Buffett argues that making a lot of money doesn’t matter if you are miserable. If you are invested in doing something that you love, this makes long hours fly by faster. Passion can make hard work seem less like a chore and more like an adventure.
Doing something that you love can motivate you to get up in the morning. It also means that you may feel less stressed and will likely have better health as a result.
Buffett also points out that we should measure success not only in dollar signs but by how much love we have in our lives.
10. “The most important investment that you can make is in yourself”
Most successful people treat learning as a life-long goal. Even after they succeed, they make learning a priority and continue to educate themselves. For instance, Warren Buffett spends 80% of his day reading.
Most billionaires also prioritize non-fiction over fictional material. Buffett often spends 5-6 hours per day just reading the newspaper business pages and going over 500 pages of financial reports.
As an investment expert, Buffett points out that while financial investments are essential, the best money you will ever spend is improving yourself. That can include reading, learning from others, or investing in skills and education that will help you make wise financial decisions.
The takeaway
According to Warren Buffet, the best way to make savvy financial decisions is to start investing early in life.
Educate yourself about your chosen investment sectors. “Learn what you know and what you don’t.” When you see a good opportunity, go for it.
Buffett also reminds us that quality of life is just as important as being a billionaire. Buffett said he would prefer to live if he had to choose between more money and adding more quality years to his life.
Through his quotes on making wise financial decisions, the investment guru brings us back to the things that matter. Pursue what you love. Buy assets that are of good value. Cultivate patience. Surround yourself with people who lift you, and never stop investing in yourself to become a wiser and better person.
Image by Gerd Altmann from Pixabay