Warren Buffett is widely considered to be the richest investor of the 20th Century and consistently ranked among the wealthiest people in the world. As well as pledging to give away 99% of his wealth to philanthropic causes, Buffett has a wealth creation and investment philosophy that he has stuck to since his early days. One of the questions he gets asked on repeated interviews is ‘How Can I Get Rich?’.
From his writings and interviews, we have compiled the 10 Ways To Get Rich, According to Warren Buffett.
How Can I Get Rich?
1. Reinvest Your Profits
When you first start a business or trade stocks and make a profit, its tempting to spend it. Don’t. Reinvest that money in the stock or back into your business. This will increase your portfolio and help your business grow as your profits grow.
In high school, he and a pal bought a pinball machine to put in a barbershop. With the money they earned, they bought more machines until they had eight in different shops. When the friends sold the venture, Warren Buffett used the proceeds to buy stocks and to start another small business. By age 26, he’d amassed $174,000 — or $1.4 million in today’s money. Even a small sum can turn into great wealth.
2. Be Different
Be willing to go against what everyone else says and thinks you should do. If you pursue the average, your returns will be just that, average. Judge yourself by your own standards and not by everyone else’s.
When Warren Buffett began managing money in 1956 with $100,000 cobbled together from a handful of investors, he was dubbed an oddball. He worked in Omaha, not Wall Street, and he refused to tell his parents where he was putting their money. People predicted that he’d fail, but when he closed his partnership 14 years later, it was worth more than $100 million. Instead of following the crowd, he looked for undervalued investments and ended up vastly beating the market average every single year.
3. Don’t Procrastinate
Be ready to gather all the required information before making a decision and go for it. Don’t hesitate and procrastinate. Dedicate yourself to your goal and stick to your decision after its made. Tell your family and trusted friends about them so they can help you stick to them.
4. Negotiate Before You Enter An Agreement
Your leverage is much higher before you enter into an arrangement. This is when you have something that the other party wants. Always nail down the specifics of a deal before a deal is done, even with family and friends.
Warren Buffett learned this lesson the hard way as a kid, when his grandfather Ernest hired him and a friend to dig out the family grocery store after a blizzard. The boys spent five hours shoveling until they could barely straighten their frozen hands. Afterward, his grandfather gave the pair less than 90 cents to split. Warren Buffett was horrified that he performed such backbreaking work only to earn pennies an hour.
5. Take Care Of The Small Expenses
Known as a frugal man, despite his vast wealth, Buffett looks for managers who also obsess over the smaller expenses. Exercising vigilance over every expense can make your profits and your paycheck go much further.
6. Limit Your Borrowing
Living on credit cards and debt won’t make you rich. Borrow as little as possible, and where you can, start a business with as little capital as possible. If you have debt, negotiate with the creditors and pay back what you can, and when you’re debt free, save money that you can invest
7. Be Persistent
By being the most motivated and persistent, you can beat any competitor. Tenacity and persistence are Buffetts most valued attributes in a business owner. To have the courage to work harder and longer than anyone else is willing to will make you richer, period.
8. Know When To Quit
Know when to walk away from a loss, and don’t let anxiety fool you into trying again. Gamblers have a habit of trying to recoup their losses by gambling some more, and before they know if, they’ve lost a months earnings.
When Warren Buffett was a teen, he went to the racetrack. He bet on a race and lost. To recoup his funds, he bet on another race. He lost again, leaving him with close to nothing. He felt sick – he had squandered nearly a week’s earnings.
9. Get Good As Assessing Risk
When you’re struggling to make a decision, put yourself through all the worst and best case scenarios possible. Then ask yourself ‘Am I willing to take that risk?’ and if you’re not, get out. Getting good at knowing which risks to take and which to pass up will make the biggest difference for you. Know when to walk away from a loss, and don’t let anxiety fool you into trying again.
10. Understand What Success Really Means
Warrent Buffett understands what real success is. Its not measured by the amount of dollars in your bank account, because if it was he wouldn’t have given almost all of his wealth away. He says ‘When you get to my age, you’ll measure your success in life by how many of the people you want to have love you, actually do love you. That’s the ultimate test of how you’ve lived your life.’ True success is impacting peoples lives and living your life to your full potential. Then you can say that you did your best.