5 Personal Finance Lessons I Had Picked Up From Warren Buffett That Can Help You Grow Your Wealth and Be Rich

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Warren Buffett is one of the world’s richest men and he is also one of the best investors in the world. He built up Berkshire Hathaway (a company whose share costs $100,000 per share) from scratch and he became a billionaire through investing alone.

I know that Warren Buffett is someone that I need to learn from if I want to become an excellent investor. I had read countless of his books, learning from the investment moves he made and also his yearly annual report. I had picked up valuable lessons from him and these lessons will definitely be useful to you as it can help you to grow your personal funds instead of seeing it dwindling.

So here are the 5 lessons I had picked up from him.

5 Personal Finance Lessons That Will Help You Grow Your Wealth

1. Spend wisely

Warren Buffett does not have a habit to splurge his money on toys such as big cars or fancy houses. Right now, he still lives in the same 5 bedroom apartment that he bought in 1957. He definitely has the capability (billionaire) to buy any toys he wants, but he simply chose to invest in the money instead.

He is not stingy about money, but he have the habit of thinking how much he will be losing out if he does not spend his money wisely. Because he believe in the power of investing and compounding, he knows that for every dollar spend foolishly, he will be losing the money for investment which he can make at least 20% return annually.

Lesson: Spend your money wisely and do not splurge on toys excessively.

2. No one will care about your money as much as you do.

Throughout his investing years, Warren Buffett does not let anyone handle his money. He checks up individual stocks by himself and makes the decision whether to buy or not.

If you allow other people (financial adviser, financial manager, stock broker) to handle your money, you will need to be aware of whether they are acting for your best benefit or theirs. Most of them have commissions for each investment that you made and sometimes they simply have too much customers on hand that they can’t pay attention to you.

Simply said, they don’t care about your money as much as you do.

Lessons learned: Invest in your financial education. Others do not care about your money as much as you do.

3. Know what you are doing

There are lots of financial instruments out there that promises you high returns in short period of time. Before you dive into them, ensure that you know what they are before buying. Most people trust others to make this decision (refer to point number 2) and they end up losing their money over their poor investment decision.

It is tempting to earn money in short amount of time but do put in the effort to know what you are going into before buying. There are many people who had incurred huge losses in the recent credit crisis because they do not know what they are buying and they ended up buying junks.

Lessons learned: Always know what you are doing when investing and remember to read the fine prints.

4. Risk of investing

Many people have fears that hold them back from investing. They think that it is risky to invest. Their mind is filled with the fear of risk and losing money, hence they are always on the side line while others are earning money investing.

You need to know the truth. It is riskier for you to place your money in the bank. For the measly interest rate that they are giving you, each dollar you put in is losing money immediately due to the inflation rate. Think about the price of a cup of coffee in the past and Starbucks now.

As Warren Buffett says, “Risk comes from not knowing what you are doing.”

Lesson learned: Overcome your fear of risk in investing. Investing is the only way you can beat the rate of inflation.

5. Think long term

Too many people overestimate what they can achieve in one year and underestimate what they can achieve in ten. Stop looking for ways to get rich quick and start investing now. When you are investing, always keep in mind that it pays to invest long term instead of switching around stocks.

Warren Buffett personally holds his stocks forever if he found a gem. Buying and selling stocks frequently will cost you admin charges and the commissions you have to pay to the stock broker.

“Life is like a snowball. The important thing is finding wet snow and a really long hill.” ~ Warren Buffett

I would like to change this quote a little. Investing is just like a snowball. The important thing is finding wet snow (great investments) and a really long hill (long term).

Lesson learned: It pays to invest early and holds on to your stock.

So do you have any other personal finance lessons that you want to share with me? I look forward to your comments and feedback.

Cheers,
Vincent


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14 Responses to “5 Personal Finance Lessons I Had Picked Up From Warren Buffett That Can Help You Grow Your Wealth and Be Rich”

  1. Wow I didn’t know that Warren Buffet still lives in the same apartment he bought over 50 years ago. You’d think one of the richest men in America would have some huge mansion. Those with less money often shake their heads at such stinginess, but it is one of the key principals that has got them where they are.

  2. Credit Girl says:

    Lana- I totally agree. We can all use some money managing tips to help our finances. Here’s an article filled with funny and entertaining pictures of our economic state. Check it out: http://www.gobankingrates.com/photographic-evidence-times-are-still-hard/
    .-= Credit Girl´s last blog ..Make a 7-Year Commitment to an USAA CD and earn a 4.06% =-.

  3. Great advice, Vincent and exactly what I needed at the moment. I am trying to become a better money manager and not being very successful yet. Well, I am working on it:) Thanks for sharing this!
    .-= Lana – DreamFollowers Blog´s last blog ..One Thing Everyone Wants =-.

  4. Zen Choices says:

    I especially agree with the ideas about thinking long term. I just read a great article about the CEO of ING, also known as the “CEO of Savings.” ING is an online bank that has cut costs and not had to change course during the financial fallout. If you’re looking for a simple, proven long-term savings institution, check them out.

  5. Hey Vincent, these are tremendous advices. My personal tip is to wait at least 48 hours before buying anything, that way you can avoid most impulsive purchases.
    .-= Oscar – freestyle mind´s last blog ..Declutter Your Life And Start Living Again =-.

    • Vincent says:

      Hi Oscar,

      That is great tip! I personally had made some impulsive buys that I regretted afterwards. Waiting for 2 days before buying is going to let me think much more clearly on how much do I need to have the product. Great tip!

      Cheers,
      Vincent

  6. Hey Vincent, this is a rocking post. Covers some of the critical basics of wealth. I just finished reading Secrets of a Millionaire Mind by T. Harv Eker. Great book, if you haven’t read it yet. Most of the wealth material suggests that you save 10% of everything you earn for long term investments(you’d never touch the principle), 10% for long term savings(eventually spent) and 10% for education and so on. As you get “richer” you save more and more as less of a percentage of your income goes to expenses.

    If you haven’t read T. Harv Eker’s 17 Wealth Files(in Secrets of a Millionaire Mind) I highly recommend it, it really got me much more excited about wealth and I learned a ton.:)

    Have a good day Vincent!

    Clinton Skakun
    .-= Clinton Skakun´s last blog ..Good vs. Great, The Two Arch Enemies of Everyday Business =-.

    • Vincent says:

      Hey Clinton,

      I had read The Secrets Of A Millionaire Mind by T.Harv Eker. He is such a no nonsense guy and I got to agree with you that the book is an excellent read.I love the JAR system and I had incorporated some of his ideas into dealing with my finances. I would recommend that book to everyone here. 🙂

      Cheers,
      Vincent

  7. Credit Girl says:

    Hey Vincent,

    Great post! You pretty much broke it down for us and that’s always appreciated. It seems like I’m at this point right now in my life where I would like to invest but I fear it as well because I don’t know what to invest in…I guess I must overcome that fear of investing in order to become successful at beating the rate of inflation.
    .-= Credit Girl´s last blog ..A Handy Guide for Preparing Your Taxes =-.

    • Vincent says:

      Great to hear that! You got to break down your fear and go out there and grab some books on investment and study them. If you are able to prepare yourself, you will be able to take on the opportunities that will appear on the next dip in the stock market.

      Cheers,
      Vincent

  8. Vincent says:

    Hey Diggy,

    You are doing great too! I saw your guest article on Daily Blog Tips and it is a great article. It is a huge blog and it must be great for your traffic too. Let us keep on going towards our target.

    Cheers,
    Vincent

  9. Hey Vincent!
    Wow you are kicking ass with your articles lately. Congrats on the huge success on stumbleupon, I saw that your article got over 30k views. Massive spike in traffic 🙂
    Keep it up!
    .-= Diggy – Upgradereality.com´s last blog ..How To Be A Man In The 21st Century =-.