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Warren Buffet’s 10 Ways to Get Rich
Warren Buffet was on the cover of Parade magazine last week. Parade magazine, you ask? We are trying a coupon experiment and are getting the Sunday paper delivered for two months to see if we can save any money through coupons. Apparently, Parade magazine comes in our Sunday paper…but I digress.
There is a brief article in Parade listing "Warren Buffets secrets that can work for you." Since he currently has a slightly higher net worth than I do, I thought it would make sense to share his "secrets." This is good advice, but I think it says a lot about the state of personal money management in the USA today that some of these are considered "secrets." (and, of course, I mean that in a bad way)
- Reinvest your profits - When you first start making some money, don’t spend it all right away. Rather, use it to grow your business and increase your profits.
- Be willing to be different - This one confused me somewhat. The article claims that instead of following the herd, Buffet focused on undervalued investments and beat the market year after year which makes a lot of sense. It then states, "To Buffet, the average is just that - what everybody else is doing." This confuses me a bit because Buffet is a big proponent of low-cost index fund investing. So much so that he bet approximately $320,000 that the S&P 500 Index Fund will outperform a collection of sophisticated hedge funds . The argument against index funds is that they are "just average." Anyway, the point is, don’t just do what everyone else is already doing in the same way that everyone else is already doing it.
- Never suck your thumb - Gather your information and make a decision. Calling any extra time wasted before making a decision "thumb sucking," the article states that when people offer Buffet a business or investment, he makes a decision on the spot. (I need to work on this thumb sucking thing with my daughter, actually…"see honey, Warren Buffet says you shouldn’t suck your thumb either and he’s the Oracle of Omaha…")
- Spell out the deal before you start - Always agree on the specifics of any deal before starting on it. Buffet notes that your bargaining position is greatest before beginning work on a job. So, even with friends and relatives, make sure everyone understands and agrees to the details of the deal in advance.
- Watch small expenses - I think this is what spurs him to recommend low cost index funds. If you read that article above, you’ll see the crazy fees that are levied by those hedge funds. This suggestion, of course, extends far beyond just investing advice. Limiting your expenses in all areas of your life will extend the reach of your paycheck as well.
- Limit what you borrow - Woohoo, now you’re talking! The article claims that Buffet has never borrowed a significant amount of money. His advice is to become debt-free and then save some money to start investing. This is quite a bit different from all the gurus claiming that rich people get rich by using other people’s money.
- Be persistent - Buffet claims that someone possessing persistence (and ingenuity) can win against a bigger and/or more established competitor.
- Know when to quit - Sometimes, it is best to just cut your losses and walk away instead of throwing good money after bad. When you are down, resist the inclination to win it all back with the next bet.
- Assess the risks - The article describes a situation where Buffet advised his son to imagine the worst-case and best-case scenarios for a certain course of action. This exercise will help you understand the risks and rewards for whatever decision you are making.
- Know what success really means - The article claims that Buffet does not measure his success by dollars. Here’s an interesting quote from Buffet:
"I know people who have a lot of money," he says, "and they get testimonial dinners and hospital wings named after them. But the truth is that nobody in the world loves them. 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."
There you have it, wisdom from the "Oracle of Omaha." For the most part, I really like what Buffet has to say about personal finances. He certainly doesn’t strike me as a Donald Trump type - rich one year, broke the next, rich the next (that makes me wonder how much money Trump actually "owns" and how much his fortune is just a product of "creative accounting"). Anyway, I’m going to try Buffet’s "secrets" and see how close I get to increasing my net worth to $62 Billion.
Seriously, though, this article was attributed to Alice Schroeder, the writer of Buffet’s new authorized biography entitled The Snowball: Warren Buffett and the Business of Life 
BTW - you can enter a contest at Parade.com to win a signed copy of The Snowball .
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15 Responses to “Warren Buffet’s 10 Ways to Get Rich”
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I love buffett and his net worth is just slightly larger than mine as well, but I am gonna catch up to him
In regards to his comments about invest you mentioned in the 2nd point - I think what I remember him saying was that he suggested index funds for people who don’t really want to get involved looking for investments.
@ChristianPF - That makes a lot of sense about the index funds. Have you read any books about Buffet? You have any good ones to recommend?
I have actually, Warren Buffet Way wasn’t bad - but honestly the best thing to do is read his annual reports on his website - berkshirehathaway.com (i think)
they are very readable and full of priceless wisdom about business and investing…
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Excellent list of tips.
I fully agree with first becoming debt free before you start risking and investing.
It is just so much easier to make good investment decisions this way, because you’re not under pressure.
Francois Viljoen’s latest blog post…Wake up to Wellness #5: Roadsigns on your journey
A lot going on……
I just officially got approval from NASB for a project I have been working on… the Bible scriptures podcast… These are basically most of the verses that are in the Bible verses about money page in audio form. To be honest, I just wanted to be able …
This was a good article.
As far as #2 (being different) goes, Warren Buffett doesn’t invest in index funds himself. I think he recommends index funds for people who are not serious investors.
Praveen’s latest blog post…Posts About the financial Crisis
I Like Buffet’s attitude but the one thing that frustrates me about his investment style is that you need a lot of patience. I am one of those poor fools who has got caught up in the buy, buy, buy mentality and as a result am much poorer for it.
My (negative) investing experience has thought me that patience is probably one of the biggest assets you can have. If you think a stock is undervalued and have the patience to wait you can make some real money.
Until Debt Do US Part´s latest blog post…The simplest solutions are usually the best
He was saying that individual investors that are not professionals — 99% of us out here — should not buy individual investments, but rather to stick to index funds. It was a matter of expertise.
No Debt Plan´s latest blog post…One Year of Home Ownership
@Until Debt Do Us Part - I think Buffet says his ideal holding period for a stock he buys is “forever” so I guess it does require a bit of patience!
@Praveen & @No Debt Plan - I see, that makes sense. I definitely do not have the time to spend properly researching all kinds of stocks. I think I’d rather have a little less money, a little less stress, and a lot more life.
I really admire Warren Buffet, however, he should follow up on the foundations he contributes to to insure that the money is used for his intended purpose and not just for propping up more wealthy folks. The assistance I was seeking would help low income people with affordable housing. However, assistance was not available to me. Their Mission Statement is false. The sieve to measure my qualifications is extremely small.
The corrupt court system can change the status of a person overnight, from millionaire to pauper. Without political connections the average person is out of luck even when all 10 Buffett secrets are followed.
Spell out the deal before you start. That’s advice I needed. Thanks.
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Warren’s persistence is his best quality. Most of his investing skills are simple math, he just has a different way of looking at things. A very different way.
Ray The Money Man´s latest blog post…Buffett Gets Preferred Stake In GE, GE Raises $15 Billion
Warren Buffet eating ice cream? Well this man eats companys, he the biggest shareholder of Wells Fargo bank and he about to eat Wachovia Bank…
@Bad Credit Loans - yeah, I thought the picture was funny. And as Ray the Money Man pointed out, Buffet just took a big bite out of GE, too.