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9 Can’t-Miss Secrets Behind Warren Buffett’s Wealth

9 Can’t-Miss Secrets Behind Warren Buffett’s Wealth

Studying the success of investors like Warren Buffet is a cottage industry. A search for “Warren Buffet” on Amazon shows over 700 book titles. As one of the most successful investors in history, it makes sense to explore the principles and ideas he used to achieve his wealth. What characterizes Warren Buffet?

1. He Is A Dedicated Student of Investing

For investors simply looking to earn average returns, Buffet recommends investing in index funds (e.g. a popular type of index fund invests in the S&P 500 stock index). What if you want to join Buffet in seeking to very high returns, in excess of the market?

Be prepared to study and learn to follow in Buffet’s footsteps. Buffet’s study of investing goes back decades to his time as a student at Columbia when he studied with Ben Graham, author of The Intelligent Investor. Learning the details and methods of investing are the first secret of Warren Buffet’s wealth.

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2. He Stays True To His Principles Even When They Are Unpopular

Do you remember the “Dot Com” era of the late 1990s? From an investing standpoint, the Dot Com era was strange indeed. Many people bought shares in companies that had little revenue or profit. At that time, Buffet avoided these trendy investments. That decision led some to question his judgement. In 2001 BBC article, Buffet points that, “investors had been hypnotised by the staggering ascent of tech stocks and ignored everything else, including whether the businesses they were investing in were making money.”

3. He Improved His Communication Skills Through Training

In order to have money to invest, Buffet understood that he had to increase his income and professional skills. When he was in his early 20s, Buffet took the Dale Carnegie course to improve his speaking skills. To keep his skills sharp, he then took up a part time teaching role at the University of Omaha. Public speaking is a skill that most people can learn with practice and training.

4. He Reads For Hours Each Day

“I read 500 pages like this every day. That’s how knowledge builds up, like compound interest.” – Warren Buffet

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Daily reading is a key habit for Buffet as he seeks new information and opportunities. He reads far and wide: multiple newspapers each day, large numbers of financial reports on potential investments and books. For example, he reads The Wall Street Journal and Financial Times every day (his billionaire business partner Charlie Munger prefers The Economist).

Reading reports, books, newspapers and other material each and every day is much like compound interest. Over time, the knowledge he learns compounds and yields greater insights. Daily reading is a wealth secret that anyone can practice with the right discipline.

5. He Practices Value Investing Principles

“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” – Warren Buffet

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There are many different investing approaches on the market: dividend investing, index fund investing, value investing, and so forth. Buffet’s approach is fundamentally based on the value investing principles developed by Ben Graham in the mid 20th century. According to Investopedia:

Value investing: The strategy of selecting stocks that trade for less than their intrinsic values. Value investors actively seek stocks of companies that they believe the market has undervalued. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond with the company’s long-term fundamentals. The result is an opportunity for value investors to profit by buying when the price is deflated.

The great challenge lies in identifying the intrinsic value of a company and then having the courage to put your money on the line.

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6. He Builds Wealth Slowly

Unlike the technology entrepreneurs of today, Buffet earned his wealth slowly over many decades. Attempting to get rich fast is a recipe for disaster that tends to lead people to taking foolish risks.

7. He Limits Personal Indulgences

Buffet is well known for spending relatively little of his fortune. For example, he still lives in the same house in Omaha that he purchased in the 1950s. Buffet is an expert at resisting lifestyle inflation. After all, if he spent all of his fortune, there would be less available to invest.

8. He Knows His Limits

Despite the potential opportunities, Buffet has steered clear of investing in high technology companies. Why? Buffet argues that investing in innovations tends not to produce good returns. In a famous 1999 Fortune Magazine article, Buffet pointed out that the automotive industry was one of the most innovative developments of the 20th century, changing the daily life of millions of people. Yet, a very large portion of American automobile companies have disappeared – a fact that should give pause to investors. Given the difficulty of successfully investing in innovative companies, Buffet tends to avoid them.

9. He Started Earning Money As A Teenager

Growing up, Buffet was determined to earn money. When he was seventeen years old in 1947, he earned $5,000 delivering newspapers (equivalent to $52,000 in 2013 income terms according to Measuring Worth). Making money and managing money effectively are skills that take time to develop. Buffet did himself a favor by starting young

Featured photo credit: Dollars/RabidSquirrel via pixabay.com

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Bruce Harpham

Bruce Harpham is a Project Management Professional and Founder and CEO of Project Management Hacks.

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Published on September 17, 2018

How Being Smart With Your Money Leads to Financial Success

How Being Smart With Your Money Leads to Financial Success

Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

1. Avoid being “penny wise but pound foolish”

It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

2. When you want something big, wait

Impulsivity can get you in trouble in most aspects of life. Finances are no different.

It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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So, you get the itch.

You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

Here’s where you have to take a step back.

Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

The impulse faded. And you just saved yourself a ton of money.

3. Live smaller than you can afford

You finally get that big raise. And you want to celebrate – and why not?

You’ve been looking forward to this forever. And after all, it was all due to your hard work.

That’s fine, splurge a little. However, make it a one-time deal and be done.

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Don’t get caught in the trap that just because you’re now making more money, you should spend more.

Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

4. Practice smart grocery shopping

Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

Create a grocery budget

Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

Make a list… and never deviate

Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

These impulse decisions will lead to overspending, which will derail your grocery budget.

Eat before going grocery shopping

It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

This makes it much easier to stick to your grocery plan.

5. Cancel your gym membership

Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

The average gym membership costs around $60 per month. That’s $720 a year.

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Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

It’s baby steps… And baby steps can start now!

I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

Featured photo credit: Unsplash via unsplash.com

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