Updated: Nov 9, 2022
We can all learn a lot from Buffett's strategy.
Photo by Roman Kraft on Unsplash
1- Live below your means
Warren Buffett is one of the wealthiest people in the world, but he still lives a frugal life. He eats at McDonald’s for breakfast every morning and still lives in the same house he bought in the 50s.
This may seem extreme, but the mindset makes all the difference. If you make a lot of money but spend it all, you will never become wealthy. Keeping the money you make is more important than how much you earn. You can save more money by reducing your liabilities and living a modest life.
2- Invest in yourself
The best investment you can make is in yourself because it will help you in all aspects of your life. Buffett took classes in public speaking to help convince others to invest with him.
The Warren Buffett way recommends taking care of yourself by exercising and learning new skills to build discipline. Your abilities will always be your greatest asset, so you should focus on building new skills. Valuable skills allow you to provide value to others and open up doors to new opportunities.
3- Hold stocks long-term
Buffett consistently preaches for people to be long-term investors in the stock market. He focuses his energy on finding great companies instead of trying to time the market. It is a better use of your time to understand why you invest in a company rather than constantly checking the stock price.
Even though Buffett is a stock picker, he recommends that 90% of investors buy index funds. If you are not dedicated to the stock market, you risk underperformance and potentially losing money investing in single stocks. Index funds have always historically recovered while many single companies have not.
4-Don’t use margin to buy stocks
Using margin to purchase stocks is a risky and unnecessary move. You are putting all of your money and then some on the line, which is not worth the risk that comes with it. Many investors use margin, but this does not mean it is a good idea. You are better off slowly adding money to your investment account over time rather than trying to make quick gains.
5- Prioritize your happiness
Many people would find Warren Buffett’s job boring, but he doesn’t. Buffett loves what he does and is still happy doing it even after turning 90. Money cannot buy you time, so you must enjoy what you do every day. Regardless of what you’re doing, it is pointless to go through life unhappy. All the financial success in the world cannot buy love or your time back.
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