Warren Buffett is a hugely successful investor, and his tips for investing are surprisingly accessible.
Most of his methods are simple, straightforward and timeless.
Here’s some of Buffett’s best money advice.
Borrow Wisely
Buffett warns against excessive borrowing.
You really don’t need leverage in this world much.
If you’re smart, you’re going to make a lot of money without borrowing.
At the same time, you don’t have to rule out borrowing completely.
Some experts classify borrowing money as “good debt” and “bad debt.”
According toThe Money Advice Service, good debt is a sensible way to invest in your future.
This includes things like a mortgage or student loan.
Keep in mindI said ideally.
Bad debt, on the other hand, is pretty obviously and inherently not meant to be an investment.
Bad debt drains your finances and has no prospect for future growth.
A loan to buy a big screen TV is probably bad debt.
If you’re going to borrow money, see to it it’s for an investment.
Don’t save what is left after spending; spend what is left after saving.
This might be Money 101, but it’s a lesson a lot of people don’t consider.
Budget for your needs and bills, then figure out how much you want to save.
Whatever is left is spending money.
Paying yourself first is basically an automatic way to prioritize your savings.
To do this, you’re free to set up automatic monthly deposits into your savings account.
And think of your savings and investmentsas a monthly bill,if that helps.
We often don’t wise up to our habits until they’ve become hard to manage.
Chains of habit are too light to be felt until they are too heavy to be broken.
Much of personal finance is about mindset.
Accepting this will help younip those bad habits in the bud, before they get out of hand.
If you want to change your habit, first break it down.
Understand yourcue, reward and routine.
On the other hand, what would be considered “changing vessels”?
“Changing vessels” is a hell of a lot easier said than done.
And there’s probably need for a larger solution that goes beyond the realm of this post.
Price and Value are Not the Same Thing
Buffett is notoriously frugal.
And frugality is all about value.
Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.
Frugality isn’t about buying anything at a low price.
It’s not about paying a lot for something just because it’s valuable, either.
it’s about buying value at a low price.
So when you’re getting a “deal,” don’t forget to calculate value into the equation.
Index fundsyep, it’s that simple, according to Buffett.
(I suggest Vanguard’s.
(VFINX)).
Open a brokerage account (Vanguard, E*Trade, etc.).
Pick an index fund (Buffett suggests VFINX).
Buy the fund through your brokerage account.
Invest Long-Term
Buffett always promotes big picture.
He warns to not get caught up in daily valuations.
Instead, think long-term.
This way, your investing won’t require much maintenance.
Money Isn’t Everything
Yepeven the world’s most successful investor knows money doesn’t buy everything.
Some material things make my life more enjoyable; many, however, would not.
I like having an expensive private plane, but owning a half-dozen homes would be a burden.
Too often, a vast collection of possessions ends up possessing its owner.
The asset I most value, aside from health, is interesting, diverse, and long-standing friends.
Money offers a lot of options.
But, of course, it’s important to remember the things in life that truly matter most.
