Warren Buffett, the “Oracle of Omaha,” has financial wisdom that everyone can heed.
Billionaire investor Warren Buffett says he is insistently against the excessive consumption of material goods. A prudent buyer and investor, Warren offers universal personal finance advice on making and saving money. Here are the top financial tips we are all familiar with that Warren emphasizes:
On spending generally, Warren says, “If you buy things you don’t need, you will soon sell things you need.” All of us have an urge to splurge for special occasions, from peer pressure, on emotional impulses, and even on supposedly clever investments.
Most marketers recognize this frailty and exploit it with advertising that conveys false notions of economy. Current equated monthly installment (EMI) options on overpriced smartphones exemplify this strategy. EMI options give a false sense of smart financing to induce consumers to buy expensive phones that bust their budgets when affordable phones are more than adequate for their needs. Consumers considering such credit schemes always should ask themselves whether they really need the item and if they are overspending.
On saving generally, Warren says, “Someone’s sitting in the shade today because someone planted a tree a long time ago.” In theory, everyone knows that saving for the future is important, but in practice, many if not most people do not save enough even for emergencies. This is because instant, rather than delayed gratification, matters more to many than saving for future rainy days. We sometimes perceive saving as sacrifice. What you should do is set aside money for future goals as soon as you get paid. Rather than save what is left after discretionary spending, you should spend what is left after paying necessary expenses and saving regular amounts.
On the necessity for patience and long-term planning, Warren says,”Some things just take time. You can’t produce a baby in one month by getting nine women pregnant.” Money from investment grows neither on trees nor overnight. Investors make money by staying in it for the long run, not by changing portfolios frequently or panicking and withdrawing over short-term setbacks. A diversified portfolio invested regularly and persistently for the long term (8 –10 years) is usually best. Making good investments will require knowledge about the market and some research on your part. For regular guidance and more knowledge, investors can subscribe to a free investment newsletter to learn more about financial markets.
On borrowing, Warren says, “If you’re smart, you’re going to make a lot of money without borrowing.” Living on credit cards is no way to get rich. In some cases, borrowing may be manageable, but too many times debt becomes overwhelming. If borrowing is truly necessary, there must be a plausibly rational plan to repay the debt and not become its slave. A debt-free life is always best for everybody.
On risk, Warren says, “Risk comes from not knowing what you’re doing.” Everyone wants lots of money as fast as possible. Some try to make it from investments promising quick, high returns without taking into account the risk. Their financial planning is vague, random, and so susceptible to unnecessary risk. Investing without knowledge increases your risk of loosing money.
Warren Buffett simply emphasizes the important financial lessons we should all take to heart. Learn to save and spend your money wisely to ensure a debt-free life..