Warren Buffett, also called the “Oracle of Omaha,” is renowned for his insight on investment matters and no-nonsense advice on finances. His wisdom in some basic financial pitfalls forms a basis of good advice in trying to attain financial stability.
- Investing in yourself
As Buffett once said, “The most important investment you can make is in yourself.” He encourages people to learn all they can. Knowledge, he says, builds up like compound interest. According to Buffett, he spends about 80 percent of his day reading, and he recommends that others read 500 pages a day to build greater knowledge and expertise.
- Avoiding credit card debt
Being an ardent foe of credit card debt, Buffett prefers to use cash while doing business. He said, “I’ve got an American Express card, which I got in 1964. But I pay cash 98% of the time.” That way, he is able to dodge the high interest rates that come with credit cards and thus manage to keep his financial health in decent shape.
- Quality over quantity
He also said in the 1989 letter to the shareholders of Berkshire Hathaway, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Beyond investing, one can notice this principle applies when quality versus quantity is debated as an alternative which yields superior results, sometimes with less overall cost.
- Reducing unnecessary spending
Buffett is also highly frugal and tends to avoid recent technology and new luxury items. For years, the business magnate used a flip phone costing only $20 before he made a switch to an iPhone in 2020. It is his words of advice that have been very important: it is not so important that “Do not save what is left after spending, but spend what is left after saving”.
- Purchasing second hand Cars instead of new ones
Knowing quite well that motorcars are fast-depreciating capital assets, he purchases the second-hand ones. Warren Buffett had also said during an interview: “The truth is, I only drive about 3,500 miles a year, so I will buy a new car very infrequently.” His financial losses remain at minimum caused by extremely rapid depreciation in a new automobile car’s cost.
- Making values from the things which are bought
Buffett loves great deals as outlined by a story narrated by Bill Gates where he remembered, “You offered to pay, dug into your pocket, and pulled out … coupons!” As in the narration of the above story indicates his habit of frugality into simple issues.
- Lifestyle choice austerity
Frugal living of Buffett reflects in everything from housing to dieting. He once said, “I like eating the same thing over and over and over again. I could eat a ham sandwich every day for fifty days in a row for breakfast.” That level of minimalism eliminates unnecessary expenses on an extravagant lifestyle.
- Availing opportunities
He also did odd jobs such as delivering newspapers and reselling used golf balls when he was young. He just appeared always to find or create opportunities that would lead him to build his fortune. This just goes to show how initiative and hard work are important components in financial success.
- Avoiding gambling
At a 2007 Berkshire Hathaway shareholders meeting, Buffett called gambling “socially revolting” and a “tax on ignorance.” He decried how people can so easily spend their money on gambling, suggesting such behavior is antithetical to financial success.
- Living within means
According to Buffett, one should not confuse the cost of living with the standard of living. He advises not to buy things based on wants but rather based on an ability to pay for them, besides advising to live well below one’s means.
Through the adoption and practice of these principles, mistakes which most people make in money matters can be avoided in order to achieve better security.
