American businessman Warren Buffett has the distinction of being the second wealthiest person in the US (the first is Bill Gates) and the fourth wealthiest person in the world, with a net worth of US$73.3 billion. He amassed his fortune by investing in shares and buying, growing and selling businesses.
Warren Buffett started his business career at a young age selling chewing gum and coca cola bottles door-to-door. Now, at the age of 86, he is still working as the chairman, president and CEO of Berkshire Hathaway, a company he took over in 1964.
Despite his great wealth, Buffett is notably frugal and a philanthropist, giving away a lot of his money to charity. Even his children won’t see much of his wealth when he dies as he feels it would hinder their growth, “I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing”.
Sounds like a guy who knows how to manage his money well, right?
Here are five powerful financial lessons that Warren Buffett swears by when it comes to succeeding in business and life:
1. Set out the specifics of a deal beforehand
“I am a better investor because I am a businessman, and a better businessman because I am an investor.”
Buffett advises, even when dealing with friends and relatives, to set out the specifics of the deal and make a solid strategy, so there are no nasty surprises. You have more bargaining leverage before you begin a job than after. This lesson was learnt when Buffett and a friend shovelled snow for his grandfather who only paid them 90 cents for the backbreaking work.
2. Do work that you love
“Take a job that you love. You will jump out of bed in the morning. I think you are out of your mind if you keep taking jobs that you don’t like because you think it will look good on your resume.”
Warren Buffett believes that success comes when you stick to doing what you love and are passionate about it, rather than taking jobs or building companies that look good on your CV. When you love your business and the work you do, it doesn’t feel like work.
3. Act fast and don’t dilly-dally
“The difference between successful people and really successful people is that really successful people say no to almost everything.”
You need to be able to make swift, well-informed decisions and act on them fast, otherwise, says Buffett, it’s the equivalent to ‘thumb sucking’. Saying ‘no’ is a mantra of successful people; you don’t have to agree to everything.
If you’re struggling to make good financial decisions or just need some unbiased advice from professionals who have been around the block, get in touch with our team. Often the difference between financial success and living paycheck to paycheck is a subtle tweak, or a well-executed thought. But it’s pretty hard to implement the right business and financial strategies without the right insight from people who have seen it all before, and know what call to make.
4. Reinvest your profits
“I try to buy stock in businesses that are so wonderful that an idiot can run them. Because, sooner or later, one will.”
Buffett believes in investing in high-quality businesses that last the distance and reinvesting profits to buy more shares. He famously refuses to buy stock in Facebook and Google because of the difficulty of estimating future value.
5. Keep track of expenditure
“If you buy things you do not need, soon you will have to sell things you need.”
Although Warren Buffett is generous with giving away money to charity, his personal spending is kept to a minimum. He believes in frugality and not wasting money but making it work for you. Case in point: he takes an annual salary of around US$100,000 and lives in the same house he bought in 1958 when he was 28.
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General Advice Disclaimer
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.
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