Friday, September 24, 2010

Tips on Getting Rich From a RICH Man

Back in January of ’09 I posted 10 investing tips from Warren Buffett, Buffett listed things like “be frugal”, “stick with what you know”, and "believe in America”. For all you out there who don’t know who Warren Buffett is where have you been?


According to his Wikipedia page:

Warren Edward Buffett is an American investor, industrialist and philanthropist. He is one of the most successful investors in the world. Often called the "legendary investor Warren Buffett", he is the primary shareholder, chairman and CEO of Berkshire Hathaway. He is consistently ranked among the world's wealthiest people, he was ranked as the world's second wealthiest person in 2009 and is currently the third wealthiest person in the world as of 2010.

Buffett is called the "Oracle of Omaha" or the "Sage of Omaha" and is noted for his adherence to the value investing philosophy and for his personal frugality despite his immense wealth. Buffett is also a notable philanthropist, having pledged to give away 99 percent of his fortune to philanthropic causes, primarily via the Gates Foundation. He also serves as a member of the board of trustees at Grinnell College.

So now you know why the man is mentioned so often in finance circles. I don’t really quite know “what I want to be when I grow up” but I know I want to follow in his footsteps. I have a long way to go. Maybe if we follow his tips we can have a piece of what he has.

Fivecentnickle has nicely laid Buffett’s tips out for us:

1. Reinvest your profits. When you make money, reinvest your profits instead of spending them. Even a small sum can ultimately be turned into great wealth.

2. Be willing to be different. Don’t base your decisions on what everyone else is saying or doing. Think for yourself if you want to be above average.

3. Never suck your thumb. Do your homework, and be prepared to quickly make up your mind and act on it. Avoid unnecessary sitting and thinking.

4. Spell out the deal before you start. Your leverage is always greatest before you begin a job. Always work out the specifics of a deal before you start, even if you’re dealing with friends or family.

5. Watch small expenses. Be vigilant about minimizing your expenses, both in business and in your personal life. By doing so, you’ll ensure that you profits or paycheck go further than ever before.

6. Limit what you borrow. You can’t borrow your way to wealth, so be careful with loans and credit cards. And if you get in over your head, negotiate with your lenders to pay what you can. Once you’re debt free, save money and start investing.

7. Be persistent. With tenacity and ingenuity, you can win against a more established competitor.

8. Know when to quit. Know when to walk away from a losing proposition. There’s no sense in repeating the same old mistakes trying to dig yourself out of a hole.

9. Assess the risks. When faced with a decision, imagine the best- and worst-case scenarios. If the benefits don’t outweigh the risks, then think twice before proceeding.

10. Know what success really means. There’s more to life than money. According to Buffett, “When you get to my age, you’ll measure your success in life by how many of the people you want to have love you actually do love you. That’s the ultimate test of how you’ve lived your life.”

A lot can be learned about how to manage money from millionaires, after all they weren’t always rich (most of them anyway). So, Mr. Buffett, I salute you!


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