Want to Become a Millionaire? Follow these 4 advice of Warren Buffett

1. Pay your savings first:

As Buffett has noted and demonstrated on multiple occasions, you should “pay yourself first” by putting a portion of your funds away first.

Too many entrepreneurs go all in on the company they create and live for the promise of “the big exit.” But then it goes wrong. Even worse, some founders have done this multiple times.

An expert and friend who owned 29 companies before the pandemic made a funny statement: “You can always tell the entrepreneurs in a room. They have the biggest stories. And then, nearly inevitably, they die broke.”

Statistically, the people who are most financially secure are the ones you wouldn’t expect. They are ordinary people who practice financial discipline. They didn’t wait to save and invest until “we can afford it” (that would never be) or “when we exit our company.”

With or without advisors, they calculated what they’d need to retire and learned to put savings away first (sometimes in a hard-to-access CD or at a separate bank). Then they covered their needs. They used the smallest share of their funds to indulge in luxuries and high-risk investments. They practiced and taught financial discipline consistently and early.

For example, the young teen daughter of one of my friends is working a part-time job, not for the chance to indulge in movie dates or brand-name fashion, but to begin her own retirement fund.

In the same way, I found out that an entrepreneur I’ve known since I was a child was homeless for a long time as a teenager.He worked multiple part-time jobs as a high school junior and senior while living first in his car, then later in a trailer.

He was even severely hungry at times, but as soon as he was paid, the first thing he bought (after braces) was gold coins, recalling the principles he’d learned from his great-grandfather as a boy. Today, in his early to mid-60s, he’s been retired for 14 years. He launched, owned, and exited multiple companies but continued to save and invest in gold, stocks, real estate, and other assets throughout.

2. Be careful about splurging on brands. —

In the case of Buffett, think about buying lightly used cars, whether they are luxury cars or not. If you want to buy a luxury home, choose one that can be easily resold or used as a permanent or part-time rental to make extra money and get tax breaks. Or, you could buy and live in a modest home and rent a luxury home for family holidays or trips with friends.

A wise person I know says that you should spend no more than 20% of your income or investment income on “the three “Fs””: food, fashion, and fun. But my business partner, Lauren Solomon, who is a professional image consultant, is quick to remind clients that working from home or having a modest income is never an excuse to ignore “the business of being you.”

You shouldn’t become so casual and laid-back that how you act goes against the high standards you hold yourself to. Even casual clothes can be used to make something that looks good. “You can’t ask other people for money if you look like you’ve never had any of your own,” she says often.

Here’s a way to think about luxury brands that might help: When you do buy something for yourself, think of it as an investment. Do the quality and style last forever? Is it something that you could change and still wear in 20 years or more?

3. Think carefully before getting a loan.

Buffett has said many times, “If you buy things you don’t need, you’ll soon sell things you do need.” Credit cards are one of the biggest ways that money can be lost. If you do what Buffett does, you almost always have to use cash.

If you use credit cards, learn how to use them best so you can keep your credit score high and get the most credit when you need it while paying the least amount of interest (or none).

4. Be even more careful about investing with borrowed money:

For the record, Buffett has said many times that you shouldn’t borrow money to invest in securities. Buffett’s rule about not taking credit could be broken by a personal note he sent to investment advisor Adiel Gorel with an interesting fact. Gorel talks about getting a call from Buffett after an interview with MSNBC in 2012.

Gorel said on air that Buffett often says it’s smart to buy or refinance a home with a fixed-rate 30-year mortgage, which is standard in the U.S. but not so common in most other countries.

A fixed-rate loan on a single-family home, as opposed to any kind of loan on a building with more than one tenant, has the benefit of letting inflation make the payment and balance of your loan a better deal over time while also letting the rent your tenant pays each month go towards paying off the loan principle.

On the air, Gorel praised Buffett for agreeing that single-family homes are a good investment and said that he and Berkshire would buy a lot of them if they knew how. After that, he found out Buffett was there. So he started writing to them and offered the help of his company to make the mass purchase easier. Buffett wrote back with a note that said, in part, “To make it worth it for Berkshire, we’d need to invest about $10 billion…”

To be clear, Berkshire has never sold a large number of homes at once. But as Gorel points out, an ordinary investor who isn’t as wealthy as Berkshire or Buffett can get a big boost from owning even one or two investment homes with a 30-year fixed-rate mortgage. This is especially true now, when interest rates are less than 4%. This could be a smart way to use debt to help you reach your goals for retirement.

There are, of course, more rules about how to save and invest. But for now, I tell everyone I know to take the advice of experts like “The “Oracle from Omaha” very seriously. Now more than ever, we can all benefit from these ideas.

Courtesy:— Entrepreneur

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