If you want to get the most out of your money, it makes sense to listen to people who know a thing or two about it. Finding a financial mentor is a great way of doing this, but if you can’t find one right away, following tips from those who are well-respected in different financial fields is a good place to begin. When most people think of finance and investments, one of the names that invariably comes up is Warren Buffett. There is a good reason for this. Warren Buffett is well-known for giving sound financial advice that many people would do well to take into consideration. Here are a few tips that he’s given to the public over the years that everyone should keep in mind:
When it comes to money, you should always spend wisely. Everyone wants to splurge here and there, and sometimes we like to justify or explain away our purchases. You buy something you don’t really need and say it’s because you just celebrated a birthday or a holiday or some personal achievement. But if you keep buying things you don’t need, especially if you have problematic finances to begin with, you’ll end up having to scrounge for money. You might even have to end up selling those items you just bought.
Save for the Unexpected
You should always be saving for the unexpected. Most people don’t save as much money as they should, as they assume they won’t have any big emergencies to deal with in the future. But you never know when an emergency will occur, and you should always have money saved up in an emergency fund. As soon as you get your monthly paycheck, set aside a small amount of money.
As Warren Buffett has stated in various interviews and articles, money doesn’t grow overnight. People often overestimate and underestimate specific purchases, investments, and savings. Many people are often wary of thinking in the long-term as they’re too concerned about immediate financial problems and situations. But long-term financial goals are important. You don’t want to find yourself in trouble ten years from now or even twenty or thirty years from now.
Limit What You Borrow
While sometimes it’s necessary to borrow money, you’ll have a harder time saving money and becoming financially independent if you rely on borrowing money. Accruing credit card or loan debt will end up drastically harming your finances. If you have debt, start trying to figure out a way to pay it down or even better, how to stop relying on borrowing money.
Never Invest In Something You Can’t Understand
Buffett also recommends that you should never invest your money into a business or idea that you can’t understand. For one thing, putting your money into something you don’t understand will only lead to trouble down the road. On the other hand, understanding a business or investment idea can help you determine if there will be any associated financial problems in the future.
Master the Basics
When it comes to money, you should master the basics of accounting and investing so that you know what you’re getting yourself into. For instance, knowing the ins and outs of debt and loans will help you out when you go to apply for a loan or credit card. Knowing the basics of finance will help you strengthen your financial decisions.
Buying Stocks Is More Than Just the Price
If you’re looking to get into investing or the stock market, it’s important to know the type of stocks you want to buy. Buffet has repeatedly said that “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Which basically means you want to make sure you buy something worth your money instead of picking the cheapest option available.
Price and Value Aren’t the Same
Sometimes, something will be very cheap and poorly made. And other times something will be moderately priced but will have a decent value. Price is what you pay for an item, but value is its true worth. It might be worth spending a little more for an item that will last you a little bit longer. Additionally, before you buy any item, you need to make sure that both the price and value are a good deal.
Keep a Modest Lifestyle
Buffett also recommends keeping a modest lifestyle if you’re trying to save money. Keeping yourself on a budget will help you watch what you spend and help you save money for the future, as well as a lot more. A lot of people want to live beyond their means, but if you’re trying to keep track of your finances, it’s important to live within your financial means. You shouldn’t be trying to spend more money than you have.
Avoid Compulsive Buying
Additionally, it’s important not to fall into the trap of compulsive buying. Compulsive buying can lead to credit card debt and wasting your entire savings. You don’t want to end up spending all your money on items you don’t need and can’t afford, right? In this day and age, many people like to buy items they think they need to own. Before you go out and buy all those items you’ve been lusting after, it’s a good idea to reassess your purchasing habits.