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Growth Strategies

#6 Prudent Tips from Warren Buffett

There should be a balance between spending on the things you need and spending on the things you desire to have
Warren Buffett
Co-owner, Sunrise Electronics and Founder, Writers Together
6 min read
Opinions expressed by Entrepreneur contributors are their own.

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With a net worth of more than 80 billion USD, Warren Buffett is synonymous to success. Apart from being one of the best investors, Warren Buffett has shared some enduring piece of advice on earning, spending, savings, risks, investments, and expectations.

The eminence of Warren Buffett’s tips is that his suggestions are simple, familiar and yet, effective! These tips are based on his life experiences, and that’s the reason it can help the majority of the youngster and people all around the globe.

When we say that these tips are universal nature, it depicts that many of already know or understand the value of these tips, but the sad fact is that only a few individuals live up to them.

These invaluable tips from Warren Buffett will help you bring a positive change in your life as an investor, employee, entrepreneur or just a common man.

With that said, let’s have a look at some of the most amazing tips from Warren Buffett on earning, spending, savings, risks, investments, and expectations.

1. Build a Multi-Learning Chain

Functional conservation and sound investments are something vital to keep you going in the long-run, especially when you learn these skills at a young age, then nothing is better than that! When you’re young, you have a lot of time, energy and willingness to work hard and at the same time, you have fewer obligations, the pressure of responsibilities and dependency of people on you.

That’s why Warren Buffett suggests that one should not depend on a single income. We should learn to invest more in reliable sources, invest in everything we know perfectly; spending in unfamiliar will increase excessive risks.

If you’re working in a 9 to 5 job, investing smartly and eventually creating another source of income will let you reduce the burden on your job’s salary. By doing that, you will be able to build a multi-earning chain. It will help you plan for your startup or something which would make you the boss.

2. Spend as if You’re Living a Mediocre Life!

Once you start earning a decent amount of money, on your path of developing saving and investing habits, the next step you need to heed is your spending habits. In the words of Warren Buffett “If you start buying things that you don’t need, you may soon have to sell the things you need.”

Every time you plan to spend your hard earned money, keep in mind that you have your long-term goals as one of your highest priorities. Next, make sure you have enough money for your monthly leisure time. Now, maintain a sufficient balance for any emergency or shortcoming.

There should be a balance between spending on the things you need and spending on the things you desire to have. Otherwise, a day will come when you will be on the verge of selling everything you need to survive.

3. Save it for the Luxury

Just like spending requires planning, developing saving habits also requires pertinent planning. Like you make a list of specific things in “spending,” make a budget while planning to start saving. Decide a fixed per cent of your monthly income to save your money effectively.

Try to set up a goal. Try to save for “something.” This “something” can be your favourite car or bike or an apartment you were always looking for!

Also, make sure that your savings are not a part of your left out money after spending. Instead, your spendings should be part of your left out money after saving. This is what Warren Buffett says “Don’t spend what’s left after spending, instead spend after you invest or save. That’s how you will soon be able to afford the luxury stuff you always wanted!

4. Calculate the Risks

The business environment is dynamic, i.e. ever-changing, that’s the reason no matter how exploratory you think you are, you should invest a limited portion of your income in an unknown or not so familiar source. Especially, when you’re a novice in something, the rate of failure is much higher than the speed of success, and that’s pretty obvious.

Therefore, when Buffett says “Never test the depth of the river with both feet,” it means that it doesn’t matter how intelligent and smart you are, you should never misjudge the situation with the comfort you feel in the initial stage, it can be dangerous in the next upcoming stages.

Instead of risking all your money without giving a second thought, focus on taking calculative risks, properly evaluate the situation, prepare a backup plan and then put your money in a chance.

5. Invest in Small Lots!

Imagine a car without brakes, or without airbags. Now, imagine a gym with only a treadmill and no other gym equipment! Horrifying and terrible enough, right? Just like investing in making a car is incomplete without spending in installing its brakes. Similarly, a workout session in the gym is incomplete without the rest of the machines or equipment.

Well, it is true that the full primary course in the lunch is way better than just one food item, right?

The same case with investing, just investing all your money in stocks will put all your money at tremendous risk. Rather than spending it all in one place, invest small amounts of your income in various things. You can invest in provident funds, mutual funds, equity share and at last, for the safety of your family, you can invest in health care and medical insurance.

And yes, never forget to invest in yourself!

6. Find Trustworthy Associates, Don’t Expect Too Much

More than just in your professional life, this is something that will help in your social and personal life also. As Warren Buffett says “Honesty is expensive, don’t expect it from cheap people.” In the world full of scams, scandals, and corruption, not everyone wants to be loyal and honest. Finding frank employees, managers, and advisers is tough. Therefore, if you have loyal people around yourself, then stick to them

Also, learn to expect less, have low expectations as not everyone is born to fulfil your expectations.

Conclusion

These tips will create a profound effect on your life and transform you into an insightful person altogether. Once you start developing effective investing and spending habits, you will realize visible changes in the way you work in your life.

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