Few names carry as much weight in investing and wealth-building as Warren Buffett. The Oracle of Omaha’s time-tested strategies and straightforward wisdom have created not just wealth but a blueprint for financial success that anyone can follow.
By understanding and applying seven of his most crucial money habits, you’ll think like Buffett and build wealth for the long term. Let’s examine Buffett’s simple but powerful financial wisdom.
1. Save First, Spend Second
“Do not save what is left after spending; spend what is left after saving.” – Warren Buffett.
The foundation of Buffett’s wealth-building philosophy starts with a simple yet powerful principle: prioritize saving over spending. Despite his billions, Buffett still lives in the same house he bought in 1958 and drives modest cars.
This isn’t about deprivation – it’s about intentional choices. Start by automatically directing 20% of your income to savings or investment accounts before it hits your checking account. This forces you to live on less than you earn, creating a solid wealth-building foundation.
If you can’t save 20%, start at whatever percentage you can and build it up as your earnings increase and you pay off debt. As your income grows, resist the urge to inflate your lifestyle proportionally. Instead, channel those additional funds into savings and investments. First, save an emergency fund, then start building an investment portfolio.
2. Make Yourself Your Best Investment
“The best investment you can make is in yourself.” – Warren Buffett.
Buffett spends five to six hours daily reading and learning about businesses, markets, and trends. While that might not be realistic for everyone, the principle remains: invest in your knowledge and skills.
Take courses in your field, learn about personal finance, or develop new skills that increase your earning potential. This investment compounds over time, just like money in the market.
Consider allocating time and money to professional development through formal education, online courses, or self-study programs.
Warren Buffett has two college degrees:
- Bachelor of Science in Business Administration From the University of Nebraska
- Master of Science in Economics From Columbia University
Buffett took a $100 Dale Carnegie Training course after graduating from Columbia Business School in 1951. He credits a Dale Carnegie public speaking course with helping him overcome his fear of public speaking and becoming a more confident leader.
Buffett has said that the course had the most significant impact on his success and that good communication skills are essential for everyone. He has also said that developing good public speaking skills can increase future earnings by 50 percent.
The returns on investments in your own skills often exceed traditional market returns.
3. Buy Assets You’ll Want to Keep for a Decade
“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.” – Warren Buffett.
When evaluating investments, think like a business owner, not a gambler. Look for companies with substantial competitive advantages, consistent cash flows, and excellent management teams.
Ask yourself: Will this company’s products or services remain relevant in ten years? Does it have a moat protecting it from competitors?
Take Buffett’s investment in Coca-Cola. He understood the business model, saw its durability, and has held the stock for decades. This long-term perspective helps avoid the costly mistakes of chasing trends or trying to time the market with no investing system.
4. Let Patience Be Your Wealth Builder
“The stock market is a device for transferring money from the impatient to the patient.” – Warren Buffett.
Market volatility tests every investor’s resolve, but patient investors understand that short-term fluctuations are the price of admission for long-term gains. When markets decline, most investors panic sell, transferring wealth to those who stay calm and buy quality assets at discounted prices.
Develop patience by creating an investment system that outlines and quantifies your strategy during market turbulence. This will help you maintain perspective and prevent emotional decisions from derailing long-term wealth building.
5. Stick to What You Know
“Never invest in a business you cannot understand.” – Warren Buffett.
Buffett’s “circle of competence” principle suggests investing only in businesses you genuinely understand. This doesn’t mean you need to be an expert in everything, but you should fully understand how a company makes money and what could go wrong.
You might have valuable insights into medical companies if you work in healthcare. If you’re tech-savvy, you might better understand software businesses. Start with industries you know, then gradually expand your knowledge base. It’s better to miss some opportunities than to lose money in businesses you don’t understand.
6. Avoid the Twin Traps of Leverage and Loans
“I’ve seen more people fail because of liquor and leverage—leverage being borrowed money.” – Warren Buffett.
Debt can destroy wealth faster than any market crash. However, some debt might be necessary (like a reasonable mortgage), so avoid using borrowed money for investments or luxury purchases.
Credit card debt and high-interest loans are wealth killers. If you have debt, prioritize paying it off while maintaining your basic investment strategy.
Create an emergency fund to avoid future borrowing and resist the temptation to use leverage to amplify investment returns. Buffett’s success comes from steady compound interest, compounding capital gains, and dividend reinvestment, not risky leverage.
7. Plant Your Money Trees Early
“Someone’s sitting in the shade today because someone planted a tree a long time ago.” – Warren Buffett.
The power of compounding works best with time. Even with small amounts, starting early can lead to significant wealth accumulation. A 25-year-old investing $500 monthly in a diversified portfolio of stocks could potentially accumulate over a million dollars by age 65, assuming an average annual return of about 7% after inflation, which aligns with historical US stock market performance.
But it’s never too late to start. If you’re starting later, focus on maximizing your savings rate and taking advantage of catch-up contributions in retirement accounts. The best time to plant your money tree was twenty years ago. The second best time is now.
Conclusion
Building wealth isn’t about finding shortcuts or get-rich-quick schemes. It’s about developing sustainable habits that align with proven principles. These seven habits, inspired by Warren Buffett’s philosophy, provide a roadmap to financial success.
They require patience, discipline, and a long-term perspective, but the rewards are worth the effort. Start implementing these habits today, and you’ll be on your way to building lasting wealth for your future.