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How to Manage Money to Get Rich: 30 Tips from Billionaire Warren Buffett


Alina Prikhodko

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If you are just starting out on your journey to financial independence and looking to build capital, then you have clicked on the right link. In this article, we are inspired by the experience of one of the most successful investors in the world, Warren Buffett, known for his financial prowess and frugal lifestyle. Materials for the article are taken from the site New Trader U.

We've put together 30 practical tips for frugal living based on financial principles, teachings, and quotes from Warren Buffett. These tips will help you change your financial habits, save money, and achieve financial stability and freedom.

1. Live within your means

“I am not interested in cars, and my goal is not to make people jealous. Don't confuse the cost of living with the standard of living."

Living within your means means avoiding unnecessary expenses and living a frugal lifestyle. This is the key to saving and reducing financial stress. Buffett adheres to the principle of quality of life, not consumerism. He was satisfied with his standard of living throughout his life, and he, for a moment, is already 92 years old. He has simple preferences and sees no need to buy huge mansions, yachts or sports cars.

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2. Invest in yourself

"The best investment you can make is investing in yourself."

Investing in your own skills, knowledge and well-being will improve your future by opening up more opportunities and increasing your income. This is an important and long-term investment that will pay off in many ways. Your knowledge and skills will help you save money, as you will be able to do what others have to pay for. You will analyze which skills do not require additional costs, because you can implement them yourself.

3. Determine the value of money

“Price is what you pay. Value is what you get."

Knowing the real value of money goes beyond the price tag. It is first and foremost an understanding of the effort it took to earn money and the true value of what it can buy.

Understanding the difference between price and value can keep you from making bad financial decisions. It's not so much about how much you spend, but about the usefulness of your purchase.

4. Don't gamble

“Rule #1: Never lose money. Rule #2: Never forget rule #1."

Buffett believes gambling is for fools. Always be aware of potential losses before making investment decisions. Don't waste money on reckless spending.

You can steadily increase your wealth, maintain capital and avoid risky investments.

5. Don't go into debt

"If your ship is leaking, it's better to spend energy changing ships than patching holes."

Debt can become a burden and limit your financial freedom. It is best to avoid debt whenever possible and prioritize paying it off.

6. Save before you spend

“Do not save what is left after spending; spend what's left after savings."

Treating your savings as a necessary expense ensures that a portion of your income is permanently set aside for future needs, emergencies, or investment opportunities.

7. Avoid Credit Card Debt

"If you're smart, you'll make a lot of money without borrowing."

Credit card debt often comes with high interest rates. Debt may not shorten life, but it makes its quality much worse. By avoiding credit card debt, you can save significant money over time.

8. Stick to your budget

The budget is the main strategy for implementing the Buffett Principles.

A structured budget contributes to the effective management of income and expenses. It provides a blueprint or framework for making financial decisions, and helps avoid overspending and encourage savings.

9. Buy things that last longer

"It's far better to buy a great company at a fair price than a good company at a great price."

Think about the value of your purchases the way Buffett thinks about the value of his investments. When you invest in quality items, you may pay more in the beginning, but in the long run it becomes more profitable because such items usually last longer. And remember that the miser always pays twice.

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10. Don't blindly follow new trends, stick to the classics

“Beware of investments that get applause; great movements are usually greeted with yawns.”

Following trends leads to wasteful spending, especially when those trends fade quickly. Buying classic items that have stood the test of time ensures that the value for money is on par. Buffett always wore the same timeless shoes and drove simple cars all his life; he never tried to impress others with flashy things.

11. Put value over price

"Whether we're talking about socks or promotions, I like to buy quality items when they're on sale."

Cost is not always an indication of quality. When you put value ahead of price, you get the most value for your money. This applies to everything from buying clothes to investing in stocks.

12. Don't buy things you don't need.

"If you buy things you don't need, soon you will have to sell what you need."

Excessive spending leads to financial problems. It is important to distinguish between needs and wants in order to maintain a healthy financial condition.

Impulsive purchases of non-essential items can quickly eat into your savings. Think twice before buying and determine whether it is a necessity or a desire.

13. Set aside a percentage of every paycheck.

Convert your earnings into savings and investments. Step one is to be lean, step two is to save money, and the last step is to invest it.

Regular savings will help you accumulate substantial savings over time.

14. Only invest in things you understand

"Never invest in a business you can't understand."

Investing in what you understand helps you make informed decisions and reduces the chance of losses. Knowing the pros and cons of investing increases the likelihood that you will make a wise choice.

15. Don't take rash financial risks.

"Risk comes from not knowing what you're doing"

Taking unjustified financial risks leads to significant losses. Make sure you understand the implications of your financial decisions to avoid potentially disastrous results. Taking on large mortgages and car payments that you can barely afford increases your risk of losing them if you don't maintain your income.

16. Don't chase others

Buffett never tried to keep up with someone buying a superyacht or a mansion in Beverly Hills.

Competition in terms of material goods can lead to unreasonable spending. Focus on your financial goals and needs rather than comparing yourself to others. Be true to yourself and what you want.

17. Limit dining out

"I eat like a six year old."

Frequent eating out can hit your wallet hard. Cooking at home is more economical and allows you to control the quality and quantity of food. Some of Buffett's favorite places to eat are McDonald's and Dairy Queen.

Photo: IStock

18. Keep a simple lifestyle

Warren Buffett is a minimalist, especially when it comes to personal wealth. He still lives in the house he bought in 1958 and keeps his car for five years or more, as long as his family circumstances allow.

A simple lifestyle can cut unnecessary expenses and help you focus on the things that really matter. It is important to remember that happiness and satisfaction cannot be bought with money.

19. Invest your profits back into the business

“My wealth comes from a combination of living in America, some genetic luck and compound interest.”

When the interest you receive also pays interest, it is a powerful tool for accumulating wealth. If you spend your money frugally, you can let your money accumulate and grow since you don't have to withdraw it for consumption.

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20. First you work for your reputation, then your reputation works for you.

“Losing money for the firm and I understand. Lose the firm's reputation and I'll be ruthless."

It takes many years to build a reputation and it only takes 5 minutes to destroy it.

Reputation is an invaluable asset.

If you constantly keep this thought in your head, then you will do many things differently.

21. Don't spend money on unnecessary things.

Buffett hates wasting money. He sees this as his investment capital, which can multiply in the future.

Impulsive purchases of non-essential items can quickly eat into your savings. Think twice before buying and determine whether it is a necessity or a desire.

22. Treat Thrift as a Good Habit, Not a Difficulty

"The chains of habit are too light to be felt until they are too heavy to be broken."

By making frugality a habit, you will integrate saving money into your daily life, and it will become easier to maintain over time. Financial habits decide your destiny.

23. Avoid luxury you can't afford.

Buffett never valued trademarks for their prestige. Preferred brands that were valuable and offered comfort.

Spending money on luxuries you can't afford leads to financial stress. It is better to save up for things that you need and that you can afford without stress.

24. Level up basic skills

"I bought a house for $31 and still live in it."

Mastering the basic skills can save you a lot of money on repairs. Like Warren, who still lives in his inexpensive home, you can make the most of what you have. It is much cheaper to repair and maintain the house you have than to buy a new one.

25. Focus on long-term financial goals

“No matter how great the talent or effort, some things just take time. You can't have a baby in one month, even if you have nine pregnant women."

Patience is key when it comes to finances. Instead of looking for instant gratification, focus on your long-term financial goals. Slow and steady wins races.

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26. Don't let fear or greed drive your financial decisions.

"The stock market is a means of transferring money from the impatient to the patient."

Making financial decisions based on fear or greed leads to adverse consequences. Greed can wreak havoc on your finances through excessive consumption. Fear also has a devastating effect, as it can prevent you from taking rational risks by turning your savings into investments.

27. Time is money

"The most important commodity is time."

Time is a valuable resource that should be managed wisely. Wise use of time can lead to financial growth and personal satisfaction, just like investing money. Be frugal with your time, as well as money, and spend it wisely.

28. Use cash instead of credit cards

Buffett prefers to have cash on hand and spend with real money as it helps to better control spending and keep a direct link to actual spending.

Knowing the importance of using cash can prevent falling into the debt trap, avoid high interest rates on credit cards, and help you budget. Cash will make you financially aware and help you control every spending.

29. Never rely on one source of income

“Never rely on income alone. Invest to create a second source"

A variety of sources of income will protect you from the fluctuations and risks of a single source and provide additional financial stability. Connecting an additional source of income is just as effective as saving on savings or paying off debts.

30. Create an emergency fund

"Cash combined with courage in a time of crisis is priceless."

An emergency fund provides a financial buffer during times of crisis and helps you cope with unexpected expenses without getting into debt. It is the cornerstone of financial stability and peace of mind. Buffett believes that in business you always need to have a supply of cash.

The path to financial freedom is a marathon, not a sprint. It requires consistency, discipline and time. By incorporating these tips into your daily life, you will see significant changes in your financial situation, allowing you to save more, invest wisely, and build a prosperous future.

Warren Buffett once said, "Someone is sitting in the shade today because someone else planted a tree here a long time ago." Start planting your financial trees today and enjoy their shade in the future.

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