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04 April 2024

Money habits principles that are keeping you broke according to Warren Buffet

Warren Buffet often referred to as the oracle of Omaha and one of the most successful investor and currently the CEO of Berkshire Hathaway has shared much wisdom on investing, money management and life. In his own life he has successfully navigated the complex world of finance which often can be daunting and overwhelming.

Drawing from warren Buffets teaching and behavior and principles we can find guidance to assist us avoid the pitfalls and the strategies we need to embrace and adapt in the money landscape.

Whether you are a seasoned investor or just beginning your financial journey, understanding these principles are keys to unlocking your financial potential.

Here are some money habits based on the teachings, principles and lifestyle of the sage – buffet that might just be keeping you broke.

  • Living beyond your means

‘if you buy things you do not need, soon you will have to sell things you need’ – Warren Buffet.

Once you live below your means, you will always have money. Wealth is usually created by the difference between your income and expenses regardless of the size of your income.

It is critical to differentiate between wants and needs. Warren buffet frugal lifestyle despite his enormous wealth and resources is a testament to this principle.

Overspending on non-essentials can lead to debt accumulation, which can spiral out of control, making it hard to achieve financial liberty.

  • Not investing in yourself

‘The best investment you can make is in yourself’ – Warren Buffet

Warren Buffet often attributes his success to his continuous learning ability. He was first mentored by Benjamin Graham then continued reading hundreds of pages of books, company balance sheet and newspapers to build his knowledge.

Invest in yourself continuously to avoid missing out on opportunities that will enhance your financial status. Investing in education personal development and your health will set you up for long term success.

  • Being fearful or chasing greed.

be fearful when others are greedy and greedy only when others are fearful’ – Warren Buffet

Making decisions based on fear can be detrimental to your financial health. The stock market is not a get rich quick scheme. Stop chasing short term gains.

Buffet epitomizes the value of long term investing, with the understanding that the markets will have ups and down, thereby reacting impulsively to market fluctuations can result in selling at a loss and missing out on potential gains.

Events have shown that wealth can never be accumulated by chasing the latest investment trends or exiting a great investment too early as a result of fear.

  • Carrying high interest debts.

‘I have seen more people fail because of liquor and leverage. Leverage being borrowed money’ – Warren Buffet

High interest debt can quickly and slowly erode your financial health. Buffet warns against excessive leverage, especially consumer debts.

Understand that while debts can amplify gains, it can also magnify losses. Being debt burdened can prevent you from investing and growing your own wealth.

He has mirrored this principle in his own consumer behavior, buffet doesn’t use debt to buy houses or new cars, and neither does he borrow money to keep up appearance.

  • Not understanding what you are investing in

Never invest in a business you cannot understand’ – Warren Buffet

Understanding the fundamentals of any potential investment is key. Diving deep, asking questions and ensuring that you are well informed before parting with your money is crucial.

Investing in what you don’t understand can lead to unexpected losses and missed opportunities

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