Daily Management Review

Best Tips from Warren Buffett for 2016


Do you want to effectively manage your money? Or make a fortune and live without worrying about finances? No one else can give a better advice than Warren Buffett, whose fortune is more than $ 72 billion, making him the third richest man in the world.

Pete Souza
Pete Souza
In addition, he often gives sound advice about how you one achieve wealth. The recommendations can be followed by absolutely anyone, regardless of whether they have experience of investing or not.

Here are six top tips from Warren Buffett.

1. Never lose money

"Rule No. 1: Never lose money. Rule No. 2: Never forget the number 1 rule ", - said Buffett.

Undoubtedly, this advice seems simple: no one thinks to lose money is a good idea.

Yet, if we look closer, here’s another side: avoid risks wherever possible. In particular, he said, to be successful and happy, never risk something you need to get something you just want, even if the rate is a thousand to one in your favor. Following this rule, Buffett himself has repeatedly abstained from many risky investments for many years and missed opportunities that could bring great benefit to him, for example hi-tech.

However, over time, following the strategy of avoiding unnecessary risks, he was able to put together a huge fortune, and the strategy paid off in full.

2. Get high profits at low cost

"The price is what you pay, profit is what you get" - Buffett wrote in a letter to shareholders of Berkshire Hathaway.

You can lose money (and violate the rule number 1), if you pay a high price for something that will bring you a low income. This can happen if you run into debt, say, a credit card. In addition to the purchase price, you will have to pay high interest rates. Or, when you buy something, no matter what - stock exchange securities or real estate – when everyone is buying and the market prices are too high.

"No matter, is it about socks or stocks, I like buying quality goods when the market is on the decline," - wrote Buffett. And this is a very reasonable approach.

3. Develop the right financial habits

"Most often we behave as we are used to - Buffett said during a speech to students - and many say that the habits are too small and invisible until they lead you to financial ruin." We all have habits that we like to break, and habits, which we like to follow. According to Buffett, the most important habit - to save money.

"The biggest mistake - not to learn to save money", - he said.

Think about how to set up automatic payments for bills or automatic transfers from your account to a savings or investment account. Such a habit of saving money is the most painless and easy way.

4. Always have available cash

Buffett says that Berkshire Hathaway has always had at least $ 20 billion, but usually a lot more of cash equivalents, which can always be withdrew if necessary.

Again, this strategy of risk aversion, as the money could have been invested in something. However, in the words of Mr. Buffett, such a strategy kept him out of trouble during the financial crisis of 2008, when many other companies were on the verge of collapse. Of course, we do not have $ 20 billion to hide in cash. However, we can allocate a certain amount and keep it in cash or on deposit accounts. This is especially important if you are an entrepreneur and do not have a steady income.

5. Invest in yourself

Buffett has often said that people must invest in themselves by any means - from taking care of the body and health to find work that they love, and getting additional education.

"Anything you do to improve your skills and make yourself more valuable will pay off in terms of improving your purchasing power," - he said in an interview. These investments will return tenfold, he said. Unlike other assets, your abilities and skills will not go anywhere.

This could mean a refresher course, other types of training and education, organization of your own business or even some volunteer job to learn new skills. Anything that makes you smarter, makes you richer.

6. Set a long-term goal

The mistake that most people make is attempts to take advantage of rising prices or a looming possibility to get quick income in the short term, says Buffett. This way of thinking leads to unpleasant consequences for most people.

In turn, he advises to invest in longer-term objectives. Instead of trying to make quick money, he suggests, it is better to focus on the growth of purchasing power over a lifetime.

source: gobankingrates.com