There is a reason why Warren Buffett is widely referred to as the Sage of Omaha, and his long-standing investment success is largely down to sticking to some very rigid principles and proven strategies.
It is probably fair to say that anyone who has had to talk to a bankruptcy attorney in Dayton, will have made a few mistakes with their own finances at some point, so if you want to plot a better future and a sounder relationship with your money, maybe a few words of wisdom from Mr Buffett might help you on the right path.
The golden rule
Warren Buffett often refers to his rule number one, which is never lose money. When asked what rule number 2 is, his answer would be to “never forget rule number 1.
It might sound such basic and fundamental advice that it is surely a matter of pre common sense rather than a valuable insight from one of the world’s most successful investors.
What it actually means when you look beyond the basic advice, is that you should always aim to avoid unnecessary financial risk whenever you can. This means never risking something you need, such as a roof over your head, just to get something that you want.
You will see when you look at his track record, that Buffett has consistently resisted the temptation to make risky investments, preferring to play the long game with his cash and employing a risk-averse strategy.
Always have good habits
Parental advice when you are a child, often includes making sure that you behave yourself, and that instruction can be carried on into your adult life, when it comes to having good financial habits and behavior.
Most of us tend to have one or two habits that might not be considered to be bad, but not that good either. If you are going to have some bad habits, just make sure that they are not related to your financial dealings.
A prime example of a good financial habit, would be transferring a percentage of your salary into a savings account when you get paid, so that you build up a reserve of cash that can be used for emergencies and to have a more comfortable retirement.
Live within your means
It is amazing to discover just how many people don’t manage to live within their means, often because they don’t have a clear picture of their true financial position.
To be able to spend less than you earn, you need to create a household budget and work out exactly where every dollar goes each month. Knowing exactly how much you have available to use for discretionary spending and how much of your money goes on bills, will allow you the chance to work out how best to live within your means.
Other nuggets of wisdom include “don’t go into debt unless you’ll profit later”. So if you want to make the most of your money, maybe following in the footsteps of Warren Buffett could turn out to be a good way to go.
Spencer Osborne has worked in the finance field for some time now and likes to post his insights online. He hopes his expertise in money management can be of help to others.