1) Start with a meat and potatoes small business – and be your own boss.
Buffett made his fortune by doing things his way, not by following the crowd. In high school, Buffett and a pal bought a pinball machine to put inside a barbershop. With the money they earned, they bought more machines until they had eight different shops running their machines. When they sold the venture, Buffett used the proceeds to buy stock and start another small business. By age 26, he’d become his own boss and amassed $174,000 – or $1.4 million in today’s money.
LESSON: Don’t fall for the temptations of a huge, immediate windfall business. Cut your teeth on the side, with something basic, reliable and small.
2) Mind the foxes who steal from the vineyard: small expenses.
In the famous book, The Millionaire Next Door, authors Stanley and Danko report that millionaires live well below their means. They budget, plan investments, and allocate their time, energy, and money into building wealth instead of displaying high social status.
Warren Buffett’s companies are known for watching out for small expenses. Exercising vigilance over every expense can make your profits and your paycheck go much further.
LESSON: The next time you spot a sale or online deal, check in with yourself to see if that $50 is better saved or invested than spent. It might seem like you’re spending a relatively small amount of money, but it all adds up.
3) Debt kills.
Warren Buffett advises his people to limit what they borrow. Living on credit cards and loans won’t make you rich. Buffett never borrowed a significant amount of money, not even for investments or mortgages.
The Millionaire Next Door reports that millionaires’ parents did not provide “economic outpatient care”, and their own adult children are economically self-sufficient as well.
LESSON: If you do give your teenager a credit card, make sure to set firm limits and specify use ahead of time. If they abuse the privilege, they lose the card. Do the same for yourself.
4) Leap forward.
Very often those who supply the affluent become wealthy themselves. In fact, one of the best ways to make money is to sell products or services to those who already have money. Many people don’t see these opportunities because they’re far too busy seeking money and security in the short term only.
Well, when Buffett began managing money in 1956 with $100,000 cobbled together from a handful of investors, he was dubbed an oddball. But he didn’t allow others’ opinions to keep him from leaping into a profitable venture. Over and above, I might add, others with greater private means.
Lastly, I will suggest this: Get professional advice on new ventures and ideas. We are here for far more than “just” tax planning. I would love the opportunity to sit with you, and help you evaluate the direction of your financial life … and point you in a new direction, should it be necessary.