If I were to say the word “investing”, what name comes to mind? For 99% of people, that name is Warren Buffett and that’s for good reason. Warren Buffett is widely know as the GOAT in the investing world and his +$80 billion net worth supports such claim. It’s for this reason that I got him to be my money mentor and in this article, I will share with you how Warren Buffett taught me to the rich!
While I would love to assume that everyone reading this article is familiar with Warren Buffett, I know that some people may not be therefore before I dive into the key lessons he taught me when it comes to money I will give you a brief background about him.
Warren Buffett was born on August 30, 1930 in Omaha, Nebraska, which of course explains why one of his nicknames is the “Oracle of Omaha”. From an early age, Buffett was fascinated by business. From re-selling Coca-Cola products to his friends to running a small pinball machine business, his eventual rise to financial success was etched in stone from the beginning. Then, while in college, he found himself under the tutelage of one of the greatest investor of all time, Benjamin Graham, who taught him the power of value investing. Accumulating all of these experiences and pairing it with the education he received, Buffett eventually found himself in the CEO position at Berkshire Hathaway, a multinational conglomerate holding company, which is the vehicle he’s used to gain his immense amount of wealth. Over the course of his career, Buffett has seen many ups and downs however his commitment to the founder’s mindset and upholding his ethical values in business has always allowed him to come out ahead. Not to mention, amidst all of these experiences, he has graced the world with many invaluable financial lessons, many of which, I have been able to use to improve my own financial position which I’ll now get into.
Lesson #1
The first lesson Warren Buffett taught me is that losing money isn’t cool. I’m not sure if my first time losing money was in the stock market or at the casino but I do recall the terrible feeling I had when it happened which is why this piece of advice resonate with me so much. When Warren Buffett said, “"Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.", what he was referring to was the fact that people need to use their money deliberately and with reasonable caution. Unfortunately, that’s not how everyone rolls.
There are those that can’t even spell the word budget and spend money until their face is blue and there are others that invest in the stock market as if they are playing games at the casino. One example of gambling with your money that comes to mind is the recent bullish run of Bitcoin. From August 2020 to November 2020, Bitcoin remained at a stable price of around $11,000USD until it experienced exponential growth at the start of 2021 rocketing to over $40,000USD. This spike was proceeded by a dip of 25% seeing Bitcoin dropping back to $30,000USD. I’m bringing up this example because 99% of people investing into Bitcoin at this time were simply gambling, hoping that they could ride the wave to crypto riches. This same phenomenon happened in late 2017 when Bitcoin hit a high of $15,000USD before dropping by nearly 50% to just over $8,000USD. The reality of this situation is that no one knows where assets like these will trend next making this much more of a gamble than it is an educated investment. For me personally, I prefer investing in tried and tested assets like Uncle Warren and sure, I won’t get rich overnight, but I also won’t become broke in that same timespan!
Lesson #2
The second lesson Uncle Warren taught me when it comes to money is the value of frugality. As the story goes, Warren Buffett, the man with a net worth of over $80 billion still lives in the home he bought for $31,500 in 1958. If you ask me, I believe there are two types of rich people. The first, are the ones that you see in the tabloids sporting their exotic cars and multi-million dollar mansions that have more bathrooms than you have fingers on your two hands. Then, there is the breed of rich individuals that gets so rich that they basically decide to go full circle and revert back to living like us common folk. This is arguably a bigger flex than driving around in a Ferrari and you actually see it more often than you think. When I think of this type of wealth, I think of Mark Zuckerberg who shops at Costco like the rest of us or the Queen who reuses gift wrapping from presents she receives.
Now of course, it’s much cooler to be frugal when you can afford not to be, however seeing people like Warren Buffett put frugality on the map really inspired me to embody this financial mindset. In fact, during my research into ways to be more frugal, I came across a definition of frugality that has totally changed how I manage my money. The saying is goes something like “being frugal is spending up until the point where further spending will not provide you any extra amount of happiness”. So many times in my life, I have spent money thinking it would cheer me up or increase my overall level of happiness and while it may have sometimes added some short-term excitement to my life, I always reverted back to baseline.
Sadly, many people simply never have this realization. They get swept up in consumer culture, in keeping up with their peers and instead of gaining increasing amounts of happiness, all they are doing is pushing themselves further away from financial success. What makes this situation even worse is that frugality has been strongly tied to being cheap which is definitely still considered to be a slight and not a compliment. Not owning as big of a home or as expensive of a car as your friends is seen as being an underachiever or a cheapskate yet in reality it may just be someone practicing proper frugality.
I think at the core, the embracing of frugality comes down to going one level deeper when it comes to money. You see, most people don’t value the money they have which is why they so easily part with it. Logically they know that they don’t need a 16th new outfit for that party this weekend but nevertheless they find themselves swiping their credit card and making that purchase. I think that what separates people who spend recklessly and those who don’t comes down to understanding the key element behind money. This element is time. Time is the most valuable and versatile asset we have. Time can be transformed into money through working, into pleasure through time with friends or knowledge through education. It’s for this reason that rich individuals like Warren Buffett don’t waste money because wasting money is wasting time and who wants to waste the most precious resource we have?
Lesson #3
The final, and most important lesson, that Warren Buffett taught me about becoming rich is that patience is a virtue. One of his most famous saying around his investing strategy is that “Our Favorite Holding Period Is Forever." Warren Buffett is known for investing in company’s trading below their inherent value and he is more than happy to wait it out until their market price reflects this. In fact, he’s probably been able to live for so long because his body and mind knows that he’s got holdings he’s waiting capitalize on when they finally come to fruition. All jokes aside, Buffett’s preaching of patience is one that must be taken to heart.
Unfortunately, being patient is easier said than done. We live in a world where we get instant messages, eat instant meals and stress when we can’t get next-day delivery on our Amazon purchases so it’s no wonder most people struggle with developing this character trait. Tying this back to the example I shared earlier in this video, people are investing in very volatile assets like Bitcoin, penny stocks and the like because they can’t fathom waiting the decades investing moguls like Buffett preach raising true wealth will take. And honestly, I can’t even blame people for their impatience. Everywhere you turn, you’re being bombarded with ads for 6-minute abs and propositions selling you the dream of making 5 figures online next month. Why would you ever want to wait when overnight solutions are constantly being presented to you?
While I’m ashamed to admit, I too used to struggle with being patient and it costed me a ton of time and money. When I was starting my career in management consulting, I was making a meagre salary leaving me with literally no money at the end of the month (even while practicing Warren’s frugal habits). This prompted me to seek other ways to make money which saw me pursue every “make money online” tactic you could even imagine. From dropshipping to Amazon FBA and even selling shoutouts on Instagram, I tried everything I could to make a buck and after trying each one for a few weeks, I would quit and move onto the next unsuccessful venture. Now, don’t get me wrong, I am in no way knocking any of these means of making money. My lack of success boils down to me not being patient enough to learn how to run any of these types of businesses properly resulting in me losing not only the limited money I had but my time as well.
It was only when I started to take Uncle Warren’s advice that I started to see my financial situation improve. When I took up YouTube as my next online venture, I made a promise to myself. I said, “Adam, this is the only online business you will work on for the next 3 years.” During this time I did everything I could to learn how to become successful on the platform. I took courses, I found mentors but most importantly, I remained patient. There were so many times when I wanted to quit and let me tell you I am incredibly thankful I never did as now YouTube has offered me a very profitable secondary source of income.
Now, running a YouTube channel may not be the path you take forwards financial prosperity but whatever you do decide to do will certainly require patience. It takes patience to complete a college degree. It takes patience when investing in the stock market to support your future retirement and it certainly takes patience when learning a new skill that you can use to make more money. It even takes patience to develop patience oddly enough. All that we can hope for is that the patience we develop will bear even just a fraction of the financial prosperity that it’s yielded our idol Warren Buffett.
Therefore, between learning that losing money isn’t cool, that frugality should be warn as a badge of honour and that patience is the key to winning, this is how Warren Buffett taught me to be rich!