Warren Buffett is universally regarded as the greatest investor ever and has a net worth of over 100 billion dollars, however, this wasn’t always the case.
Warren Buffett got his start at just 11 years old when he made his first investment buying 3 shares of City service preferred at $38 per share.
I know if you clicked on this you want real-life steps on how you can build wealth towards your first or maybe even next Million Dollars.
Today we are going to be talking about 4 lessons from Warren Buffett to help make sure you are on track to getting your first million, all I ask of you to do in exchange is to follow me on social media thank you…
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1. Always Have The Mindset Of A Student And Continue Learning
One of the most important lessons from studying Warren Buffet is the importance of being what he refers to as a learning machine.
Warren Buffett has said that he’s never seen anyone become extremely successful without always trying to better themselves and upgrade their skills and knowledge.
And this isn’t just learning for the sake of learning, the ultimate goal is to become one of the most skilled people in your given career.
Because once you reach that level of talent in your chosen career you can expect to see earnings skyrocket, since you can essentially charge whatever, you want for your services and people gladly pay it.
If you’re the best doctor, lawyer, plumber, real estate agent, or salesperson, in your area you can charge hundreds and maybe even thousands of dollars per hour, depending on your profession, and your customers and clients will beg you to take their money.
Even Charlie Munger (Warren Buffet’s business partner) agrees, and this is what he says about how being a learning machine has made Warren Buffet a massive success …
“Without Warren Buffet being a continuous learning machine, the record would have been absolutely impossible, the same is true at lower walks of life, I constantly see people rise in life who were not the smartest, sometimes not even the most diligent, but they are learning machines, they go to bed every night a little wiser than they were when they got up, and boy does that habit help particularly when you have a long run ahead of you.”
2. Develop An Entrepreneur Mindset
Many people don’t know this but before Warren Buffet was the world’s most successful investor and CEO of 1 of the largest companies, he was an entrepreneur as a kid and a teenager.
Warren Buffet was the master of side hustles before side hustles were even cool, when he was young, he would buy 6 packs of coca Cola bottles and sell each bottle for a Nickel making about a penny on each bottle sold.
He got upgraded to a pinball business, 1 of his most lucrative ideas involve setting up pinball machines at barbershops, he bought a pinball machine for $25 in 1946 and built a small empire out of it.
Warren Buffet’s proposition to the owner of the barbershop was simple, let me put this pinball machine in your barbershop and while people are waiting to get their hair cut, they can pay a nickel to play.
Any money would be split between the owner of the barbershop and Warren Buffet, this business was a hit from day 1.
The first night after he put the pinball machine in the barbershop Warren Buffer collected $4 in nickels after a week of it he had $25 enough money to buy another machine.
Soon enough Warren Buffet had pinball machines operating in barbershops all over Washington DC where his family lived at the time.
He then ended up selling the business which he started with just $25 for $1000 a year later, while pinball machines have gone out of style, the lesson from Warren Buffet’s entrepreneurial ventures as a kid and a teenager are still as relevant as ever.
Starting some type of business even if it’s not your full-time gig, can be extremely powerful to getting towards your first $1,000,000 the math behind this statement is very compelling let me explain what I mean.
Let’s say you’re an engineer and you make $47,000 a year at your day job, with this $47,000 salary let’s say you’re able to save $5000 a year after paying for all your living expenses.
If you’re able to have a business on the side making $30,000 a year whether it’s online or offline you were able to increase your yearly savings by a massive factor, let me explain…
Your salary from your day job covers all of your expenses, this means that any additional income you have from your side business can all be used for savings and investing.
Now that $5000 you used to be able to save each year gets an additional $30,000 added to it, meaning you can now save and invest $35,000 which is greatly more than you could before you had your side hustle, this is going to help you build wealth significantly faster.
3. Know The Power Of Compound Interest
It is much harder to get that $1,00,0000 goal without having what is referred to as compound interest work on your behalf if you’re only saving money and not investing it, it will take significantly longer to hit the $1,000,000 target.
Warren Buffet frequently talks about when he learned about the magic of compound interest it totally changed the way he thought about money and building wealth.
In fact, compound interest is so important to the success of Warren Buffett that his official biography is titled Snowball, because he compares compound interest like rolling a snowball downhill.
The snowball starts small but picks up more and more snow as it rolls down the hill until at the end of the hill it is huge compared to the snowball that started at the top of the hill.
If you save $25,000 a year it will take you 40 years to save up $1,000,000 if you just have that money sitting in a bank account and not earning interest.
However, if you can invest that same $25,000 a year in the stock market and earn a 10% return on that money you will cross that $1,000,000 target in just 17 years, less than half the time it would have taken if you weren’t investing.
In this example, you would only deposit $425,000 and would have earned over $588,000 in investment returns.
This is the power of compound interest Warren Buffet is talking about, once you understand this concept you will no longer view that brand new car as only $50,000.
You will think about how the true cost of the new car is hundreds of thousands of dollars and maybe even $1,000,000 of wealth you’re missing out on due to you not being able to benefit from the effect of compound interest on that $50,000.
Just as the power of compound interest can work wonders for you and your investment account, it can also work against you if you aren’t careful.
As Albert Einstein said… “Compound interest is the eighth wonder of the world, he who understands it earns it, he who doesn’t pays it.”
People that have large amounts of high-interest debt are having compound interest work against them.
This is why people in America have been paying on their student loans and credit card debt for years, but still owe just as much, if not more money than what they originally borrowed.
One of the biggest lessons from Warren Buffet that you can apply to your own life is to make sure compound interest is working for you and not against you.
4. Live Simply
In order to even have money to invest you first have to be able to save money, typically the more money people earn, the more they upgrade their lifestyles with luxury possessions.
But Warren Buffet takes a different approach despite being 1 of the world’s wealthiest people, he lives a simple and modest life.
He currently resides in Omaha Nebraska in a home he purchased in 1958 for $31,500 and he only earns a base salary of $100,000 as chairman and CEO of Berkshire Hathaway.
The math is very simple, the more you spend the longer it will take to earn your first $1,000,000.
If you live simply and minimize expenses there are opportunities to save, invest, and earn from compounding interest.
1 of the most important keys to building wealth is avoiding what is referred to as lifestyle inflation.
Lifestyle inflation is where the more someone earns in their job the more, they tend to spend on living expenses.
As they get paid more people tend to get nicer cars, live in fancier apartments/houses, go on fancier vacations, and eat more expensive food.
Lifestyle inflation is like running on a treadmill, you’re running faster by making more money, but you aren’t going anywhere in terms of savings because your expenses are increasing just as fast as your income is growing.
You don’t have to be extreme but in order to truly build wealth and hit that first $1,000,000 target, you have to resist the urge to have your living expenses increased at the same rate your income grows.
It’s simple math, the bigger the difference between your income in your living expenses, the more you’ll be able to save and invest and ultimately the quicker you will be able to hit the goal of having your first $1,000,000.
Thank you for spending some time with me and I’m looking forward to talking to you again very soon.
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