Warren Buffett’s Top 20 Tips That Will Save You From Financial Disaster

Warren Buffett’s Top 20 Tips That Will Save You From Financial Disaster

Kellan Jansen   Sun, Apr 28, 2024,

Warren Buffett is one of the most widely trusted investors of the modern era. When he offers financial advice, it’s worth listening to — especially if it can help you avoid financial disaster.

Put yourself on the right track for financial success by studying Buffett’s best everyday money tips.

Start an Emergency Fund

Buffett says you should start an emergency fund before investing. Try to fund it with three to six months’ worth of expenses. That way, if you suddenly lose your job or have to allocate your paycheck elsewhere, you won’t have to sell your assets to get back on track.

You can’t time financial emergencies — if they occur when the market is down, you could be forced to sell for a loss unless you have enough in savings to cover the cost.

Avoid Debt

Buffett is strongly against debt. In a 2004 Berkshire Hathaway meeting, he said, “It’s very tempting to spend more than you earn. It’s very understandable. But it’s not a good idea.” This puts him in line with other personal financial experts, like Dave Ramsey, on the subject.

When you’re in debt, unexpected expenses can be devastating. They can force you to miss installment payments, which may hurt your credit score and delay you from reaching your financial goals.

Pay Yourself First

Next, Buffett recommends making saving your first priority. He said, “Don’t save what’s left after spending, but spend what is left after saving.”

You can summarize his mindset as paying yourself before you pay others. This shift in approach can improve your spending habits and make sure you’re always primarily focused on building wealth.

Think Long Term

When it comes to investing, Buffett prides himself on taking the longest view in the room. In a 2022 shareholder letter, he said, “Our favorite holding period is forever,” and “having a long attention span and the ability to concentrate on one thing for a long time is a huge advantage.”

For the average person, this is a reminder to only invest in companies and assets you’re comfortable holding for many years. When you adopt this strategy, you’re less likely to make financial decisions based on short-term market fluctuations. This ensures you benefit from the long-term growth of great companies instead of selling too soon and missing out on gains.

Recognize What You Don’t Know

One reason people struggle with investments is they buy stocks they don’t really understand. When you don’t understand an asset, it’s harder to make good decisions about when to buy, sell and hold it.

Buffett is a firm believe in never investing in what you don’t understand.

Create Opportunities for Yourself

Buffett was a big believer in side hustles before the term existed. In his early years, he made extra money by delivering newspapers, selling used golf balls and even buffing cars.

Stories from Buffett’s early years show that he was always looking for new opportunities for himself. When they didn’t exist, he created them. Adopting a similar approach could help you bring in more income, which means more cushion for scary financial situations.

Be OK With Sitting Out

Buffett’s company, Berkshire Hathaway, has $168 billion in cash and short-term investments. If you had that much extra cash lying around, you’d probably invest a good chunk of it. But Buffett doesn’t. He’s OK with waiting on the sidelines until the right opportunity emerges.

His famous “20-slot rule” is a great example of the philosophy. He says to imagine you had a card with only 20 slots in it — those slots represent all of the investments you could make in your lifetime. You’d probably think a little more carefully about the assets you buy and sell. This is how Buffett always thinks.

Admit Your Mistakes

To Read More:

https://finance.yahoo.com/news/warren-buffett-top-20-tips-140115339.html