Warren Buffett is a fascinating man. He took the then-failing company Berkshire Hathaway and within a few decades turned it into a multi-billion dollar holding company. The success of Berkshire Hathaway catapulted Buffett to becoming one of the world’s richest men—second, in fact. At any given time he has around $70 billion to his name, but that vast wealth doesn’t come without some fantastic business and financial sense.
Although it might not seem like it, many of Buffett’s money habits can translate to just about anyone—no matter how rich or poor. While the list of things that could be learned from Warren Buffett is long, here are seven of his smart money habits that everyone could stand to emulate:
1. Live below your means
It can be tempting to spend all of the money that you have whenever you get it—whether it be going out all the time, going on a trip, or buying something. however, the best thing to do is to live below your means. You never know when something is going to come up—be it an opportunity or an emergency—and you’ll want to have options.
Buffett does this constantly with his company, Berkshire Hathaway, which always has cash on hand for not only emergencies, but also for purchasing opportunities.
2. Take advantage of compounding interest
Compounding interest is one of the best and easiest ways to grow your money, and it’s something that most people underestimate. However, the catch with compounding interest is that the earlier you start, the better off you’ll be.
Buffett is a huge fan of compounding interest and frequently has listed that as the No. 1 way that he has grown his fortune.
“My wealth has come from a combination of living in America, some lucky genes, and compound interest.” – Warren Buffett
3. Learn all you can
Buffett is constantly reading, and when asked about the key to his success, the billionaire frequently attributes his love of books. In fact, Buffett reads an estimated 500 pages per day, which equates to dozens of books a year. By his logic, reading works much like compounding interest; the more you read, the more connections you’ll be able to make and the better off you’ll be.
4. Look for bargains
To many people, “bargain” means getting something cheap. And while in essence that is true, the real meaning here is found in Buffett’s famous quote: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” To Buffett, a bargain company is one that is priced slightly under the market value (or sometimes right at the value) but which has plenty of opportunity for return down the road.
5. Think long term
Success, and making money are rarely things that happen overnight, especially where investing and finances are concerned. The important thing is to look at the big picture and always plan for the long term. Buffett, for example, refuses to look at or purchase a company if it’s not a company he would be comfortable owning forever. That isn’t to say he always keeps his companies forever—more that he’s always looking at the big picture instead of trying to make a quick buck.
6. Don’t follow the herd
It stands to reason that everyone would be rich if they could. So, by that logic, following the rest of the herd and making the exact same choices is not the way to stand out and be exceptional.
The Warren Buffett quote, “Be fearful when others are greedy, and be greedy when others are fearful,” really comes to mind here. Following the rest of the crowd is never the right way to approach things.
7. Have a safety net
No matter what you do, be it in business or your personal life, it’s important to have some sort of safety net. In business this can be found both in the form of a financial cushion and what Warren Buffett calls a “moat” or, in other words, some sort of competitive advantage. As far as personal life goes, this mostly just means having something to fall back on just in case the worst happens.
“Never risk something you need to get something you don’t need.” — Warren Buffett