When it comes to getting inspiration on how to build wealth, Warren Buffett is one of the most famous examples. He's amassed a fortune worth billions and has shared some of his wisdom along the way.
Reaching middle-class status might have you eager to enjoy your hard-earned money, but also ready to learn how to make it work for you.
Keeping these clever (yet simple) money rules in mind can help.
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Make a plan and stick to it
Crafting a sensible investment plan is a great start. But sticking to your investment strategy for the long haul is another thing altogether. If possible, make a plan and stick to it. A disciplined investor can go a long way.
"We don't have to be smarter than the rest," said Buffett, "We have to be more disciplined than the rest."
Avoid unnecessary debt
In a 1991 speech at the University of Notre Dame, Warren said, "I've seen more people fail because of liquor and leverage — leverage being borrowed money. You really don't need leverage in this world much. If you're smart, you're going to make a lot of money without borrowing."
When possible, avoid going into debt. While taking on debt can make sense in certain situations, like a home purchase, generally avoiding it can help you build wealth.
Prioritize saving early
Compound interest represents the concept that your money can grow over time, especially if you start early.
"My life has been a product of compound interest," said Warren Buffett. With decades of growth behind him and some undeniably savvy investment decisions, Buffett's wealth has soared to practically unimaginable heights.
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Stick to what you understand
It's tempting to jump into the hottest stocks. But if you don't understand the underlying company, Buffett has advised against owning that stock.
"Buy a stock the way you would buy a house, said Buffett, "Understand and like it such that you'd be content to own it in the absence of any market."
Dig into the background of a company or underlying investment before adding that particular stock to your portfolio.
Avoid overconsumption
"If you buy things you do not need, soon you will have to sell things you need," said Buffett. In other words, make it a point to avoid spending on things you don't need, especially if you cannot afford them. Prioritize building a solid safety net to support yourself before jumping into luxury purchases.
Invest in yourself
"Invest as much in yourself as you can; you are your own best asset by far," said Buffett.
When you start to invest in yourself, you could significantly change your financial trajectory. For example, picking up a new skill could help you bump up your income, which could lead to more breathing room in your budget and faster progress toward your financial goals.
Be Patient
Building real wealth takes time. Although patience might feel boring, it can result in amazing outcomes.
"The stock market is a device to transfer money from the 'impatient' to the 'patient,'" said Buffett.
Beyond the stock market, this advice can apply to everyday living too. For example, you might need to be patient and spend less now in order to amass true wealth to spend big later. That might mean living in the smaller apartment while your friends are upgrading or driving your older vehicle until the wheels fall off.
Don't follow the crowd
He's also said to "be fearful when others are greedy and greedy when others are fearful."
The market swings back and forth. While it's tempting to follow the herd, that could mean selling low and buying high. Instead, stick to your own opinions and try to stay the course during volatile times.
Give back
As you build wealth, choosing to give back matters. Buffett is a well-known philanthropist and has challenged many of his peers to give back more.
"If you're in the luckiest one per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent," said Buffett.
But giving back doesn't have to wait until you've amassed a fortune.
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Think for yourself
"I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business," said Buffett.
Although it's sometimes difficult to cut through the noise of modern life to find time for deep thought, making it a priority to think for yourself every day can make a big difference. Consider using some of that time to chart a course for your money and regain control over your financial future.
Live below your means
Buffett advises, "Do not save what is left after spending; instead, spend what is left after saving." In other words, make it a priority to spend less than you make.
Of course, living below your means can be a challenge. But making a concerted effort to slash spending, especially on things you don't care about, can make a big difference to your financial well-being. For example, shopping around to lower your car insurance bill or skipping out on takeout could help you start to spend less.
Invest for the long term
"If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes," said Buffett.
When building an investment portfolio, Buffett encourages investors to think for the long term. Consider what your long-term investment goals are before jumping into any stock purchase.
Bottom line
With an uncertain economy and rising expenses, it's a good idea to prepare yourself financially as best as you can. Luckily, Buffett's tidbits of wisdom offer a framework to follow as you grow your wealth.
Consider getting started with one or two tips and gradually incorporating more into your life. And, although it might cost you upfront, meeting with a financial advisor can help you create a plan that you can stick with, which will pay off in the long run.
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