I’m a big fan of Warren Buffett and not just because, as the fourth richest man in the world, he’s worth $64.5 billion…yes billion! And he’s done it all through investing.
He’s a brilliant thinker and a very witty nonagenarian who is still investing and avidly followed by the rest of the world.
For example, this week Berkshire Hathaway (Buffett’s company) invested big-time in telecommunications conglomerate Verizon, insurance broker parent company Marsh & McLennan and energy giant Chevron and immediately their share prices went up and up because everyone else followed. As long as Berkshire are invested there they should do well.
So, would you like to know what the ‘Sage of Omaha’ has to say about your money and how you can grow it? Well, read on!
- Pay off your mortgage
- Set up a savings safety net
- Invest in cheap, easy index-tracking funds
- Some top Warren Buffett quotes
When Warren Buffett was asked what his advice was for ordinary people to make money and create a secure future for themselves he said that the first thing they should aim for is to pay off their mortgage.
We have a lot of help for you to pay off your mortgage in double-quick time as in this article so read it and find out how to set yourself free from that monthly payment burden. We also have a lot of helpful articles on how to save for a deposit, how to get a cheap mortgage, how to switch to a better one and more in our mortgage section.
The great thing about overpaying on your mortgage is that a) you save thousands in interest payments over time, b) it’s tax-free because HMRC sees it as paying off a debt (which it is) rather than investing in something, and b) you get mortgage-free much quicker which means that you don’t have to work so hard each month to bring the money in. It’s a secure investment because once you’e paid off your mortgage…you’ve paid it off…that’s it.
So pay off your mortgage and tell us about how you did it in the comments below!
All the experienced investors say this and Warren Buffett has said it several times: before you even think of investing properly, you should set aside enough money to keep body and soul together and keep the roof over your head for six months (or at least three months).
As you can see in this article on the importance of having a savings safety net, you need to set aside enough money to cover your living expenses (just go for a survival budget) for at least six months before you get into proper investing, so that if it all goes pear-shaped and you suddenly need access to cash quickly, you can do it with your savings rather than have to cash in your investments just at the wrong time.
To get to this stage you first need to do a budget to work out how much you have to spend to keep everything going each month, then you multiply that by six (or at least three) and start moving money into an easy-access savings account until you have enough to get started with investing.
We say six months, by the way, because, on the whole, when you get a life shock like redundancy or a bereavement, it can take up to six months to get yourself back on track again and earning regularly.
Warren Buffett is a big fan of cheap, easy, index-tracking funds as a good investment vehicle for ordinary people like us.
We are too. In fact, you can see in this article why we really like index-tracking funds.
Here you can see how investing in index-tracking funds in your ISA will make you a lot more money than putting it in cash ISAs
why index-tracking funds?
Buffett has recommended these for ordinary people who don’t want to spend time and effort (as he does) studying the market, doing the calculations and working out when to buy and sell, because Index-tracking funds simply and cheaply track a particular index (maybe the FTSE100 or the S&P 500 or a Global Index) without you having to do anything.
On the whole, these funds, which are run by computer programmes that are cheap to operate, give better returns than the funds run by clever humans on big salaries!
Here are just a few pieces of wisdom from the Sage of Omaha himself that we can all take on board…
1. Stop and think
“I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business. I read and think. So I do more reading and thinking, and make less impulse decisions than most people in business. I do it because I like this kind of life.”
2. Remember your business basics
“Price is what you pay. Value is what you get.”
3. Think, think, think
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
4. Be smart, be realistic
“I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”
5. Don’t talk the talk until you can walk the walk
“After all, you only find out who is swimming naked when the tide goes out.” (my favourite of Buffett’s lines!)
6. Morals maketh the man
“You can’t make a good deal with a bad person.”
7. Be good – seriously
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
8. Know what is genuinely valuable
“Too often, a vast collection of possessions ends up possessing its owner. The asset I most value, aside from health, is interesting, diverse, and long-standing friends.”
9. Know when to fold ’em
“The most important thing to do if you find yourself in a hole is to stop digging.”
10. Go for it!
“I always knew I was going to be rich. I don’t think I ever doubted it for a minute. ”
*This is not financial or investment advice. Remember to do your own research and speak to a professional advisor before parting with any money.