10 Ways to Get Rich-:Warren Buffett's secrets that can work for you
world. In 1962, when he began buying stock in Ber
kshire Hathaway, a share cost $7.50.
Today, Buffett, 78, is Berkshire’s chairman and CEO, and one share of the company’s
class A stock is worth close to $119,000. He credits his astonishing success to several key
strategies, which he has shared with writer Alice Schroeder. She spent hundreds of hours
interviewing the Sage of Omaha for the new authorized biography The Snowball.
1. REINVEST YOUR PROFITS
When you first make money, you may be tempted to spend it. Don’t. Instead, reinvest the
profits. Buffett learned this early on. In high school, he and a pal bought a pinball machine
to put in a barbershop. With the money they earned, they bought more machines until they
had eight in different shops. When the friends sold the venture, Buffett used the proceeds
to buy stocks and to start another small business. By age 26, he’d amassed $174,000 - or
$1.4 million in today’s money. Even a small sum can turn into great wealth.
2. BE WILLING TO BE DIFFERENT
Don’t base your decisions upon what everyone is saying or doing. When Buffett began
managing money in 1956 with $100,000 cobbled together from a handful of investors, he
was dubbed an oddball. He worked in Omaha, not on Wall Street, and he refused to tell his
partners where he was putting their money. People predicted that he’d fail, but when he
closed his partnership 14 years later, it was worth more than $100 million. Instead of
following the crowd, he looked for undervalued investments and ended up vastly beating
the market average every single year. To Buffett, the average is just that - what everybody
else is doing. To be above average, you need to measure yourself by what he calls the
Inner Scorecard, judging yourself by your own standards and not the world’s.
3. NEVER SUCK YOUR THUMB
Gather in advance any information you need to make a decision, and ask a friend or
relative to make sure that you stick to a deadline. Buffett prides himself on swiftly making
up his mind and acting on it. He calls any unnecessary sitting and thinking “thumbsucking.”
When people offer him a business or an investment, he says, “I won’t talk unless
they bring me a price.” He gives them an answer on the spot.
4. SPELL OUT THE DEAL BEFORE YOU START
Your bargaining leverage is always greatest before you begin a job - that’s when you have
something to offer that the other party wants. Buffett learned this lesson the hard way as a
kid, when his grandfather Ernest hired him and a friend to dig out the family grocery store
after a blizzard. The boys spent five hours shoveling until they could barely straighten their
frozen hands. Afterward, his grandfather gave the pair less than 90 cents to split. Buffett
was horrified that he performed such backbreaking work only to earn pennies an hour.
Always nail down the specifics of a deal in advance - even with your friends and relatives.
5. WATCH SMALL EXPENSES
Buffett invests in businesses run by managers who obsess over the tiniest costs. He once
acquired a company whose owner counted the sheets in rolls of 500-sheet toilet paper to
see if he was being cheated (he was). He also admired a friend who painted only the side
of his office building that faced the road. Exercising vigilance over every expense can
make your profits - and your paycheck - go much further.
6. LIMIT WHAT YOU BORROW
Living on credit cards and loans won’t make you rich. Buffett has never borrowed a
significant amount - not to invest, not for a mortgage. He has gotten many heartrending
letters from people who thought their borrowing was manageable but became
overwhelmed by debt. His advice: Negotiate with creditors to pay what you can. Then,
when you’re debt-free, work on saving some money that you can use to invest.
7. BE PERSISTENT
With tenacity and ingenuity, you can win against a more established competitor. Buffett
acquired the Nebraska Furniture Mart in 1983 because he liked the way its founder, Rose
Blumkin, did business. A Russian immigrant, she built the mart from a pawnshop into the
largest furniture store in North America. Her strategy was to undersell the big shots, and
she was a merciless negotiator. To Buffett, Rose embodied the unwavering courage that
makes a winner out of an underdog.
8. KNOW WHEN TO QUIT
Once, when Buffett was a teen, he went to the racetrack. He bet on a race and lost. To
recoup his funds, he bet on another race. He lost again, leaving him with close to nothing.
He felt sick - he had squandered nearly a week’s earnings. Buffett never repeated that
mistake. Know when to walk away from a loss, and don’t let anxiety fool you into trying
again.
9. ASSESS THE RISKS
In 1995, the employer of Buffett’s son, Howie, was accused by the FBI of price-fixing.
Buffett advised Howie to imagine the worst - and best - case scenarios if he stayed with
the company. His son quickly realized that the risks of staying far outweighed any potential
gains, and he quit the next day. Asking yourself “and then what?” can help you see all of
the possible consequences when you’re struggling to make a decision - and can guide you
to the smartest choice.
10. KNOW WHAT SUCCESS REALLY MEANS
Despite his wealth, Buffett does not measure success by dollars. In 2006, he pledged to
give away almost his entire fortune to charities, primarily the Bill and Melinda Gates
Foundation. He's adamant about not funding monuments to himself - no Warren Buffett
buildings or halls. "I know people who have a lot of money," he says, "and they get
testimonial dinners and hospital wings named after them. But the truth is that nobody in the
world loves them. When you get to my age, you'll measure your success in life by how
many of the people you want to have love you actually do love you. That's the ultimate test
of how you've lived your life."
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