Warren Buffett is probably the most famous investor in the world, and certainly one of the most successful. Born in 1930, Buffett is a self-made billionaire who turned a $10,000 investment made in 1956 into a $50+ billion fortune. He is the CEO of Berkshire Hathaway, which owns dozens of companies including Geico, Dairy Queen, Fruit of the Loom, Fruit Stripe Gum, See’s Candies, and NetJets. In 2007, he was listed as the richest person in the world by Forbes magazine.
Buffett is known for his investment foresight, his long-term investing approach, and his willingness to settle for “the lowest possible return that an investor can expect to receive, after taxes and inflation.” In other words, he is the poster boy for how to invest in the stock market long-term, favoring safe and reliable long-term returns over hype.
In an interview with Fortune magazine, Buffett famously said, “You only find out who is swimming naked when the tide goes out.” This quote from Warren Buffett is a simple and direct way of saying that at some point in time, reality will catch up with you. If you are living beyond your means, you will eventually have to pay the piper. If you are living beyond your means, you will eventually have to face the consequences of your actions.
The idea of living beyond your means is one of the most powerful concepts in personal finance. It means that you are spending money you don’t have. The bigger the amount of money you are spending, the farther away from your means you are living. This concept is one of the most important concepts in personal finance because it has a direct impact on your financial well-being and your ability to achieve financial peace.
It is a simple concept. In fact, it is so simple that it can be easily overlooked. But it is a very powerful concept because it helps to explain why we have financial problems. Most people have financial problems because they are living beyond their means. In other words, they spend more than they earn. Buffett’s wisdom, therefore, can be applied not just to investing in the stock market but to personal finances at all levels.
The second piece of Buffett wisdom I want to highlight is “Be fearful when others are greedy and greedy when others are fearful.” This Buffett quote makes a great deal of sense. Most people tend to be greedy when the economy is booming. They borrow money to invest in real estate or stocks. They borrow money to invest in new companies. They invest in the latest hot technology. They invest in the latest hot industry. They borrow money to buy a boat, a new car, or a new wardrobe. They borrow money to fund an extravagant lifestyle.
When the economy tanks and the market crashes, most people get scared. They lose a lot of money. They lose a lot of confidence. They find themselves in financial trouble. They find themselves in foreclosure. They find themselves in bankruptcy. They find themselves in a very difficult financial situation.
But while most people get scared, Warren Buffett (in his own words) gets greedy. He has become one of the richest men in the world because he is willing to take advantage of the fear that most people experience. Buffett is a very smart investor. He takes advantage of the fear and greed of the masses. He takes advantage of the fear and greed of those who are desperately trying to make money while the stock market is down. He wants to buy stocks at a steep discount from the current price.
I want you to take away two things from Buffett today – the first is to not live beyond your means, and the second is that you should look for opportunities in unexpected places. This is helpful when investing, but also helpful in life.