Warren Buffett is arguably one of the most successful investors of all time. At the age of 87, he currently has a net worth of roughly $78 billion, which makes him the fourth richest person in the world.
Over the years he has delivered some very insightful quotes on the topics of investing, risk management, and philanthropy.
In this article, we explore some of his most famous quotes and apply the meaning behind them to certain areas of your personal finances.
“It is not necessary to do extraordinary things to get extraordinary results.”
When it comes to your personal finances, often it’s the many small things you do, compounded over time, which can produce extraordinary results. Take a regular savings plan for example. Let’s say you decided to commence a saving plan and regularly deposit $50 a week into an investment account generating a net return of 5% per annum. If you continued the regular deposit over the course of a 30 year timeframe, your regular investment of $50 would grow to $180,880 (i.e. $78,000 invested and $102,880 in investment earnings). So, powerful results can occur when the small things you do in all aspects of your personal finances are combined together and compound over time. These can include, budgeting, debt reduction and saving and investing for the future.
“Someone is sitting in the shade today because someone planted a tree a long time ago.”
This can be applied to several areas of your personal finances. For example:
“Do not save what is left after spending; instead spend what is left after saving.”
Given the choice, would you restart the way you approach your income and expenditure? Instead of focusing on what you can buy with your income, would you start with the mindset of how much do I need to save to achieve my financial goals and objectives and then spend the remainder? In many ways, this can be reiterated in one of our recent articles, ‘Future self-continuity: Preparing for the future’, where we discuss the importance of aligning your present self with your future self.
“Risk comes from not knowing what you’re doing.”
There are certain gifts and skills that each individual has and it’s important to recognise where yours end and another’s begin. In the world of personal finance, this is especially pertinent. People can often come unstuck when they try to undertake something that is beyond their capability. By building and leveraging a professional advice team, you can use their gifts and skills to help you achieve your financial goals and objectives.
“If you buy things you do not need, soon you will have to sell things you need.”
This is particularly relevant when considering healthy financial habits in cashflow and debt management. For example, by consistently tilting your spending habits towards want purchases, and further exacerbating it with the inclusion of credit cards and borrowing, there may come a time when your expenses exceed your income – once this point is reached then some difficult decisions may need to be made to get back on track towards equilibrium regarding your income and expenses, for example, selling certain assets to clear debts obligations that aren’t able to be met with your existing level of income.
“Predicting rain doesn’t count. Building arks does.”
Unfortunately, it’s often very hard to forecast the future in terms of when an unexpected event may occur. However, when such an event does present itself, the results can be distressing for those that weren’t appropriately prepared. As such, it’s important to consider risk management when it comes to your personal finances. This can often involve multiple areas, for example, superannuation (e.g. retirement planning), investments (e.g. diversification and dollar-cost averaging), insurance planning (e.g. general and personal insurances) and estate planning (e.g. will and powers of attorney).
“The investor of today does not profit from yesterday’s growth.”
This is an important reminder of making sure that procrastination does not get in the way of achieving your financial goals and objectives. By failing to be proactive with putting plans into action regarding wealth accumulation, you can miss the opportunities that present themselves throughout your lifetime; however, it’s never too late to start. As another famous saying goes, “The best time to plant a tree was 20 years ago. The second best time is now.” (Chinese Proverb)
We hope you have enjoyed our look at some of Warren Buffett’s famous quotes. If you have any questions regarding anything discussed in this article then please contact us.