Warren Buffet has two money rules: Number 1) “Don’t lose money.” Number 2) “Never forget rule number 1.” Sounds simple, right?
Considering Warren Buffet is arguably the greatest stock investor in the world, I’d say that his money rules are probably worth following.
I’m certainly no Warren Buffet, but after reading his two money rules, it made me reflect on my own thoughts on money. Here are 5 money truths that are worth remembering.
1) Don’t confuse your net worth with your personal worth
This applies to everyone, regardless of whether your net worth is billions of dollars or nothing. What you have doesn’t define who you are. If you’re unhappy and unfulfilled, no amount of money is going to change that.
2) Don’t spend more than you make
This sounds obvious but considering the average American household has over $15k in credit card debt, it’s a rule that the majority of people don’t appear to follow. If I can’t afford something outright, then I definitely can’t afford to put it on credit. Want to get out of debt? Stop spending more than you make, and start spending less.
3) Don’t confuse your wants with your needs
Do you really “need” a new dress for that wedding you’ve been invited to? Sure, it’d be nice. But unless you don’t own an appropriate dress (and can’t borrow one) then it’s a want, not a need. This doesn’t mean you can’t buy anything that’s not a “need”, but if you’re drowning in debt, have unpaid bills and don’t have an emergency fund, then you should think hard about purchasing a “want” before you’ve taken care of the “needs.”
4) Don’t have a sense of entitlement
Newsflash – life doesn’t owe you anything. It sounds harsh, but it’s true. I’ll admit it – I struggled with this briefly. I’ve gone through some difficult times in my life and experienced personal tragedy. As much as I’d give anything to have not gone through this, it made me a stronger person. But I also went through a period of thinking “after everything I’ve gone through, it’s time for life to cut me a break.” Unfortunately, that’s not how life works. Sometimes good fortune might drop in your lap – if so, great for you! But for the vast majority of the time, if you want something you need to work for it.
5) Don’t be afraid to talk about money
Did you know that money issues are cited as one of the top reasons why couples divorce? I believe this statistic would drop drastically if people maintained an open dialogue when it comes to money. My husband and I make it a point to regularly discuss our finances. When I sat down to write up our most recent budget, we discussed each entry. Perhaps the most important item was our personal discretionary spending fund. Rather than blindly purchasing whatever we want, whenever we want it, we came to a number we both agreed upon which ensures there are no nasty surprises at the end of the month.
6) Don’t try to impress other people
Also known as “Keeping up with the Joneses”, and a good way to get into debt. Instead of trying to impress others with your material items, try impressing them with your kindness, your sense of humor, your brains, your knowledge of the world. Your friends aren’t your friends because you have an expensive handbag (and if they are, then you should considering re-evaluating your friendship). Focus on impressing people by who you are, not by what you have.
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