Tips Warren Buffetta: Main mistakes in personal finance
From whom to listen to the councils about money, as not from one of the richest people of the planet? When the famous billionaire Warren Buffett acquired Berkshire Hathaway in 1964, its cost was $ 19. By the end of last year, it was already worth $ 114,214 and supports the growth rate of the cost of 19.7% per year for 48 years. Judging by how Warren Buffett disposes of his money, he should trust in this issue. And this applies not only to investments, but also to personal finance.
According to the famous billionaire, there are two simple mistakes in terms of personal finance, which we are very expensive. When the billionaires asked that, in his opinion, is the main mistake, Buffett gave a simple answer:
Well, I think the biggest mistake is not to get used to save from the very beginning, because savings are a habit. And the second mistake: trying to become rich quickly. Slowly improve your material state easily, and get rich quickly – no.
When it comes to money and investment, easy to get into the trap and decide that the savings can wait, and now the best option is to invest in new areas that no one knows about. Be that as it may, such thoughts are a big mistake.
Consider an example of two people 25 years old: David, who earns $ 40 thousand. a year and Michael, which makes $ 80 thousand. Every year their incomes grow by 2.5% and they will work up to 73 years.
The only difference between them is that David began to save 10% of his income, since he turned 25, and Michael decided to wait with savings until he was 40, and until he had to earn $ 115 thousand. in year.
Well, of course, they keep money not under the bed, but send them to the bank, for example, under 7% per annum.
By the time each of them will be 50 years old, they will postpone about $ 144 thousand. on retire. But when they retire at 73 years old, guess, who will have more money?
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Despite the fact that David earned all his life half less money than Michael, he will be 10% more funds. David will have $ 2.3 million in savings, and Michael has $ 2.1 million.
And even more noteworthy what Michael invested in accumulation by 60% more of his money than David (approximately $ 610 thousand. posted Michael out of the wallet, and $ 375 thousand. – David)
If we imagine that their money will grow by 8.5% per year, at the end of David will remain 30% more money than Michael – $ 3.7 million. in stock, compared to $ 2.9 million.
What follows from this
Very often novice investors say: "To make money, you need to have them first," but that they appear, you need to save.
Buffett claims, it is important to get used to savings from the very first steps, and it is not possible to understand that wealth does not come immediately, but gradually, throughout life.