I’d like to dedicate a few words this week to one of my favourite people in the world, Warren Buffet, chairman and CEO of the investment firm of Berkshire Hathaway. In my opinion he is the world’s most admirable business magnate, investor, and philanthropist. It’s not that I admire the 82-year-old so much for having amassed incredible wealth, but for the philosophy that helped him attain that wealth, which I believe today amounts to something like 50 billion dollars.
You wouldn’t know it by the way the man lives. He earns a base salary of $100,000 a year at Berkshire Hathaway. It's a salary that has not changed in 25 years. He still inhabits the same relatively modest home he purchased 55 years ago. In 2008, he treated himself to a new Cadillac – valued at about $40,000 - after auctioning off his seven-year-old Lincoln Town Car on eBay. For Buffet, the new Caddy was a very big-ticket item. Outside of work, he amuses himself by watching sports on TV or playing cards. He has announced his kids will not inherit much of his money, the vast majority of which is earmarked for charity.
Warren Buffet, for all his sophisticated financial planning, is essentially a simple man with simple needs, and a very sane outlook on life. Thankfully, he has not been stingy with his opinions.
Above all, his financial planning advice advocates the importance of saving money and holding fast to investments over the long term. Don’t buy impulsively or compulsively, he tells us. Always give thought to what you spend, and for significant outlays even write down on paper the reason or reasons why you need to buy a particular item. If your reasoning isn’t sound in terms of satisfying real needs, forget about making the purchase. He says, “If you buy things you don’t need, you may soon have to sell things you do need.”
For Buffet, a very good reason for going into debt would be a college education thanks to the payback that comes later many times over, making it an excellent investment. As Buffet has been known to point out time and again, “The most important investment you can make is in yourself.”
He urges people to never save what is left after spending, but to only spend what is left after saving or investing. That may be hard for those of us who are in cash-strapped circumstances. Still, we should always strive towards saving, because in the long run it will pay off. Holding fast to possessions has certainly paid off for Berkshire Hathaway, which has averaged an annual growth in book value of more than 20 per cent to its shareholders for the last 44 years, while employing large amounts of capital, and minimal debt.
“Respect all of your money as if it were the last five dollars in your pocket. This perspective will help you value your money and put more thought into how much you save, spend, and invest,” Buffet says. He might add to that the demonstrated benefits of living life below one’s means whenever possible.
And here’s another interesting part of Buffet’s thinking. He tells us, “Do what you love.” If you can make money doing what you love, you’ll be happier. It means you’ll spend less money trying to gratify yourself through material possessions. He notes that if the work you do to make a living isn’t something that you love, then find a new job that does please you. Or do what you love as a hobby, which might bring in a little extra money or, who knows, develop into a full-blown business.
His point is, where there is passion there is always possibility.
We should thank Warren Buffet for the riches he bestows upon others not only through his bank account, but through his wisdom.