Warren Buffett Notes on Personal Finance
Usually, when someone says Warren Buffett in a sentence, people pay a little more attention.
The general advice is simple:
If Warren Buffett says to do something, you probably should.
If he says not to do something, you probably should not.
I would like to think people listen to what I say in the same way. Of course, I often cannot get my own wife to listen to me, so I may have a ways to go before my hopes come true. Truth be told, I have no idea if Warren’s wife listens to him. It is not in the notes or comments I have read.
Maybe she calls him a butt-face like my wife calls me.
Relationships be tricky.
For this post, let’s condense a few of Uncle Warren’s most useful ideas into practical personal finance lessons.
He seems like an uncle figure, right? Someone we secretly listen to instead of our parents?
Let’s begin.
1. Uncle Warren says: Invest in yourself
“The most valuable investment you can make is in yourself.”
You may be tempted to boo me for putting this first because it sounds corny.
But this is one of Warren Buffett’s secret weapons.
During his lifetime, Buffett has poured a tremendous amount of knowledge into his mind. He has been quoted as saying that he believes people should read 500 pages a day. He has also said that he sometimes spends about 80% of his day reading.
That is a ridiculous amount of reading.
Think about how much smarter you could become if you spent a consistent amount of time learning every day. You do not need to read 500 pages daily. Most people do not have the time.
But you can read a few pages.
You can listen to a thoughtful audiobook.
You can study your retirement plan, insurance coverage, or employee benefits.
You can learn how investing actually works before putting money into an investment.
The point is not to hit an exact page count. The point is to build a habit.
I can almost guarantee that most of Buffett’s reading is nonfiction. It is unlikely that Uncle Warren spends his day reading the Twilight saga.
Although some fiction is still good for you. I am not here to ruin all the fun.
Watching the movie version does not count, either. Just a heads-up.
No shortcuts.
Investing in yourself can also mean:
- Learning a skill that increases your income.
- Understanding your employer’s retirement plan.
- Improving your communication.
- Taking better care of your health.
- Learning how taxes, debt, and investing work.
- Building habits that make your future easier.
Your knowledge can compound just like money.
The more you understand, the fewer expensive mistakes you are likely to make.
2. Buy a wonderful company at a fair price
“It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
In other words, when you invest, look for quality.
Do not buy something only because it is cheap.
A low price does not automatically make an investment valuable. Sometimes a low price is simply a warning that the underlying asset is weak.
This applies to stocks. It can apply to real estate. It can apply to businesses. It can even apply to everyday purchases.
Buy things that can stand the test of time.
That does not mean you should never look for a good deal. If you find a great piece of real estate below market value, that may be worth considering. If you want to invest after a market drop, that can also be reasonable.
Make your money, homie.
That is also probably a Warren Buffett quote somewhere.
But over the long term, you should not build your entire financial plan around trying to perfectly time the market. Most people will not consistently know when the market is about to rise or fall.
Instead, focus on buying quality assets on a regular basis.
For many investors, that may mean using diversified, low-cost funds rather than chasing individual stocks they do not understand. It may mean holding investments for the long term instead of constantly buying and selling.
Buffett has also said:
“The stock market is designed to transfer money from the Active to the Patient.”
That is a useful reminder.
Too many people chase price. They see something falling and assume it must be a bargain. Then the investment falls apart because the company or asset was never strong enough to begin with.
Price matters.
Quality matters more.
You can read more about Buffett’s broader investing principles in this summary of Warren Buffett’s personal finance advice.
3. Spend what is left after saving
“Do not save what is left after spending, but spend what is left after saving.”
This guy, am I right?
Wordsmith.
And he hits the problem directly.
Many people spend in this order:
- Necessities.
- Entertainment.
- Eating out.
- Shopping.
- Subscriptions.
- Whatever is left goes toward saving or investing.
The problem is that there is usually nothing left.
This is why saving often becomes an afterthought. It is not necessarily because people are careless. It is because the money disappears before they make a decision about it.
Flip the order around.
- Receive your income.
- Save and invest first.
- Pay your necessary expenses.
- Spend what remains.
Start with a percentage that is realistic for your situation. Maybe it is 1%. Maybe it is 5%. Maybe it is 15%.
The first goal is not perfection.
The first goal is consistency.
Set up an automatic transfer on payday. Direct money into an emergency fund, retirement account, or other long-term investment before you have a chance to spend it.
Then increase the percentage over time.
A raise does not have to become a larger car payment. A bonus does not have to disappear into a weekend of spending. Some of every increase can go toward your future.
You are not depriving yourself.
You are paying your future self first.
4. Follow the Noah Rule
“The Noah Rule: Predicting rain doesn’t count, building arks does.”
This may be one of the most practical lessons in the entire list.
You do not need to predict every storm.
You need to prepare for one.
Eventually, the market will fall. A major expense will appear. You or your spouse may lose a job. A health problem may interrupt your income. The economy may enter a recession.
That is life.
If you build your financial plan as if everything will always be fine, you are putting yourself and your family in a fragile position.
Your first financial goal should be building a safety ark.
That may include:
- An emergency fund.
- Health insurance.
- Life insurance when others depend on your income.
- Disability insurance.
- A plan for high-interest debt.
- A budget you can reduce quickly during a crisis.
- Enough cash to avoid selling investments at the worst possible time.
An emergency fund does not need to be perfect on day one. Start with a small target. Then work toward several months of essential expenses.
The goal is breathing room.
Money stress can make every problem feel bigger. A cash reserve cannot prevent every bad event, but it can prevent one bad event from becoming a financial disaster.
The same principle applies to investing.
Do not build a strategy that only works when markets rise. Use diversification. Keep your timeline in mind. Avoid investments you do not understand. Do not invest money you need next month.
Predicting rain is not enough.
Build the ark.
5. Appreciate what you have
“The happiest people do not necessarily have the best things. They simply appreciate the things they have.”
One of my strongest beliefs is that most people do not need to become millionaires or multimillionaires to have a good life.
There is nothing wrong with building significant wealth. Wealth can provide choices, security, and opportunities.
But reaching a specific number does not automatically make you happy.
If you have $999,999, you do not suddenly become a completely different person when you reach $1 million. Your worries do not disappear. Family problems do not automatically stop. Your health does not become perfect.
You simply have a different number on a net worth calculator.
That is why your financial plan should not be built only around reaching a number, buying a certain house, driving a certain car, or creating a perfect version of the American dream.
Money is a tool.
Use it to make your life more stable. Use it to protect your family. Use it to create more freedom. Use it to reduce the chance of financial disruption.
But appreciate the life you have while you are building.
Enjoy your relationships. Take care of your health. Notice the ordinary things that are already working.
A newer car will not automatically make you happier than a reliable older one. A larger house will not automatically improve your family life. More possessions can create more payments, maintenance, and stress.
Be appreciative, not greedy.
Put the lessons together
There are many more Warren Buffett quotes we could add here.
Technically, there are too many.
But these five lessons create a solid personal finance framework:
- Invest in yourself. Build knowledge and skills.
- Choose quality. Do not chase cheap investments just because they are cheap.
- Pay yourself first. Save before your spending expands.
- Prepare for storms. Build your emergency fund and protect your income.
- Appreciate what you have. Wealth is useful, but contentment matters too.
You do not need to become Warren Buffett.
You do not need to read 500 pages every day.
You do not need to pick the perfect stock or predict the next market crash.
You need a clear plan. You need consistent habits. You need enough patience to let good decisions compound.
If you want practical, human help putting these ideas into action, learn more about FundWise financial coaching and education.
And remember: you do not have to solve your entire financial life today.
Read a few pages.
Save a little money.
Build your ark.
Appreciate what you already have.
Then do it again tomorrow.