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Almost everybody is familiar with America’s favorite uncle, Warren Buffett. He is the Oracle of Omaha and the investing guru that runs Berkshire Hathaway. He, however, has had a right-hand man for almost 60 years, Charlie Munger. They have been in partnership together since 1959. Clearly it’s worked out well for both of them, since they still work together today and are multi-billionaires.
Charlie has said that he and Buffett “don’t agree totally on everything, and yet [they are] quite respectful of one another.” Buffett chimed in with, “Charlie says, “Well, you’ll end up agreeing with me because you’re smart, and I’m right.”
While Charlie is less famous than Warren Buffett, he is among my favorite investors of all time. He has some of the best soundbites on investing. I thought today, I’d share some of Charlie’s wisdom with you all. Most of these quotes come from Charlie’s book, Poor Charlie’s Almanac.
A No-Brainer to Getting Rich
“Spend less than you make; always be saving something. Put it into a tax-deferred account. Over time, it will begin to amount to something. This is such a no-brainer.”
How many times have we heard, “Save more than you spend”?
It’s such simple advice. But it’s clear that not everybody is listening. The average American has $16,000 in credit card debt, while the total household debt is $132,500, including mortgage debt.
Pay off your debt now so that you can start investing for your future. Otherwise, you will be looking in the rearview mirror instead of focusing on your future goals.
High IQ Not Required
“You don’t need to have a high IQ to be rich. You only need to avoid real stupid mistakes.”
I don’t pretend to be the smartest person in the room when it comes to finances. There are so many people who know way more than me. I’ve tried to understand Bitcoin and the cryptocurrencies, but I just don’t get it. Things I don’t understand, I avoid at all costs. It does make me feel slightly better when Charlie refers to Bitcoin as “rat poison”.
The way that I’ve made my wealth is by being incredibly fortunate to avoid dumb mistakes.
I didn’t buy rental properties when all of my friends were jumping on them. I didn’t pull all my money out of the market when it was dropping. And finally, I opted for delayed gratification and avoided buying new cars and fancy clothes while my friends were splurging.
Today, some of my friends are still struggling from the mistakes that they made from ten years ago. It’s astounding to see how much a mistake can set you back in life.
Hard Work Pays Off
“The safest way to try and get what you want is to try and deserve what you want.”
As much as I’d love to win the lottery, I know my chances are very slim. In turn, I try to work as hard as possible on things that I can control. That means that I have to tune out some of the noise that goes on around me.
I try my best not to become distracted at work. Instead, I put my head down, avoid the drama, and work my butt off. And guess what? I recently got recognized for my hard work. It was really surprised as I try to maintain a low profile, but it felt really nice.
Stop Debt In Its Tracks
“Once you get into debt, it’s hell to get out. Don’t let credit card debt carry over. You can’t get ahead paying 18%.”
Credit card companies are very lucrative. Don’t believe me? Take a look at this chart from MasterCard. The blue line is MasterCard. That nearly flat red line? That’s the S&P 500’s return since MasterCard IPO’d.
Can you tell that credit card companies are prospering? Pay off that credit card debt as soon as possible.
Seize Opportunities When They Arise
“What you have to learn is to fold early when the odds are against you, or if you have a big edge, back it heavily because you don’t get a big edge often. Opportunity comes, but it doesn’t come often, so seize it when it does come.”
I am extremely risk averse. I don’t play the lottery, I drive the speed limit, and I eat simple foods. It’s just not in my nature to be too adventurous. However, when the time feels right, I can move impulsively and make a snap decision. It baffles my wife since I’m usually so cautious. I figure when something great comes along, you gotta move quickly before someone else does. That was my philosophy when I met her.
Do What Is Right, Not What Is Easy
As for the secret to their success, the topic of good morals came up. Munger said he didn’t think “we deserve much credit” for having good morals, saying early on they “figured out that the world would reward us better if we behaved that way.”
Some people refer to this as karma. I prefer to use the Bible verse Luke 6:31, “Do to others as you would have them do to you.”
I sleep much better when I know that I’ve done the right thing, especially in tricky situations. You should never compromise your morals for the sake of convenience or in pursuit of more money.
Surround Yourself With People Who Will Lift You Higher
“We both have the theory that you should hang around good people,” Munger said, “and always behave better every year than you behaved the previous year.”
I use to struggle with this in my younger days. During high school and college, I had a wide variety of friends. Some were good influences but others, not so much. It took me a while to cull through some of these friends over the years. But now, I am at a point where I find myself gravitating towards people who have similar perspectives and standards that I do and who also motivate me to be better.
As sad as it is to cut off friends that you have known all your life, sometimes it’s necessary. Bad company can really weigh you down. Look at some of the cautionary tales of athletes that wasted millions as they paid their entourages. Retired basketball center Danny Schayes stated, “Guys go broke because they surround themselves with people who help them go broke.”
Take the Road Less Traveled
“Take the high road, it’s uncrowded..you do not run into heavy traffic…you have a huge advantage on the high road, there’s not too many competitors.”
Have you ever noticed how many people seem to run towards get-rich schemes? Usually, the first movers are the ones that make all that money, as they try to tout the foolproof method in which they gained their success. It’s the ones that arrive late to the party that end up getting burned.
I think if people spent less time trying to cut corners to gain wealth and simply work hard, they would be much better off.
Whatever It Is, Pity Will Not Solve It
“Generally speaking, envy, resentment, revenge and self-pity are disastrous modes of thoughts. Self-pity gets fairly close to paranoia, and paranoia is one of the very hardest things to reverse. You do not want to drift into self-pity. … Self-pity will not improve the situation.”
When you hit a bump in the road, it’s easy to get down and feel sorry for yourself. I’ve noticed that in my own life. My self-pity ends up affecting other aspects of my life, which, in turn, pulls me deeper down. I find that if I hit a funk like this, it can take me a week or two to escape.
Now, I try to ensure that I don’t throw a pity party when things don’t go my way. Otherwise, I know how quickly life can spiral out of control.
Never Stop Learning Because Life Never Stops Teaching
“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you.”
After grad school, I was done with learning. I didn’t want to pick up another textbook or learn anything new. I was completely burnt out. But that cost me big time. Since I wasn’t willing to challenge myself mentally, I avoided taking harder jobs. In turn, I probably slowed down my trajectory at work. It wasn’t until I talked to someone at work who gave me a swift kick in the pants that I finally realized that I should never stop learning and pursuing more challenging opportunities.
Don’t Blame Others for Mistakes You Created
“Another thing that does one in, of course, is the self-serving bias to which we’re all subject. You think the ‘True Little Me’ is entitled to do what it wants to do. And, for instance, why shouldn’t the True Little Me overspend my income. There once was a man who became the most famous composer in the world but was utterly miserable most of the time, and one of the reasons was because he always overspent his income. That was Mozart. If Mozart can’t get by with this kind of asinine conduct, I don’t think you should try.”
I love this quote. It hits so closely to home for me. How often have I thought that the rules apply to everyone else but me? I’m guessing I’m not the only one, based off of some of the things people get caught doing before they end up in jail.
The Inability to Delay Gratification is a Sign of Immaturity
“It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.”
If you haven’t seen the marshmallow test, here it is on Youtube. Patience may not come innately, but great things come to those that wait.
A Goal Without a Plan is Just a Wish
“Like Warren, I had a considerable passion to get rich, not because I wanted Ferrari’s – I wanted the independence. I desperately wanted it.”
I think most of us in the FIRE community are diligently nodding our heads at this quote. Most of us aren’t passionate about getting rich. We want to fulfill the dreams and desires of our hearts.
To Teach Is to Touch a Life Forever
“And I like to ask Warren what he wants to be remembered as, and he says a teacher. Who else in America who is a CEO says he wants to be remembered as a teacher? I like it.”
I saved this quote for last, as it was, by far, my favorite. We all want to be able to pass our knowledge down from one generation to another. I love that Warren Buffett desires people to learn from him. It’s incredibly powerful to seek to live our lives in such a way that we would be remembered as teachers ourselves.