Financial independence and financial education are crucial for achieving long-term financial success. One of the most successful investors of our time, Warren Buffett, has shared some insights on what poor people tend to waste their money on. In this article, we’ll explore these 12 things and how you can avoid them.
- Earnings Power – Invest in your skills, education, and ability to earn a good income. “Investing in yourself is the best thing you can do. Anything that improves your own talents; nobody can tax it or take it away from you.” – Warren Buffett
- Credit Card Debt – Credit cards offer many benefits, including cash back, points, and airline miles. However, these benefits only make sense if you pay the full payment every month. If you carry a credit card balance, the interest rate can be as high as 20%, meaning you’ll pay an extra 20 cents on every dollar you owe. Avoid carrying credit card balances, and ensure any loan you take is worth the interest you’ll pay. “If you buy things you do not need, soon you will have to sell things you need.” – Warren Buffett
- Bars and Pubs – Alcohol at bars and pubs can be expensive, costing up to $10 per beer bottle. Instead, consider hosting a house party to socialize with friends. This can save you significant money to put towards other things. Warren Buffett doesn’t drink alcohol, so he never goes to bars.
- The Latest Technology – The newest and greatest technology may seem appealing, but there’s often little difference between one phone and the latest. Compare features and specifications carefully, and consider if the upgrade is worth the price. Gadgets like back massagers, fancy toothbrushes, and sound systems are cool but unnecessary. Warren Buffett still had a flip phone in 2008 that he was still learning to use and didn’t have a computer in his office at work for decades.
- Expensive Clothes – Billionaires like Mark Zuckerberg, Warren Buffett, and the late Steve Jobs practiced the art of simplicity in their wardrobes. They stick to basics and repeat the same type of outfits, making it a practice not to waste money on expensive clothes. You don’t have to give up luxuries, but you can make better decisions about what you buy. Warren Buffett wears the same type of plain suits he has for his whole adult life.
- New Cars – A brand-new car may look good but is never worth the price. Cars lose value as soon as you drive them off the lot, with a new vehicle typically losing 20-30% of its value in the first year alone. Don’t borrow money to buy an asset that immediately depreciates. Warren Buffett keeps the same car for as long as his family will let him.
- Gym Memberships – Many gym memberships go unused after the first few months. A gym membership doesn’t make sense if you’re not committed to working out regularly. Consider free workout options like walking, running, or hiking. Warren Buffett hates wasting money as he sees its potential for long-term growth as investment capital.
- Subscription Services – Subscription services can be tempting, but they’re set up to charge your credit card automatically. This can make keeping subscriptions you don’t use or forget about entirely easy. Take stock of your subscriptions and cancel those you don’t need. Buffett believes it is more important to be an investor in businesses than a consumer in too many of their products. He would not want you to be a business’s cash-flowing asset with an automatic bill for something you don’t use.
- Overusing Skincare Products – With so many skincare products available, it’s tempting to overuse or combine them, which can worsen your skin. Find a natural and simple hair, face, and body care routine and stick to it. Buffett would warn about falling for vanity marketing.
- Frequent Nights Out – Going out for drinks or movies with friends can add up quickly. Instead, consider cooking and eating at home, which can be far cheaper and healthier. While Mr. Buffett loves weekly trips to his favorite steakhouse, he also goes to McDonald’s for breakfast most working days because it’s so cheap. He also spent most nights at home eating dinner with his family, not overdoing it at restaurants.
- Gambling – Betting can be fun and addictive, but Buffett doesn’t believe in making bets when the odds are against you. He loves the insurance business as he can put the odds in his favor and turn policyholders into cash-flowing assets.
- Smoking -Cigarettes and cigars are expensive, costing around $2,400 annually. Quitting can save you a significant amount of money, and many ways exist to resist tobacco cravings. Warren Buffett has never smoked, and he grew up in a time when most people smoked cigarettes. It’s a nasty habit for your health and personal finances.
Warren Buffett’s insights on what poor people waste their money on are important lifestyle tips for achieving personal financial success. By avoiding the common financial traps Buffett identified, such as credit card debt, excessive nights out, and other unnecessary expenses, you can save and invest more money for your future.
As you work towards financial peace, it’s essential to prioritize financial education and sound financial practices. By adopting a frugal mindset and focusing on long-term financial goals, you can build wealth over time and achieve financial freedom. It all starts with the right mindset, self-control, and habits. See your ability to earn income as crucial to your financial success, and once you earn it, be very thoughtful in how you spend it and save as much as possible. Financial success is a cultivated set of habits based on your priorities. Warren Buffett has given us an example as an investor and CEO and in his personal financial life.