The Practical Way

10 Ways To Get Rich

Parade
By Warren Buffett
published: 09/07/2008

With an estimated fortune of $62 billion, Warren Buffett is the richest man in the entire world. In 1962, when he began buying stock in Berkshire Hathaway, a share cost $7.50. Today, Buffett, 78, is Berkshire’s chairman and CEO, and one share of the company’s class A stock is worth close to $119,000. He credits his astonishing success to several key strategies, which he has shared with writer Alice Schroeder. She spent hundreds of hours interviewing the Sage of Omaha for the new authorized biography The Snowball. Here are some of Buffett’s money-making secrets—and how they could work for you.

1. Reinvest your profits
When you first make money, you may be tempted to spend it. Don’t. Instead, reinvest the profits. Buffett learned this early on. In high school, he and a pal bought a pinball machine to put in a barbershop. With the money they earned, they bought more machines until they had eight in different shops. When the friends sold the venture, Buffett used the proceeds to buy stocks and to start another small business. By age 26, he’d amassed $174,000—or $1.4 million in today’s money. Even a small sum can turn into great wealth.[...]

“Think Big and Kick Ass! in Business and Life” by Donald Trump and Bill Zanker

This is one of the latest books of Donald Trump that he wrote together with Bill Zanker from the Learning Annex. They draw from their experiences in life to provide practical advice on how to think big in your life and achieve what you want. Donald gives many examples from real estate and his experience with dealing with famous people. Bill’s prospective is different. He draws his examples from the struggles that he had in starting the Learning Annex and transforming it into a successful company.

They recommend that is very important to find your passion and follow it. Do not do something for money, but because you are passionate about it. Then the money will follow. You need to go after your passion with 150% focus and to focus on the solutions to the problems that you will encounter and do not be dishearten by the problems.[...]

“The Snowball: Warren Buffett and the Business of Life” by Alice Schroeder

This is a great book for anyone who is interested to invest in the stock market and run a business. The book describes the life of Warren Buffett from the day he was born up to 2008. The lessons are drawn from both his personal and his professional life.

Warren got involved in a very young age in the process of making money and managing other people’s money. When he was a kid he took his sister’s money to invest in a stock. This stock went down and everyday his sister would ask him why the stock is down. Warren did not like that experience at all and from that day on he did not want to manage other’s people money unless he knew he could do a great job. This gave birth to his first rule of investment “Never lose the money.”

You can find a lot of details on his management style in the book and how he pushes his people to get the best out of them.[...]

Never sell a stock

One of the biggest challenges that people face when they buy stocks is to decide when to sell them. This decision is as important as deciding which stock to buy. Even Warren Buffet, the legendary buy and hold investor, is selling stocks if he believes that he can find a better place for his capital.

First of all, you should never sell simply because a stock—and the market in general – goes down several percentage points. Selling on this basis alone is an overreaction that usually costs you money in the long run. Don’t waste your time on trying to time the market. Instead, you want to know your stocks well enough to be able to recognize which events spell danger and which scream opportunity.

Here, then, are some pointers to help you decide whether to stay the course or sell—for the right reasons:[...]

Has Warren Buffett lost his touch?

It is always useful to see both sides in an argument. This increases your understanding of the situation and hopefully will help you to make better decisions. I have been following Warren Buffett very closely in the last 3 years and I have been reading articles written about him and his investment and management style. Everyone is praising him for being a very good investor and being able to attract great companies.

There is one person though who is betting against him. Who tells that his time is over and he has lost his charm. This person is Doug Kass and the last few months he wrote articles on why Warren is wrong and why his style does not work any more. His articles and reasoning are very interesting. His main point is that his style is not applicable to this new age and following it will cause you to lose money.[...]

The practical way to riches, Part 6

This is the last post of this series. By now you must have a very clear idea of the practical way to riches. I have shared with you practical ideas that I have learned over the years. Most of the richest people in the world have followed the exact same ideas to build their wealth. What surprises me is that many people are failing to follow these simple steps and they are struggling so much today.

Today I will share with you the last idea. You might not realize the benefit of this one in the beginning and you might not even understand why this is important. I would recommend that you just look around you and decide if it is something that makes sense and you want to do as well. This is something that I did unconsciously some years ago and now I am happy I did it.[...]

The practical way to riches, Part 5

By now you must have a clear idea of the practical way to riches. To summarise what we said before, you need to follow these practical steps. You must put aside money every month that you will use for investments. You must save money every month that will cover you in case of emergency. You must control your expenses and spend less than what you earn. Finally, you must seek advice from competent people on a way to invest your money.

The above steps must become your habits. Every month you must do them like you brush your teeth every morning. Where most people fail is that they follow this advice for a while and then they relax and skip a few months. In the end, they just do it whenever they remember or when they have money left over. This is a disaster and it will make you to fail. This step will help you to resist the temptation of going down that path. It is a very critical step.[...]

The practical way to riches, Part 4

The last posts have covered the basic steps of the practical way to riches. In order to become rich, you must put aside money every month to invest in projects. In addition, you need to save money every month to cover any emergencies that might happen along the way. The last thing we covered was the need to control your expenses, so you can enjoy life and build your wealth.

Now it is time to get into more depth about the creation of wealth. We have built a good basis by spending less than we earn and saving money for troubled times. We started to build a sum of money to invest to expand our wealth. Now it is time to invest this sum of money and make it work for us. Make the money produce more money without us having to be involved. This is the secret.[...]

“The Wordly Philosophers” by Robert Heilbroner

I just finished “The Wordly Philosophers” by Robert Heilbroner. It is a very interesting book that looks into the lives and teachings of great economists like Adam Smith, Carl Marx and focuses on their lives and how their every day life has influenced their theories.

This book does not provide any practical steps on how to become a great economist or any other secrets. It reviews the theories of these people that have shaped the world today. Therefore, you might wonder why I review it.

The reason why I decided to write about it is because it can help you with achieving wealth.[...]

The practical way to riches, Part 3

In the last two posts we talked about the first two habits on the practical way to riches. These two habits are putting aside money to invest and save. This first will help you grow your wealth and the second will help you in a case of emergency. We need to plan well and get organized if we want to get rich.

Today’s post is about the third habit. The first two habits talked about managing the money that is flowing in. Now it is time to monitor the money that is flowing out. This is a very painful topic for many people and also an eye opener. If you do not get a good handle on this habit, then nothing else matters. You are moving away from riches fast.[...]

“Think and Grow Rich” by Napoleon Hill

This book is a classic one about wealth creation and it covers practical and theoretical ways on how to achieve this. It is structured in 13 steps that you can follow to achieve wealth. Most of the focus of the book is on the mindset, as the title implies. Think and grow rich, not work and grow rich.

It guides you to build a goal for your future in step 1 and then in the following steps it talks about how to move towards that goal. Near the end it starts to focus more on traits that you need to have to achieve the goal and also it has some very nice questionnaires for self analysis. These are useful to see where you are aiming at, but it does not provide steps on how to achieve them.[...]

The practical way to riches, Part 2

Last week, we talked about the first habit on the practical way to riches. The first habit is to put aside some money each month so you can invest it and make the money work for you.

The second habit is as important as the first one. The first one will help you to expand your wealth and start to earn more. What we must pay attention to is that the wealth that we build is built on a strong foundation. The second habit will help to prevent a bad event of destroying our progress.[...]

The practical way to riches, Part 1

If you want to become rich you need to develop certain habits. Being rich is a state of mind and a collection of habits. Money is used to keep count. I have been looking into this area the last few years and I have noticed certain patterns that emerge.

One of the biggest ideas and misconceptions about becoming rich is that rich people are born rich. This is wrong. There are countless examples that prove the opposite, but people think that these are the exceptions. What you must realise is that these people have some habits in common. These habits are not specific to a region/race/sex/age/year. They can be universally applied. In the next series of posts I will discuss these habits in detail.

Habit 1 – Invest your money

Rich people make their money work for them. They do not work for their money.[...]

“Why We Want You to Be Rich” by Robert Kiyosaki and Donald Trump

This is a very interesting book that is written by two great authors. The book is packed with good material about the things you need to focus to get rich. It spends some time in the beginning to tell you why you need to get rich and why depending on a job and the government to look after you is not a wise decision.

I found that Robert is repeating his mantras here, a lot. If you have read some of his other books I do not think you will read anything new here. Maybe some bits here and there, but nothing amazing. Donald is a bit more original than his usual books. His parts in the book are smaller that Robert’s, but I found they contain much more practical steps on how to think big and negotiate. [...]

How to profit in tough times

I have asked a friend of mine to write a guest post for this blog. My friend is a person who is very keen on action and I asked her to share her thought on these tough times that the economy is going through. Here is the practical way she is dealing with the downturn:

TOUGH TIMES AHEAD!!! Well at least that’s what all the tabloids have been screaming for some time now. Will it change? How long will it last? Who’s to blame? Who knows!!! BUT the famous saying of what goes up must come down, can be positively correlated with ‘where there’s a winner there’s always a loser’ and vice versa. So in dark down-turning times such as these, who is silently sitting in the corner smirking as they watch the markets take a dive? [...]

“Breakthrough to success” NLP seminar with Chris Howard

In June, I went to the Breakthrough to Success seminar by Christopher Howard. It was such an awesome event. Chris rocks. He has studied NLP and hypnosis for years and it shows every minute he is on stage. I have studied NLP as well, but I have never seen anyone put it to practice so well. Every move and every word he says are calculated and full of meaning.

In the seminar he covers the areas of wealth, personal growth, career, relationships and family. The best thing is that he shows you the skills to use to achieve what you want in the areas and you practice them with him. So, you gain a lot of insight on the practical application of these tools. [...]

“The 4-Hour Work Week” by Timothy Ferriss

This is an amazing book and I believe that it is a must read for people who want to get out of the office jobs and experience life to the full. Tim explains how he went from working 80h per week to working 4h per week while at the same time increasing the profits in his company.

In this book he gives the tools and techniques that he used to achieve this and how other people he met during his travel have achieved similar goals. His main process has four steps and he explains them in great depth. At the start, he recommends that you need to define which tasks are important to you and which ones are not. The second step is to eliminate what is not important. Then you automate the ones that are left and then you are ready for the final step, liberation. [...]

“Richest Man in Babylon” by George S. Clason

This is a great book that talks about personal finances. It has many practical steps on how to control your financial situation as well as ideas on how to build wealth. The book is a collection of stories that take place in ancient Babylon. In these stories rich people of that age share their secrets of how they have created their wealth with other citizens of the city. Through these stories you can understand the principles and the actions that these people took and apply them in this modern age. The advice of these people is timeless and is not specific to that time or location. Of course if you try to find a camel trader these days to do business…… good luck with it. [...]