Buffet’s four rules of becoming a millionaire.

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If you are the one who wants to be a millionaire with the show, then kudos to you. You can try your luck, but if you are among 1% of people who think that they can become a millionaire by the hustle they do, then welcome to the club. I can surely tell you that many people have the potential of becoming a millionaire in their lifetime. They failed to do so because at the first point they lacked conviction. They do not think that it is possible to become a millionaire. The only stability in your life will be achieved through continuous risk management and well-studied risk structure through finances. For the record, a great book on this subject is the intelligent investor by Benjamin Graham. Here we are talking about Warren Buffett’s principle about becoming a millionaire.

Let it shed light on some of his principles about finances and financial management.

“Don’t measure the depth of the river with both feet.”

Buffet says that you need to save something for yourself. He says that you need to pay yourself some of your savings so that you can advance your risk management.  Many people think that the only way to financial freedom is going all in, but that’s not possibly correct. When you are in for the long game. You need to understand that the risk associated cannot be completely understood and that is why you should take away some of your funds and keep them in a separate portion for later miseries. Financial freedom will be achieved through systematic financial discipline and a risk-managed structure. If you are not very much careful with your investments and if you’re investing just because you are interested in someone else’s opinion, that means that you’re not practicing financial intelligence completely.

All the glitters are not always gold.

Whenever you on revenue or profit, understand the differences between spending and investments. You should be intelligent in your approach and should understand the distinction between an expense and an investment from the perspective of further return. Surely there is no justification between want and need. But you need to understand what is your want and what is your need. Because if you don’t distinguish the need and want at the earliest of financial independence, you will never achieve the independence you’re aiming for. That’s the truth. If you are purchasing a stock that is just a good brand, that doesn’t mean that it will perform exponentially. You need to understand the statistics, the math, the sales figures, and then put your money into it. Just do not look at the cover and judge the book.

Don’t borrow for luxuries.

Say if you want to purchase a Lamborghini, now you have to understand if you really can afford it or not. I’m not just talking about the cost of the car or taxes or related costs. I’m also talking about the longevity of the car, for which it will serve you. The maintenance-related, the recovering cost, repairing costs, and the operating costs throughout the years. Generally, whenever we are purchasing an asset, especially when it is a luxury, we do not think about the related costs. But later we regret it because we really can’t afford it. You need to understand that “don’t buy things you do not need because if you do that, you will soon need to sell whatever you need.” A general rule of thumb is just to see that if you have 10 times the money, whatever you’re spending on your luxury in your bank account. If you do that, you may be able to afford it, but if you don’t, just don’t think about it again. 

Do not invest with borrowed money. if you do, be very very careful.

The general thought process is more money will solve more problems or the more you invest, the more you reap. But The thing is, the more you invest, the more risk is associated. And if you’re not able to earn the money, you’re investing. If you are just borrowing someone else’s money for your benefit, that means either you are very clever and intelligent about the whole financial system or you are the biggest fool in the market.  Borrowed money or credit gives us an Inflated experience that we have money that we do not. And if you’re not very much careful with the risk associated, you may lose the money and will owe more than what you can pay. 

These are the top four rules of becoming a millionaire because becoming a millionaire is not just about earning big fat money, it’s more about being more intelligent about money than the other people who are not millionaires.

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