Making Money Like Warren Buffett

Warren Buffett is without question one of the most successful businessmen of all time. Unlike many millionaires and billionaires who either had seed wealth handed to them or just happened to be in the right place at the right time, Buffett started out with nothing in life. In fact, he learned one of his first money making decisions at a very early age.

Negotiate the Best Deal Possible

A picture of businessman Warren Buffett.
Warren Buffett pauses during an interview.

There is an old story about how Warren Buffett took a job from his own grandfather to dig the grandfather’s store out from under a pile of snow. After working for 5 hours with another boy, all Buffett earned from his labor was 45 cents. Even in those days that was not enough money to justify so much work.

Buffett eventually realized that if you’re going to do a job you should be paid what you really want to be paid for that effort; otherwise, seek a different job. Negotiate a better deal.

This writer has occasionally accepted deals that proved to be financially disastrous. Never assume the other guy really means it when he says “this is the only offer I’m going to make you”. If you’re being offer a job, no matter what the salary they offer you is, ask for more money. And if they don’t increase the offer even a little, think about how badly you want to work for such a cheap employer.

The same is true when you are selling things. Don’t settle for less than what you value your merchandise at. Negotiate the best deal possible; and if you cannot get a good deal, then don’t deal at all.

Reinvest Your Profits As Soon As Possible

How did Warren Buffet build his first business? He and a friend bought a pinball machine and put it in a store. When they had earned enough money to buy another pinball machine they did exactly that. Over time they bought eight pinball machines but they only had to come up with enough money o their own to buy one pinball machine.

Imagine your investment in a small money-making opportunity. What do you do with the money it earns? If you reinvest that money in another money-making opportunity you’ll have two such opportunities working for you. And you only had to pay for the first out of your original income and savings.

The longer you reinvest your profits in new money-making opportunities, the more money-making opportunities you will end up with.

Be Patient

Warren Buffet did not get rich over night. In fact it took years for him to become wealthy. He managed his money carefully by waiting for situations to mature to the point where he was better off selling his businesses than staying invested in them.

Time is the investor’s best friend. As long as you are making money and reinvesting your profits wisely your business will grow.

Borrow As Little Money As Possible

In America we live on debt. We borrow money to buy cars, we borrow money to buy houses, we borrow money to finance vacations, etc.

The more interest you pay the more expensive everything you buy becomes. You have to ask yourself if it’s really important to pay that much extra for what you NEED. You need a car but you only need a car that runs well and is easy to maintain. You need a home but you only need a home that is safe, comfortable, and easy to maintain.

Borrowing money sets you on the track of spending too much for everything. Limit your borrowing to as little as possible.

No Matter What Your Income, Save Something

Even people who live in poverty can find ways to set back at least a little bit of money every week. Make that savings pool completely untouchable and over time it will grow into a substantial sum you can use to invest in a small business opportunity.

Warren Buffett does not consider savings bonds and certificates of deposit to be business opportunities. If he had only $1000 to work with, you can be sure Mr. Buffett would not leave that money in a savings account for long. He would look for an opportunity to invest that money so that it grows into something over time.

And he wouldn’t think in terms of “how can I turn this $1000 into $2000”. Instead, he would think in terms of “if I make $20 a month from this $1000 investment, when will I be able to invest another $1000?”.

Always be saving money, no matter how hard that is. Don’t set unreasonable savings goals. Be modest but be consistent.

You Own the Business, Always

Whether you are buying stocks, bonds, or commodities if you are INVESTING your money they you OWN the business. Even the smallest shareholder in the largest corporation OWNS THE BUSINESS.

Thinking of yourself as a business owner puts you into a frame of mind that makes better use of your time. Ask yourself, “Do I want to own this business for at least five years?” If the answer is “no”, you don’t need to make that investment.

Ask yourself, “Will I earn enough from this business to start another one in five years?” If the answer is “no”, you don’t need to be in that business.

You don’t just invest your money; you own the business.