Warren Buffet’s 10 Rules for Getting Rich

This afternoon I went to Jimmy John's for lunch and noticed a sign on the wall that showed Warren Buffet's list of 10 Rules for Getting Rich. Instead of ripping the sign off the wall and risking felony charges for theft and vandalism, I decided to Google the list instead. Unfortunately, I was never able to find an exact replica of the rules that were on the wall of the sandwich shop. I did, however, find this blog post, Warren Buffett's Ten Secrets to Wealth and Life, which discusses the rules as they were in Parade magazine. Here is the list in its entirety as written by J.D. on September 10^th, 2008.

1. Reinvest your profits. "Even a small sum can turn into great wealth," Schroeder writes, if you're disciplined to not touch your profits. Let the power of compound interest work for you.
   
2. Be willing to be different. Don't follow the herd. Do what is best for you and your situation.
   
3. Never suck your thumb. Ah, how I could learn from this one. Buffett makes decisions quickly based on the available information. I tend to sit and stew about things. Acting decisively can give you an advantage and prevent procrastination.
   
4. Spell out the deal before you start. I stress this all the time: Don't sign a contract unless you've read it (especially not a mortgage). Read the fine print. Understand the what you're getting yourself into.
   
5. Watch small expenses. While it's true that the big things matter, the little things do too. Frugality is an important part of personal finance. But this principle also applies when investing, which is one reason I'm a fan of low-cost index funds.
   
6. Limit what you borrow. "Living on credit cards and loans won't make you rich," writes Schroeder. Sure, leverage can get you into a home or a new car, but too much debt is one of the biggest drags on your financial well-being.
   
7. Be persistent. If you know what you're doing is important and right, stick to it. Doggedly pursue your goals. Learn to "fail forward".
   
8. Know when to quit. The other day, I wrote about the danger of the sunk-cost fallacy. Just because you've already paid $10 to see Indiana Jones and the Kingdom of the Crystal Skull, doesn't mean you should sit through to the end. Be willing to cut your losses and walk away.
   
9. Assess the risks. "Asking yourself 'and then what?' can help you see all of the possible consequences when you're struggling to make a decision — and can guide you to the smartest choice."
   
10. Know what success really means. Success is different for each of us. Find what it is that brings meaning to your life, what makes each day important. Make this your focus. Buffett says: "When you get to my age, you'll measure your success in life by how many of the people you want to have love you actually do love you. That's the ultimate test of how you've lived your life."
    

Thanks to J.D. for writing this article on the Get Rich Slowly blog on September 10^th, 2008.

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