Warren Buffett's Ten Rules
Rule 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 firends sold the venture, Buffett used the proceeds to buy stocks and to start another small business.
Rule 2: Be Willing to be Different
Don't base your decisions upon what everyone is saying or doing. When Buffett began managing money in 1956 with $100,000 cobbled together from a handful of investory, he was dubbed an oddball. He worked in Omaha, not on Wall Street, and he refused to tell his parents where he was putting their money. People predicted that he'd fail, but when he closed his partnership 14 years later, it was woth more than $100 million.
Rule 3: Never Suck Your Thumb
Gather in advance any information you need to make a decision, and ask a friend or relative to make surve that you stick to a deadline. Buffett prides himself on swiftly making up his mind and acting on it. He calls unnecessary sitting and thinking "thumb-sucking".
Rule 4: Spell out the deal before you start
Your bargaining leverage is always greatest before you begin a job - that's when you have something to offer that the other party wants. Buffett learning this lesson the hard way as a kid, when his grandfather Ernest hired him and a friend to dif out the family grocery store after a blizzard. The boys spend five hours shoveling until they could barely straighten their frozen hands. Afterwards, his grandfather gave the pair less than 90 cents to split.
Rule 5: Watch Small Expenses
Buffett invests in businesses run by managers who obsess over the tiniest costs. He once acquired a company whose owner counted the rolls of 500-sheet toilet paper to see if he was being cheated (he was). He also admired a friend who painted only the side of his office building that faced the road.
Rule 6: Limit What You Borrow
Buffett has never borrowed a significant amount -- not to invest, not for a mortgage. He has gotten many heartrending letters from people who thought their borrowing was manageable but became overwhelmed by debt. His advice: Negotiate with creditors to pay what you can. Then, when you're debt-free, work on saving some money that you can use to invest.
Rule 7: Be Persistent
With tenacity and ingenuity, you can win against a more established competitor. Buffett acquired the Nebraska Furniture Mart in 1983 because he liked the way its founder, Rose Blumkin, did business. A Russion immigrant, she built the mart from a pawnshop into the largest furniture store in North America. Her strategy was to undersell the big shots, and she was a merciless negotiator.
Rule 8: Know When To Quit
Once, when Buffett was a teen, he went to the racetrack. He bet on a race and lost. To recoup his funds, he bet on another race. He lost again, leaving him with close to nothing. He felt sick -- he head squandered nearly a week's earnings. Buffett never repeated that mistake.
Rule 9 Assess The Risks
In 1995, the employer of Buffett's son, Howie, was accused by the FBI of price fixing. Buffett advised Howie to imagine the worst- and best-was scenarios if he stayed with the company. His son quickly realized that the risks of staying far outweighted any potential gains, and he quit the next day.
Rule 10: Know What Success Really Means
Despite his wealth, Buffett does not measure success by dollars. In 2006, he pledged to give away almost his entire fortune to charities, primarily the Bill and Mlinda Gates Foundation. He's adamant about not funding monuments to himself -- no Warren Buffett buildings or halls. "When you get to my afy, 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."