The Best Way to Become Rich, According To Warren Buffett

Rule No. 1: Never lose money, said Warren Buffett, one of the world’s richest men and an active investor since age 11. Rule No. 2: Never forget rule No.

Pay Yourself First
Take 10% of everything you make and put it in a savings account. Automate that transaction so that you don’t have to do anything; just let it happen. The more money that goes into your account, and is kept away from your daily consumption spending—the better off you will be.

Borrow only if you must
You’ll pay back every penny of what you borrow, but interest will leave you in debt for a long time. Borrowing just because you can doesn’t make sense if it costs you more than your current rate of return. Focus on saving and investments first—borrowing should be a last resort.

Invest Wisely
I never attempt to make money on the stock market. I buy on the assumption that they could close the market for five years and then when it reopens I’d be glad to sell. —Warren Buffett

Spend Only on Experiences
If you’re looking for financial freedom, you should invest your money in experiences instead of possessions. Don’t buy a car; go on a driving tour through Tuscany. Don’t buy fancy clothes; take a trip around Asia and make friends with local artisans. And don’t spend thousands of dollars on a watch—the experience gained from learning about luxury watches will be worth more than any jewelry ever could be.

Develop Skills
If you want to be rich one day—really rich—then it’s worth taking a long-term view of your career. Instead of trying to figure out how you can make more money next year (or month), focus on how you can continuously improve your skills and knowledge for years to come. By doing so, you’ll gain marketable experience and network with new people; both will increase your earning potential long term.

Use Money to Help Others (And Yourself)
Maybe you’ve heard about people who have become philanthropists in their later years. Maybe you know someone who has made a big difference through his or her generosity and donations. Whatever your perspective on philanthropy is, it’s a noble endeavor—and by giving back and helping others, it can make us feel good about ourselves too.

Save as Much as You Can
Buffett says that one of his most important pieces of advice for young people is to set aside as much money as possible early on. He says that by putting aside money in your 20s and 30s, you can avoid problems later on in life. In fact, he said in an interview with Fortune in 2013, I believe that super-saving is more important than having a high IQ.

Choose a Simple Lifestyle

If you’re trying to get rich, don’t make it more complicated than it needs to be. Consider that Buffet drives a Honda and lives in a small house without much splendor. By keeping his lifestyle simple, he can better focus on making smart investments. If you want your millions of dollars to compound quickly and efficiently, focus on how much money you can save rather than how you can spend it.