Sunday, August 21, 2011

Frugal Formula

A recent Yahoo News article features Warren Buffet's frugal formula. I find it very inspirational, as this is one of America's Wealthiest individuals, telling you that frugality helped him get to where he is, and having a lot of money does not mean you need to spend it. It's about setting a state of mind and work ethic that can help you achieve your goals. In fact, he still lives in the home he bought in 1958 for around $31,000. Here are his five tips:

Live Below Your Means: Living a good life does not mean spending every penny you earn. In fact  being wealthy involves a lot of saving. Saving is the key to preserving your financial well being. Your income and expenditure should not be equal. By living below your means you set yourself up to save and to survive during harsh times. Just because you CAN get something (like a highly leveraged mortgage) does not mean you should.

Don't Get Discouraged: The job market is a tough place right now. Millions of people are unemployed. It can be easy to get down on yourself. Don't fall into this trap. Most successful people have had their ups and downs too. What sets them apart is their ability to go on and bounce back.

Self Promote: We've all heard it before - "it's about getting yourself out there". Having a strong self of self worth, this does not mean arogance it means knowing you skills and abilities, can help you get on the right career track and speak up for yourself. You need to use you connections and not be afraid to network amongst your peers. And when they need a hand and you are in a place to give it - do so. That's what networking is all about.

Be Smart:This does not mean geting an ivy league education. It means trusting your gut when you feel someone is taking advntage of you. Don't just assume things are gong well because someone else said so, do your own due diligence, and be careful about who you invest with and who you go into business with. Friends and family are great sources of inspiration, support and comaraderie, but ayone that tries to convince you that you don't need to go through the usual channels of protecting yourself, looking over the books, having formalized agreements and money tracking systems etc. because "we're family" is doing you AND your family a disservice. Setting up proper boundaries is a street smarts move that many people ignore.

Buy Cheap- That does not mean inferior. It means realizing that just because you can splurge does not mean you have to in order to get the same quality. Paying more than you have to just makes no sense. Know prices for items and what you should be paying for them. Plenty of wealthy people frequent designer consignment shops - because they love a god deal too.


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