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Jakarta, CNBC Indonesia – One of the most successful investors and influential people in the world, Warren Buffet, is often used as an example by many. He is known for his simple lifestyle.
It is known that poor people are often hindered by financial traps. According to Buffett, people who have financial difficulties often get trapped in spending money on unnecessary things.
Buffett identified seven areas where money is often wasted. This provides a roadmap for wiser financial choices to achieve long-term wealth.
Here are seven things that Warren Buffett believes make it difficult for poor people to become rich, as quoted from newtraderu.com:
1. High-Interest Debt
Buffett is known for his frugal lifestyle and dislike for wasting money. He views high-interest debt, such as credit card debt, as a bad financial choice.
“I’ve seen more people fail because of liquor and leverage – leverage is borrowing money. You really don’t need leverage in this world. If you’re smart, you’re going to make a lot of money without borrowing,” Warren Buffett expressed.
2. Luxury Brands
Buffett often emphasizes value over brand names. He may consider spending on items, including luxury fashion brands, unnecessary.
“Price is what you pay. Value is what you get,” he said.
3. New Cars
Buffett is known for his simple choice of cars. He sees new cars with full dealer prices that quickly depreciate as wasteful.
In a BBC documentary, Warren Buffett’s daughter, Susie Buffett, mentioned that he buys cars that he can get at a cheaper price – like cars damaged by hail. These cars have been repaired, don’t look damaged by hail, and have become part of Buffett’s routine lifestyle.
4. Eating at Expensive Restaurants
Known for his simple eating habits, Buffett may view expensive dining out as an avoidable expense. Warren Buffett is famously known for having breakfast at McDonald’s almost every morning during his working years.
However, it’s not just any menu he orders. Buffett opts for a simple breakfast. He also once tried using coupons at McDonald’s when dining with Bill Gates.
5. Lottery Tickets and Gambling
Buffett supports investing over gambling. He may see lottery tickets as a poor use of money and a tax on those who can’t do math.
At the 2007 Berkshire Hathaway shareholders meeting, he referred to gambling as a “tax on ignorance” and “a pretty dumb action.”
6. Trendy Gadgets
Buffett’s practical approach may extend to skepticism towards constantly upgrading to the latest technology. “If you buy things you do not need, soon you will have to sell things you need,” he said.
7. Get-Rich-Quick Schemes
Buffett advocates for long-term investments rather than chasing quick profits. “Successful investing takes time, discipline, and patience.”
