Wednesday, 15 August 2012

Spending money is simple - anyone can do it. Making money is not.

Living below your means

Frugality is a natural aspect of Buffett's character.  As his wealth increased, he indulged in minor extravagances.  He bought an executive jet he named The Indefensible.  

But wealth didn't change his natural frugality.  It is easy to see how the consequence of living below your means is important when you're starting out.  It's the only way you can accumulate capital to invest.  What's less obvious is how this mental habit remains crucial to your investment success even after your net worth has soared into the billions.  

Very simply, without this attitude to money you won't keep what you have earned.  Spending money is simple - anyone can do it.  Making money is not.  That;s why living below your means is the attitude that underlies the foundation of the Master Investor's success:  Preservation of Capital.

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