Tuesday, 14 August 2012

"Whatever you have, spend less." If compound interest isn't working for you, it's working against you.

By keeping what he has, and adding to it by living below his means, the Master Investor lets his money compound indefinitely.  And compound interest plus time is the foundation of every great fortune.  

Wealth is really a state of mind.  In the words of Charlie Munger:  "I had a considerable passion to get rich.  Not because I wanted Ferraris  -- I wanted the independence.  I desperately wanted it."  If you share this attitude, once you have gained that hard-fought independence the last thing you're going to do is jeopardize it by blowing all your money.

The alternative to living below your means is the debt-laden pattern of the middle class:  If compound interest isn't working for you, it's working against you, bleeding your money away just as a spurting artery drains your life-energy.

Additional notes:

Most people want to be rich so they can fly first class, live it up in the Ritz, feast on champagne and caviar, and go shopping at Tiffany's without giving a second though to their credit card bill.

The problem is that people who have this attitude to money don't wait until they're rich before they start indulging their fantasies, even if only on a small scale.  As a result they never accumulate any capital, or even worse go into debt so they can live beyond their means ... and remain poor or middle class.

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