7 Secrets to Investing Like Warren Buffett

Chances are, if you’re looking for tips on generating wealth, you’re probably not expecting a lesson on making good habits. But that’s exactly what the first secret to investing like Warren Buffett is all about.

You need money to invest money. So before we even get into picking the right stocks, we need to talk about setting aside the funds you’re going to use. Even though saving doesn’t come naturally to all of us, it’s one of the most important secrets of success.

This is why you need to make a habit of it; something you’ll practice steadily and consistently.

But where do you start? Well, step one is to put away 10 percent of your earnings. Transfer this money into a separate savings account, or put it somewhere else that’s out of reach. You don’t want the temptation of dipping into this pot. Once you’ve got the savings account set up, start to build on this money. Add to it regularly, with each and every paycheck.

If 10 percent sounds a little steep right now, here’s another idea: incremental savings. This week, put away one dollar. Next week, two dollars. Week three, three dollars, and so on. It may not feel like much to start with, but if you keep it up, in a year’s time you’ll be stashing away $52 a week.

Starting out small and gradually increasing your commitment is a tried and true way of forming a positive habit. It’s all about keeping things manageable and consistent. Many people jump out of the gate with goals that are too ambitious, only to stumble and fall a short while later. That can be very discouraging – a surefire way to kill off a good habit.

But what if you’re being steady and methodical? What if you’re seeing that savings pot grow and grow? How much should you aim to save up? A good rule of thumb is to create a solid emergency fund, enough to cover your costs for some time in case your source of income is cut off.

And then, on top of that, it makes sense to arrange an insurance policy, such as an accident and disability plan. The authors recommend a plan that’ll cover ten years of regular income, just in case.

Spending money is easy. Anyone can do it. Wealthy people save money, put it aside, and grow it.

There’s a reason why people who win the lottery and become overnight millionaires squander their fortune. They haven’t developed the kind of habits that can keep them wealthy.