How to measure your success
Buffett believes that, beyond a certain level of wealth, people’s lifestyles and experiences aren’t actually all that different.
“Think about it, seven hours a day you are in bed,” he told the Georgia Tech students. “You’ve got the exact same mattress I’ve got. So, we are on a parity. I can’t outdo you in terms of my sleeping enjoyment… We eat at the same places… We dress more or less the same.”
Life’s basic necessities and interests, according to Buffett, aren’t much different for those with modest means and those with immense wealth.
Considering he was speaking to a congregation of college students, he said their energy and education already made it likely they’ll make good money down the road, so that shouldn’t be the primary yardstick for gauging success in their lives.
Instead, Buffett prefers a more sentimental measure: “You’ll measure [wealth] by how many [people] really love you in the end. You can’t buy love.”
Research appears to back this up. A study published in the Healthcare (Basel) Journal showed that increased social interactions and frequent gatherings with family improved the overall life satisfaction of older adults.
On the flip side, social support and frequent interactions with other people were not the only factors determining life satisfaction. Another study published in the Journal of Advanced Nursing found that poverty had negative mental health impacts on elderly people as they struggled to meet their basic needs.
Simply put, Buffett is correct in that money isn’t everything; however, it’s still a vital ingredient for a long, fulfilling life. With that in mind, investing and building wealth is actually an important goal.
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Studies by Nobel Prize-winning economist Daniel Kahneman and happiness researcher Matthew Killingsworth have established a link between wealth and overall life satisfaction. Earning more money, they found, tended to make people happier.
For people seeking more satisfaction in their lives, they could still follow Buffett’s principles on wealth-building. The Oracle of Omaha’s frugal spending habits, focus on long-term investments, diversification, avoidance of debt and value-oriented investment strategies could help many people accumulate sizable fortunes over time — especially if they start young.
You don’t need to be an investing guru to start amassing capital. For example, Buffett swears by low-cost index funds, such as an S&P 500 index fund.
During a 2021 shareholders meeting, he said, “I do not think the average person can pick stocks.”
Therefore, investing in an S&P 500 index fund is a relatively simple passive income strategy. One just has to purchase the fund and hold onto it — without having to select individual stocks.
You can also consider asset classes, such as bonds and real estate. Before making any money moves, talk to your financial adviser and consider your risk tolerance.
These strategies shouldn’t come at the cost of your personal and family life. Buffett’s philosophy is that nurturing relationships and friendship along the way may be just as important for a well-balanced, satisfying life.
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