Warren Buffett says America ‘doesn’t reward’ teachers, nurses like it does investors. How to get your first $1M anyway
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While you might not expect billionaires to discuss the merits and drawbacks of capitalism, that’s exactly what Warren Buffett and Charlie Munger did during a 1996 Berkshire Hathaway annual meeting (1).
When someone in the audience mentioned social inequity and asked if those with very little should just wish for a million dollars, Munger’s response was curt.
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“There’s always plenty wrong with a social order, and certainly there are places where ours is a lot more broken than it used to be … but wishing for a million dollars instead of some more tangible short step is the wrong frame of mind,” Munger said. “That isn’t the way we got our million dollars.”
Buffett’s reply noted the realities of modern American capitalism.
“There is a tremendous amount of inequality,” Buffett said.
“The market system does not reward teachers, does not reward nurses — I mean, it does not reward all kinds of people who do all kinds of useful things in any way comparable to how it will reward entertainers or people who can figure out the value of businesses or athletes or that sort of thing.”
Buffett pointed out the importance of appropriately taxing those with incredible wealth, like he has, in order to ensure those whose skills are not richly rewarded by capitalism are still taken care of.
“I do think that it’s incumbent on the people that do very well under that system to be taxed in a manner that takes reasonable care of anybody that is not well adapted to that system,” he said.
Despite his acknowledgement of the massive economic disparity that benefits him and those like him with “enormous rewards” for their particular skill sets, he still agreed with Munger.
“I don’t think the wishing for the million dollars, though, is that — you know it just doesn’t work that way, and I think, if you are lucky enough to have something that this market system rewards, you do very well here.”
While there are many more careers that capitalism doesn’t reward compared to those it ‘enormously rewards,’ a strong saving and investing strategy can make it possible for some to eventually achieve millionaire status.
After all, as Munger pointed out, neither guru started out with a million dollars.
Tangible steps to reach your first million
If your career doesn’t pay six figures, there are still concrete steps you can take to achieve millionaire status in your lifetime.
You need a budget
It begins with budgeting — and Munger often pointed out, you can’t invest if you’re spending more than you earn. Budgeting is the key to understanding your spending and learning to live below your means, so you can invest the excess and let it compound.
But while some may enjoy staring at numbers in spreadsheets, for many, budgeting can feel like a laborious, daunting task that never ends, making it hard to stick with it.
Monarch Money’s expense tracking system makes managing your finances easier. The platform seamlessly connects all your accounts in one place, giving you a clear view of where you’re overspending.
By linking your credit card accounts, you can monitor your payment progress in real-time and set specific goals — like getting out of debt faster.
Even better, for a limited time you can get 50% off your first year with the code WISE50.
A financial advisor can also help you crunch the numbers and build a plan that works.
But hiring an advisor can be a lifelong commitment, which might make or break your retirement. That’s why finding reliable advisors is crucial.
That’s where Advisor.com can help you chart a course. The platform connects you with an expert near you for free.
Advisor.com does the heavy lifting for you, vetting advisors based on track record, client ratios and regulatory background. Plus, their network comprises fiduciaries, who are legally required to act in your best interests.
Just enter a few details about your finances and goals, and Advisor.com will connect you with a qualified expert suited for your needs based on your unique financial goals.
Finding the right advisor isn’t always easy — there’s no one-size-fits-all solution. That’s why Advisor.com lets you set up a free initial consultation with no obligation to hire to see if they’re the right fit for you.
Once you’ve got the right financial advisor in your corner and a budget built, the next step is figuring out where to put those extra dollars.
Make consistent low-cost investing a default setting
Once you understand your monthly budget and have extra savings to invest, the next step is to follow a simple, low-fee investing strategy you can stick with. Buffett recommends automating your finances so that a certain amount of your paycheck is automatically invested in low-cost index funds every time you are paid.
“The goal of the non-professional should not be to pick winners, but should rather be to own a cross-section of businesses that in aggregate are bound to do well,” he wrote in a 2013 Berkshire Hathaway shareholder letter. “A low-cost S&P 500 index fund will achieve this goal (2).”
The S&P 500, Buffett’s frequently mentioned top pick, has delivered an annualized ten year return of 13.56% — and that’s even accounting for the sharp market drop during the COVID-19 pandemic (3).
That’s the beauty of ETF or index fund investing: accessibility. Anyone, regardless of wealth, can take advantage of these tools to bet on America. And the sooner you start, the sooner you can reap the benefits of compound interest.
If you’re looking to get into set-and-forget investing, like Buffett recommends, you can get started with Acorns, an app that automatically invests your spare change.
How it works is simple: Just sign up and link your debit or credit cards. Then, every time you buy something Acorns rounds up the total to the nearest dollar. This turns a morning coffee for $3.25 into a 75-cent investment in your future.
From here, that money goes into a diversified portfolio of ETFs that you can tailor to your risk tolerance. Along with the big names like the Vanguard S&P 500 ETF, Acorns also sets you up to invest in specific sectors of the economy through custom portfolios. This includes areas like heavy industry, energy, consumer staples and utilities.
Then, once you’re comfortable with your round-ups, you can supercharge your saving with recurring monthly deposits into your favorite funds. And if you sign up today with a $5 recurring deposit, Acorns will add a $20 bonus to help you begin your investment journey.
If you prefer active trading and are willing to take on a higher risk strategy than the index method Buffett prefers, you’ll want to be sure you know everything about the various stocks you’re interested in.
Diversify with real estate on easy mode
Charlie Munger initially built his wealth through real estate and made it clear that he never bought into the house flipping method of property investing.
“The big money is not in the buying and the selling but in the waiting,” is one of Munger’s most famous quotes, but the waiting part is why many people opt out of real estate investing altogether. Waiting means you have to let time pass so your property can grow in value, and that requires being a landlord, which is not for everyone.
Arrived, a real estate platform company backed by investors such as Jeff Bezos, helps investors get into SEC-qualified investments in real estate, including rental homes, vacation rentals and diversified funds.
In addition to any property appreciation, Arrived’s properties can help you earn a passive income stream without any of the extra work that comes with being a landlord. No midnight maintenance calls over burst pipes required.
All you have to do is sign up, then you can view a selection of vetted properties and start investing with just $100. That way, you can make sure the platform is right for you.
Once you become an investor with Arrived, you’ll have access to more than 596 properties in 67 plus markets. Once a property is fully funded, you can also take advantage of Arrived’s secondary market after six months if you want to reshuffle your portfolio.
And, for a limited time, investors can get a 1% account match when opening an account and adding $1,000 or more.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Adam J. Mead – The Oracle’s Classroom (1); Berkshire Hathaway (2); S&P Global (3)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.