Warren Buffett: America ‘doesn’t reward’ teachers, nurses like it does investors. How to take steps to your first $1M

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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.

If you can relate, you might want to try Rocket Money to simplify the process.

Rocket Money tracks and categorizes your expenses, providing a clear view of your cash, credit, and investments in one place. It can even uncover forgotten subscriptions, helping you cut unnecessary costs and save potentially hundreds annually.

For a small fee, the app can also negotiate lower rates on your monthly bills, making it a valuable tool for keeping your finances on track.

Read More: Vanguard reveals what could be coming for U.S. stocks, and it’s raising alarm bells for retirees. Here’s why and how to protect yourself

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 12.99% — and that’s even accounting for the sharp market drop during the COVID-19 pandemic (3).

One of the easiest ways to do this is to open a self-directed investing account with SoFi. This DIY approach lets you invest in low-cost index funds like the S&P 500 with no commission fees.

SoFi is designed to help you learn how to invest as you go, providing real-time investing news, curated content and all the data you need to make smart investing decisions. Plus, for a limited time, you can get up to $1,000 in stock when you fund a new account.

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.

Moby can help ensure you have all the information you need at your fingertips by researching the best companies to invest in and accurately summarizing the findings for you.

The platform provides tailored, data-driven insights via three hand-picked investment opportunities delivered straight to you.

And best of all, Moby also offer a 30-day money-back guarantee, so you can try the service risk-free.

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.

That said, if you’re interested in investing in real estate, but not ready to deal with the second job that is being a landlord, Arrived can help you enter the market.

Backed by Jeff Bezos, Arrived lets you invest in shares of vacation and rental properties, creating a passive income stream that avoids midnight maintenance calls and leaky faucets.

Browse their selection of properties to find the ones you like, and you can start investing with as little as $100.

Arrived also offers a secondary market where you can sell your shares — allowing for flexibility — especially when compared to managing a mortgage.

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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.