Warren Buffett’s golden rule: Never waste your money on these 5 things
In today’s world, spending money wisely has become a rare quality as there are countless ways to splurge — from expensive cars and luxury houses to branded items and even the pressure to show off on social media. If you are someone who often spends money unnecessarily or mindlessly and wants to break this habit, it might be time to listen to Warren Buffett, one of the most successful investors of all time. Known for his simple yet powerful financial wisdom, Buffett has valuable lessons on saving and investing that can change the way you think about money.
Buffett’s life is an example of the fact that it is possible to live a simple life and make successful investments without any frills, even if you have billions in assets. One of his most popular Buffett quotes is – “Rule No.1: Never lose money. Rule No.2: Never forget Rule No.1.”
These rules are not just applicable to the stock market but also apply to every financial decision made in everyday life. Buffett, the 94-year-old billionaire and CEO of Berkshire Hathaway, believes that only one who knows where not to waste money can protect money.
Also read: Warren Buffett’s 7 golden rules for mutual fund investors
Let’s take a look at 5 common but useless things that Buffett advises people to never spend their money on.
1. Buying a new car
Whenever someone gets a new job or promotion, the first thing that comes to their mind is to buy a shiny new car. But Buffett considers this one of the biggest mistakes made by most people. He says that the value of a new car depreciates as soon as it comes out of the showroom, and this value keeps falling year after year, and goes down by up to 60% in just 5 years.
Buffett himself, despite having assets worth billions of dollars, owns a 2014 Cadillac XTS, and that too he bought from General Motors at a huge discount. He believes: Why buy something that loses value the moment you drive it off the lot? The message here is that a car is just a means of transportation, not a measure of one’s success. A car that is serving its purpose but is becoming a burden on your balance sheet every day is not wise. Especially when the same money can be invested and give you better returns in the future.
2. Credit card interest
Buffett considers credit card debt to be a trap that once you get caught in it, it becomes very difficult to get out of it. The easier the facility of a credit card seems, the higher the interest is. In India, the annual interest rates on most credit cards are more than 30%, which means if you keep a balance of Rs 1 lakh, then in a year, you may have to pay more than Rs 30,000 in interest alone.
Buffett says, “If you’re smart, you’re going to make a lot of money without borrowing.”
Many people think that they have paid off their credit card by paying the minimum due, but the reality is that the interest keeps getting added every month, and the principal does not reduce at all. It is like a snowball effect – gradually, the debt grows like a snowball, and one day it becomes a heavy burden.
Buffett advises young people to use credit cards as a convenience, not a habit of overspending. He once said that if you are trying to earn a 15% annual return on a stock, why hold yourself back by taking on a 36% interest loan?
Also read: Warren Buffett’s blueprint to beating the market and building wealth in 2025
3. Gambling and lottery
Buffett calls gambling and lotteries a “math tax” – that is, a tax that is levied on those who do not understand mathematics and logic. He believes that these habits take people away from real hard work and investment and entangle them in the illusion of hope and luck. Buying lottery tickets or betting in a casino may seem attractive at first, but it slowly eats away financial discipline, savings and self-control.
People often think that if they hit the jackpot once, their life will change, but statistics show that the chances of winning the lottery are one in a million, while losing money is almost guaranteed. This is why Buffett always says, “Do not put money in a place where the probability is against you.”
Such expenses not only harm your bank balance, but also mental peace and financial stability. It is not wise to risk your future for temporary excitement.
4. A bigger house than needed
Buffett still lives in the same house that he bought in 1958. He says: “A house is a place to live, not a measure of success.”
A bigger house means more taxes, maintenance, staff and responsibilities. If you need a 2BHK, but you are taking a 4BHK just for show-off, then you are burning lakhs of rupees every month just for show-off.
5. Complex investment products
Buffett has always been an advocate of simplicity and understanding in the world of investment. He has this investment principle: “Never invest in a business you cannot understand.”
That is, if you are not able to understand an investment properly yourself – the strategy behind it, the risks, the potential returns, or the charges on it, then investing in it is like putting your hard-earned money at risk.
Today, there are many complex products in the market in the name of investments, and they promise instant profits. But Buffett believes that if something looks too complicated and promises to make you “rich quick”, that should be a red flag.
He says that risk comes from not knowing what you’re doing. That means when you invest without understanding, you are unknowingly taking a huge risk – and you may later have to pay the price for it not just in the form of loss of money, but also in the form of mental stress and disappointment.
You get 3 big lessons from these words of Buffett:
- Recognise your need, do not indulge in showing off.
- Do not invest money in financial products that you do not understand.
- Focus more on savings and investment than spending.
If you include these habits in your financial planning, not only will you avoid wasting money, but you will also gradually start building wealth.
Summing up…
The financial wisdom of Buffett is no less than a roadmap for any common investor. In his words: “Do not save what is left after spending, but spend what is left after saving.”
If you understand this, not only will your financial condition improve, but you will also be able to secure your future. So the next time you go to make a big or unnecessary expenditure, ask yourself, “Would Buffett spend money on this?”