What Warren Buffett says about basic investing, spending, savings are so true, that MOST of us know it. However too many of us do not live it. So it is useful if once in a while somebody can just rejig the memory.

If it does make a change in your life, thank HIM (I mean God) because this is common sense. WB said it once, I am just reproducing it. It helps because you did not remember it. Or you did not do it.

Now, just go and b…..y well do it!

  1. On Earning: Do not depend on a single income, Invest and create a second/ third source of income: This means when you are young your first task should be saving and investing. By creating a second source of income you are quickly reducing your dependence on your job. This could help you to set out on your own one day. The quicker you can do it, the better.

  2. On Spending: If you buy things that you do not need, you may soon have to sell things you need: OK WB is being very harsh, but it kind of summarizes Gen X’s reaction towards ‘luxuries’. As a part of Gen X we were perhaps criticised for some of our expenses, so it could be a Generational thing even for WB. However having goals and knowing where you are going, and not spending just to ‘show off’ are important lessons for all generations.

  3. On Savings: Do not save what is left after spending, instead spend after you save/invest: Also called ‘Pay Yourself First’. If you realise that investing in a pension plan or for your kid’s education is JUST helping you to save MORE later on. It is not a sacrifice, it is just postponing consumption. So understand your payments, then you will not cringe on saving, investing or far more important insurance. So first invest, then spend.

  4. On taking Risk: Never test the depth of the river with both your feet: If you are doing something, do small. If you are a first gen investor, do not be carried away by equity lovers like me and put all your money in equity. Do a SIP with a small amount, and test the waters. Do a SIP of Rs. X (which could be 10% of your take home pay) for 5 years and then step up. And for heavens sake UNDERSTAND risk of inflation, and the concept of REAL RETURNS.

  5. On Investing: Do not put all eggs in one basket. Immaterial of who you are and how much you understand, create a portfolio. A full range lunch plate is always better than just one item. So create a portfolio with bonds, bond funds, ppf, nsc, equity, equity mutual funds, …..and on the risk side medical and term insurance.

  6. On Expectation: Honesty is expensive, do not expect it from cheap people: Not everybody is honest, nor does everybody want to be honest. Honest advisers are difficult to find esp in Health and Wealth, be careful.

dark bold letters are Warren Buffet’s comments, other part is my interpretation / explanation of WB’s sayings….

Related Articles:

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

  1. Good explanation. Just one query. Why didn’t you mention home insurance along with mediclaim and term insurance policy? After all, home is the biggest asset after human life.

    The complete portfolio will be shattered if someone losses home in fire or natural calamity. It will be double trouble for those who have taken home loan. Term insurance will not work there, whatever the S.A. is.

    We all know what happened in Gujrat earthquake few years back.

    Just a thought…

    What’s yours?


  2. Home insurance is a thing which the building society does, NOT the individual. Things INSIDE the house today are NOT expensive AT ALL. For a person earning say Rs. 30L a month, we are talking of a risk of ONE MONTH’S SALARY….Hi risk? Not at all.

  3. For a home loan taken from SBI. SBI charges us separately for the home insurance, with a single payment for the term of loan (very small amount, and am not talking of life insurance). But alas! the customer never even gets to see the home insurance papers.

  4. Not all homes are under building society. There are many (and many) independent homes also (generally called villa now-a-days).

    A person earning Rs.30 Lacs pm might not think for home contents insurance. But what about others, who are earning Rs.10 lacs p.a. or less than that?

    You mentioned home contents are not expensive at all. I do not agree with that. Just imagine your own home with boundaries only – no contents inside, no fan, no TV, no bathroom fittings, no furniture, no kitchen contents, no clothes, no laptop – NOTHING. Just empty home.

    Now, start calculating the value of all these contents at today’s rate. You need to spend BIG amount on all these. And from where will you get the money in absence of insurance? You’ll liquidate your portfolio to some extent.

    Also, does building society covers home contents also in insurance? I doubt that.

    MangoMan, you mentioned that SBI has given you home insurance also with loan. I think they must have given it from SBI General insurance, which covers only home building but not home contents.
    Check your documents carefully.


  5. Hello Subra, Point 3 (On Savings: Do not spend what is left after spending…..). I think u meant (On Savings: Do not <> what is left after spending)…….The correction inside <>.

    Nice simple 6 points. Simple lines but difficult for most to implement 🙂

  6. sorry typo. 30L a year, all home furnishings (basic) cost say Rs. 2.5L. For smaller amounts with not a great consequence of losing, you are better off having self insurance. Cheaper over the long run. Also not sure if the claim will be easy to settle too 🙂

  7. but yes I do know a couple of people earning in this region…no names please. One is a govt guaranteed job with a Citi kind of a salary. Rs. 6 crores. Not bad, eh?

  8. home insurance is futile. we bought a very big flatscreen tv last year. last month my 4 year old son threw his toy at him during a tantrum and the tv went kaput :-).
    all you can do is grin and bear it.nobody is going to pay for incidents which are as common as that.i dont think earthquake insurance makes sense in large parts of india.ahmedabadis can perhaps buy it.how do you think ajit jain makes tons of money for warren buffet.he bets against people who buy earthquake insurance and wins 99% of then time!

  9. Dear Pravin,
    I live in Ahmedabad, We did not have earthquake in Ahmedabad before 2011…..at least not in living memory.

    We had home insurance which does not cover compound wall….i paid for its repair

    My home was about 30 yrs old…..depreciated value of building taken into consideration……landed up with a miniscule amount compared to the damage……

    SILVER LINING….all family members escaped unharmed


  10. Hi Subra Sir,
    You said “Honesty is expensive, do not expect it from cheap people.”
    In financial industry, you should expect in even lesser quantity in rich people than cheap people. Pension funds are suing Goldman Sachs for lying. Credit Rating agencies have given AAA rating to junk bonds.
    In financial industry, everybody tries to fleece you. Only few regulators like RBI and SEBI are caring for investors. Otherwise, in many countries, the system is ‘gamed’ by big organizations.

  11. RBI and SEBI are caring for investors- are u kiddin me..for them its like “Honesty is cheap,do not expect it from expensive people”

  12. Hi Subra Sir,
    I was looking forward to examples of wrong and harmful decisions by RBI and SEBI. For me, RBI’s decision of keeping interest rate high when everybody including government is requesting to decrease it was a indicator that it is still a regulator and not playing in hands of government and lobby. Compare it with Fed which is printing 40 Billion dollars every month till the world stops accepting US Dollar as exchange currency.

    SEBI might have gone overboard with decision related to MCX but it did right thing of slashing entry load of MF. Also, SEBI did right thing about Sahara which was doing illegal thing.
    I am not an expert in the field and dont know how much is witchhunt. From what I read from news articles, SEBI is stopping greedy industry from fleecing ordinary investors.

    As far a license raj is concerned – yeah, we still have license raj in banking and other financial sectors. But it is small thing which can be ignored as compared to greater good SEBI and RBI is doing.

  13. i’d honestly love to know what illegal stuff sahara has done.they obviously are not transparent about their books.but have they cheated customers by the millions? i am not talking about poor customer service or a few disgruntled customers or a couple of rogue ‘relationship’ manager types.the fact that many poor people trust these guys with their money for MANY years must mean something.i say the SEBI and RBI are less concerned about the poor and aam admi than the fact that sahara is not playing by their rules.they just cant take people who dont respect their authority.
    i’d like to hear the opposite side of this argument

  14. Subra Sir,

    I definatlly differ on the statement”Do not expect honesty from Cheap people”
    At least in India the Cheap person has more honesty. The more you go up the corporate ladder,More the shitty persons you come acros

    I can trust My Driver more than my bank RM who earns nearly equal to me… really sad is it not?

    My personal opinion however.

  15. @Siddant: I think the word “cheap” here does not mean a lower income person. It means a person with no ethics and no understanding of the products that they maybe selling or marketing and the client interest is not at all taken care of.

  16. @Siddhant: I completely agree with your viewpoint. It also makes me wonder what really inspires them to keep their honesty!

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>