If I hadn’t seen it for myself, I would not have believed it — or maybe I would have. On second thought, it doesn’t surprise me one bit.
This past Wednesday, a half-page picture in the Wall Street Journal showed Warren Buffett on stage at some event in which he was a panelist. As is done sometimes, the event organizers had their panel sitting in casual living room chairs holding a hand-held mic. The “Oracle of Omaha” appeared comfortable. Why wouldn’t he? As bright as he is, what question could possibly be posed that would throw him for a loop? His shoes looked comfortable, too. Real comfortable. Some would say too comfortable.
The paparazzi snapped the picture from such an angle that, there for the entire world to see, was one of the richest guys in the world with a hole in the bottom of his shoe.
Do you sense the irony captured in this picture? One of the very richest men in the history of the world had a hole in his shoe. And therein lies the lesson; The richest man in the world had a hole in his shoe, thus making him as rich as he is. The paradox is a lesson in frugality and money management.
While he had a hole in his shoe (and that has been documented for posterity), I’d bet he only has three or four pairs of shoes, max. Black dress shoes, brown dress shoes, one pair of casual shoes and some slippers probably makes up his entire repertoire. I’m guessing that the floor of his closet has plenty of room. How about ours? That’s why he’s loaded and we’re not.
Effective budgeting and money management starts with an idea based around needs versus wants. We want lots of stuff, but we need very little. That’s just the facts. And really rich people (not Hollywood rich) have real money (billions versus millions) because they aren’t frivolous with their spending.
This holiday season, we will all want lots of stuff. It’s just human nature to acquire those special things that satisfy our insatiable appetite for more. But shoes stacked in the closet don’t spend and can’t be considered assets. Real wealth comes from practicing a very simple principle first — pay yourself, i.e. have a savings account. Restraint is this year’s mantra for success. Repeat three times before entering any store or going online.
Warren Buffett had as much money as you and I did at one point in time. We took our money and bought stuff we wanted; he invested his money to accumulate wealth.
The moral of the story is that he is very good at accumulating wealth. We are very good at accumulating shoes. The difference is a couple of billion dollars in savings.