We’ve all heard it before: money doesn’t buy happiness – and investment legend Warren Buffett took this statement a step further.
“When you’re my age, I can guarantee you, you won’t measure your success by how much money you have,” he once said in a speech to students at Georgia Tech. “Money won’t be as important.”
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Buffett is the 10th richest person in the world, according to the Bloomberg Billionaires Index – behind Elon Musk, Jeff Bezos and Bill Gates, to name a few – with an estimated net worth of $135 billion.
The CEO of Berkshire Hathaway became a millionaire in his early 30s and a billionaire by the time he was 50. Now nearly 94 years old, he offers a unique perspective on wealth and success — one that also includes living a simple, humble life.
Here’s a closer look at the Oracle of Omaha’s method for tracking success.
How to measure your success
Buffett believes that once people reach a certain level of wealth, their lifestyles and experiences are not actually that different.
“Think about it, you spend seven hours a day in bed,” he told the Georgia Tech students. “You have the exact same mattress as me. So we’re on the same level. I can’t beat you in terms of sleeping pleasure… We eat at the same places… We dress more or less the same.”
According to Buffett, the basic needs and interests of life are not significantly different for people of modest means and people of enormous wealth.
He said he was speaking to a group of college students and said their energy and education had already made it likely that they would make good money later in life, so that shouldn’t be the most important measure of success in their lives.
Buffett prefers a more sentimental yardstick instead: “You will measure (wealth) by how many (people) you end up really loving. You can’t buy love.”
Research seems to confirm this. A study published in the Healthcare (Basel) Journal showed that increased social interactions and frequent meetings with family improved the overall life satisfaction of older people.
On the other hand, social support and frequent interactions with other people were not the only factors that determined life satisfaction. Another study published in the Journal of Advanced Nursing found that poverty had a negative impact on the mental health of older people as they had difficulty meeting their basic needs.
Buffett is right when he says that money is not everything. However, it is an important part of a long, fulfilling life. With this in mind, investing and building wealth is indeed an important goal.
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Can you buy (a little) happiness with money?
Studies by Nobel Prize winner in economics Daniel Kahneman and happiness researcher Matthew Killingsworth have established a connection between wealth and general life satisfaction. They found that earning more money tends to make people happier.
Those looking for more satisfaction in their lives can follow Buffett’s principles for building wealth. The Oracle of Omaha’s frugal spending habits, focus on long-term investing, diversification, debt avoidance, and value-based investment strategies could help many people amass significant wealth over time – especially if they start young.
You don’t have to be an investment guru to start accumulating capital. Buffett, for example, swears by low-cost index funds like an S&P 500 index fund.
During a shareholder meeting in 2021, he said, “I don’t think the average person can pick stocks.”
Therefore, investing in an S&P 500 index fund is a relatively simple passive income strategy. All you have to do is buy the fund and hold it – without having to select individual stocks.
You can also consider asset classes such as bonds and real estate. Before making any investments, talk to your financial advisor and consider your risk tolerance.
These strategies should not come at the expense of your personal and family life. Buffett’s philosophy is that nurturing relationships and friendships can be just as important to a balanced, satisfying life.
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This article is for informational purposes only and should not be construed as advice. It is provided without warranty of any kind.
