“Habit is the intersection of knowledge (what to do), skill (how to do), and desire (want to do).” ― Dr. Stephen R. Covey

Warren Buffett is an American investor, business tycoon, and philanthropist, who is the chairman and CEO of Berkshire Hathaway. He is considered one of the most successful investors in the world and has a net worth of USD 71.8 billion as of July 2020, making him the fourth-wealthiest person in the world.

Warren Buffett is arguably the most celebrated and most famous investor of our generation, perhaps even in history, who is constantly setting examples of knowledge, skill, and a strong desire to achieve his future goals.

Buffett is also a champion of leadership and personal development, sharing his wealth advice to improve our lives.

Here are his habits, and if followed properly, it will provide astronomical results later in life:

Habit 1: Lust of Reading

“The man who does not read has no advantage over a man who cannot read” — Mark Twain

One piece of advice is a rule Warren Buffett calls the key to his success — a rule that he follows religiously.

Go to bed a little smarter each day.

Warren Buffett Reading Newspaper

Reading!

That’s the Buffett formula. As simple as it sounds, it operates on the power of compounding interest. Within a few years, it starts to yield results. “That’s how knowledge builds up. Like compound interest,” he once clearly expressed.

According to research from Thomas Crowley, 88% percent of wealthy people read 30 minutes per day. Millionaires and Billionaires read books that encourage self-improvement.

This includes topics like how-tos, biographies, self-help, leadership, or current events.

Buffett’s reading habit is what he credits as the foundational instrument to improve his knowledge. He is an insatiable reader who spends 80 percent of his day, reading, and he suggests that anyone desiring to achieve similar success should read “500” pages per day.

“The means of learning are abundant, the desire to learn is scarce.” — Naval Ravikant

Why should you read:

• Reading gives you an advantage.
• Reading increases focus.
• Reading increases determination.
• Reading develops patience.
• Reading inspires.
• Reading helps to learn the facts.
• Reading helps to get better at something you love or want to love.
• Reading makes you smarter.
• Reading makes you a better person than yesterday.

Books recommended by Warren Buffett:

1. The Intelligent Investor by Benjamin Graham

2. Jack: Straight from the Gut by Jack Welch

3. Stress Test: Reflections on Financial Crises by Tim Geithner

4. Nuclear Terrorism by Graham Allison

5. Business Adventures by John Brooks

“I read and think,” Buffett once said. “So I do more reading and thinking, and make less impulse decisions than most people in business. I do it because I like this kind of life.”

Following this one simple formula of reading everyday, within a few years, it will start to yield some very serious results for you.

Habit 2: Compounding in Finance and Life

“Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” — Albert Einstein

All along the way, Warren Buffett’s investment approach never changed. He has continued to follow the same principles:

• Think of buying stocks as buying fractional interests in whole businesses.
• Construct a focused low-turnover portfolio.
• Invest in only what you can understand and analyse.
• Demand a margin of safety between the purchase price and the company’s long-term value.

One of Warren Buffett’s central principal investments is the Principal of Compounding. Not only his financial success but also his thinking patterns strongly reflect compounding principles.

What is Compounding?

Compounding is the process of re-investing your earnings in your principal to earn an exponential return as the next growth is on a bigger principal, then following this process of adding the earnings to the principal.

With time, the principal grows exponentially and produces unusual returns.

KEY TAKEAWAYS

• Compounding is the process whereby interest is credited to an existing principal amount as well as to interest already paid.
• Compounding can be construed as interest on interest — the effect of which is to magnify returns to interest over time, the so-called “miracle of compounding.”
• When banks or financial institutions credit compound interest, they will use a compounding period such as annual, monthly, or daily.

He regularly combines reading with compounding, “Read 500 pages like this every day,” said Buffett, holding up a bunch of reports and trade publications. “That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.”

Once questioned, how he gained this enormous amount of wealth, he replied, “Due to 3 things: Living in America for the great opportunities, having good genes so I lived a long time, and Compound Interest.”

He often gives the example of the King that asks his prisoner, who was awaiting his death sentence and was brought in front of the King.

King says, “What is your last wish? The prisoner replies, “I wish to make provisions for my family to survive after my death”.

King says, “What do you want?”, prisoner replies, “Give me the number of grains of rice on the last square of the chess board, if a single grain was kept on the first square and then doubled on every next square (1 on first, 2 on second, 4 on third, 8 on fourth, 16 on fifth and so on, till the 64th square), and I shall give it to my family before I die!”

Thinking what a small demand, the king grants it.

The king then orders his ministers to have the amount of rice calculated and given to the prisoner. The amount calculated was so large that the king lost his entire kingdom and was indebted to the prisoner all his life.

• In finance and life, compounding rewards.
• In growing a talent, compounding rewards.
• In building a business, compounding rewards.
• In love and friendships, compounding rewards.

Compounding = Incremental success.

Are you compounding your finances?

Are you compounding your reading habit?

Are you compounding your relationships?

Habit 3: Power of Isolation

“A season of loneliness and isolation is when the caterpillar gets its wings. Remember that next time you feel alone.” — Mandy Hale
“Knowing how little you matter is very important for your mental health and your happiness.” — Naval Ravikant

Isolation opens you to more opportunities than you expose yourself — it cuts you off from noise and external information, it makes you outstanding and infamous.

Despite being the greatest investor in the world and the world of stock markets, Warren Buffett says living far from Wall Street helped him.

He adds. “It’s very easy to think fast. You’re undisturbed by unnecessary factors and the noise generally of business investments,” Buffett said, “If you can’t think clearly in Omaha, you’re not going to think anyplace.”

It’s not so bad to pick up this habit of Warren Buffett for a week and try this out:

1. No computer on his desk.
2. No cell phone.
3. He plays bridge 12 hours a week but Bill Gates is often his bridge partner.
4. No internet.
5. Sit and think.
6. Staying away from noise and finding your voice.

Try it for one week or one day, at least: no computer, no cell phone, play a game for at least 12 hours for the week or a day.

Thinking + no internet = your focus becomes your future.

Habit 4: Inner Scorecard, Outer Scorecard

“The big question about how people behave is whether they’ve got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard.” — Warren Buffett

Having an inner scorecard means to be content with your own opinion and not of everyone else. He advises to take up a decision and stick to it despite what others think, speak about or respond over your decision and judgment.

In his investing world, it meant toughness about financial decisions that had helped him and allowed him to stay the ground.

Achieving success and making difficult decisions go hand in hand. “So what’s the best way to make ethical decisions during tough times?” That’s a question one student asked Warren Buffett at a 2005 Q&A session with Microsoft co-founder Bill Gates at the University of Nebraska-Lincoln.

“It all comes down to reputation, the billionaire told the audience. Integrity and ethics are essential for building a solid, positive reputation. They also indicate trust and adherence to high moral standards.”

“I got an awful lot of good advice from my dad. He taught me that it’s more important in terms of what’s in your inner scorecard than your outer scorecard,” says Buffett.

“Some people get into a position where they think all the time what the world is going to think of this or that, instead of what they are going to think about it.”

The inner scorecard refers to living through values that are important to you. The outer scorecard refers to what could be measured by those around you. He also ads, “if you can find peace and comfort with your inner scorecard you’re going to live a happy life. But people often subscribe to the outer scorecard.”

Habit 5: Do What You Love

“The only way to do great work is to love what you do. If you haven’t found it yet keep looking. Don’t settle. As it’s all matters of the heart, you’ll know when you find it.” — Steve Jobs

Warren Buffett is against the philosophy of doing a job. But he always followed to work with his hero — Benjamin Graham, author of The Intelligent Investor, because he loves stocks and working with Graham.

“Majority of the people accept a job because of conditions, but they fail to switch it to the job that they like,” Warren says, “it’s hard, but then it’s hard for everyone on the planet.”

Warren has advised many times that it is a temporary pain to work at a low salary but then it compounds at the rate your skills grow and they grow exponentially because you love doing it. Human mind never switches off if it likes a thing and you give it daily.

Warren further says, “doing a job that you don’t like is like saving up sex for your old age.”

But one thing Buffett said always stuck with me. Someone asked him, “How do you measure success?” And all 20,000 people leaned forward to hear what the “magic number” was.

But he said this: “I measure success by how many people love me. And the best way to be loved is to be loveable.”

Habit 6: Invest in Yourself

“Invest in yourself. Your career is the engine of your wealth.” — Paul Clitheroe

That fundamentals in life — healthy eating, regular exercise, restful sleep — are important is a no-brainer. It ultimately comes down to whether we are doing them right.

Most famous figures, from basketball legend Michael Jordan and Google co-founder Larry Page to Mahatma Gandhi, have stressed the importance of fundamentals at one point or another. And the message is always the same — get the basics right and you will succeed.

To quote, Buddha, “To keep the body in good health is a duty otherwise we shall not be able to keep our mind strong and clear.” A strong foundation is everything. Once you crack these fundamentals, it becomes a way of life.

“By far the best investment you can make is in yourself,” Buffett told Yahoo Finance editor-in-chief Andy Serwer.

First, “learn to communicate better both in writing and in person.” Honing that skill can increase your value by at least 50%, he said in a Facebook video posted in 2018.

Next, take care of your body and mind — especially when you’re young. “If I gave you a car, and it’d be the only car you get the rest of your life, you would take care of it like you can’t believe. Any scratch, you’d fix that moment, you’d read the owner’s manual, you’d keep a garage and do all these things,” he said.

“You get exactly one mind and one body in this world, and you can’t start taking care of it when you’re 50. By that time, you’ll rust it out if you haven’t done anything.”

By far the best investment you can make is in yourself.

Habit 7: Time Management

“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” — Abraham Lincoln

We have 24 hours or 1,440 minutes a day. And all the leaders and successful people that had ever lived on this planet had only one thing in common and that what made them ultra-successful is the potential of this mighty tool — Time.

Time is an allocation.
Time is energy.
Time is money.

Warren works all day. As he says, “I skip to work.”

But he delegates the management of all the businesses he owns (includes all the billion dollar businesses).

And he only gets involved in investments when he gets deals so good that they are easy for him to say “Yes” to. Which is rare but he is fine waiting and being patient.

And then the rest of the day he reads and he plays bridge.

He has a great life.

Reading is the best way to make sure you have more knowledge than the people you are doing deals with.

And bridge is his favourite game. It uses the brain, it uses his passion for statistics, and its fun (his bridge partner is usually Bill Gates).

He loves his day. He loves his life.

Invest your energy and time wisely because the dividends compound and produce a great life.

And THAT is how Warren Buffett use his habits daily, weekly, yearly, and gets rich.

Give Yourself Plenty Of Time Alone — Time To Reflect, Meditation, Create Vision. (at least 1 hour per day)

Consequently, you’ll need plenty of time to yourself.

All along the way.

To develop your skills.

To continue learning.

To continue creating vision and focusing on one single major goal.

To continue getting clarity, and regulating your emotions.

To keep yourself healthy, since you are your #1 asset.