Warren Buffett is the richest man in the world, yet his reputation for frugality, folksy wisdom, and straight talk make him seem like just a regular guy, like he might be the billionaire next door. He’s one of my heroes.

Several Buffett biographies have seen print over the years — The Making of an America Capitalist, The Good Guy of Wall Street, etc. — but at the end of September, author Alice Schroeder will publish a new one: The Snowball: Warren Buffet and the Business of Life.

In the most recent issue of Parade magazine (a Sunday newspaper supplement), Schroeder shares ten of Buffett’s “money-making secrets”, which she gleaned during hundreds of hours of interviews for her book. Though Parade has billed these as “10 ways to get rich”, I think they’re actually ten sensible ways to deal with life in general. Buffet advises:

  1. Reinvest your profits. “Even a small sum can turn into great wealth,” Schroeder writes, if you’re disciplined to not touch your profits. Let the power of compound interest work for you.
  2. Be willing to be different. Don’t follow the herd. Do what is best for you and your situation.
  3. Never suck your thumb. Ah, how I could learn from this one. Buffett makes decisions quickly based on the available information. I tend to sit and stew about things. Acting decisively can give you an advantage and prevent procrastination.
  4. Spell out the deal before you start. I stress this all the time: Don’t sign a contract unless you’ve read it (especially not a mortgage). Read the fine print. Understand the what you’re getting yourself into.
  5. Watch small expenses. While it’s true that the big things matter, the little things do too. Frugality is an important part of personal finance. But this principle also applies when investing, which is one reason I’m a fan of low-cost index funds.
  6. Limit what you borrow. “Living on credit cards and loans won’t make you rich,” writes Schroeder. Sure, leverage can get you into a home or a new car, but too much debt is one of the biggest drags on your financial well-being.
  7. Be persistent. If you know what you’re doing is important and right, stick to it. Doggedly pursue your goals. Learn to “fail forward”.
  8. Know when to quit. The other day, I wrote about the danger of the sunk-cost fallacy. Just because you’ve already paid $10 to see Indiana Jones and the Kingdom of the Crystal Skull, doesn’t mean you should sit through to the end. Be willing to cut your losses and walk away.
  9. Assess the risks. “Asking yourself ‘and then what?’ can help you see all of the possible consequences when you’re struggling to make a decision — and can guide you to the smartest choice.”
  10. Know what success really means. Success is different for each of us. Find what it is that brings meaning to your life, what makes each day important. Make this your focus. Buffett says: “When you get to my age, you’ll measure your success in life by how many of the people you want to have love you actually do love you. That’s the ultimate test of how you’ve lived your life.”

Parade also published a short piece describing how Warren Buffett made his first dime.

Although I consider Warren Buffett a personal hero, I realize my admiration may be more for the idea of Buffett than for the man himself. Still, I’m eager to read this new biography when it’s released at the end of September. Maybe I should make it my selection for my monthly book group. (Nah, they’d kill me.)

[Parade: 10 ways to get rich, via All Financial Matters, where JLP provides his own thoughts on these ten tips]

This article is about Gurus, Hints and Tips, Interviews, Self-Improvement  Wednesday, 10th September 2008 (by J.D. Roth)