My five favorite quotes from Warren Buffett

This post recently appeared on FreeMoneyFinance.com

I am a big fan of Warren Buffett and have always been inspired by his words of wisdom. These are my five favorites…

“Do business with people you like and who share your objectives.”

Isn’t there more to life than money? I have met people who I wouldn’t work with for a million dollars, haven’t you? People are people and you will never be completely insulated from people who bug you, but if you are hiring them or choosing to work with them, they might as well be people you enjoy being around.

When your business partners are sharing your objectives you won’t have to waste your time pulling against each other. If you are building a business to selling eco-friendly products with the sole intention of saving the rainforest and your partner is only concerned with increasing profits - you are going to be in trouble.

“Leave your children enough money so they can do anything, but not enough that they don’t have to do anything.”

A cousin of mine received 8 million dollars as an inheritance on his 21st birthday. A few people I was talking to couldn’t believe me when I said I wouldn’t want it. To me, the joy in life is overcoming the challenges and reaching the successes. I would have felt like I was robbed of the chance to fight and earn it.

I want to be able to look back on my life and see all the obstacles that I overcame in order to reach my destination. Don’t get me wrong, everyone needs help on the way. For some people the 8 million dollars might be just the help they need to get their non-profit off the ground or get their business started.

But for me, if I would have had 8 million handed to me at age 21, it wouldn’t have helped, it would have been crippling. I would have been tempted to relax just a bit too much. I would have probably ended up a big, fat blob.

The irony is that as much as some people desire retirement and the “easy life” many of them find themselves bored out of their minds. We all need something to live for. I remember how miserable I became when I was out of work for a few months. I wanted to contribute to society, but couldn’t find the opportunity. I felt like a big, fat blob and wanted more than anything just to have an opportunity to do some work. Amazingly, as soon as I started working again, I felt a whole lot better about myself.

“Decision making abilities fade as cash flow increases.”

Suppose you only have $5 in your pocket until the end of the week, it is likely that you will make a good decision with it, because it is all you have. On the other hand, if you have $100 for the week, your decisions regarding a $5 purchase are far less critical since you have another $95. Therefore, people tend not to treat those decisions with the same respect they would if it was their last $5.

Parkinson’s Law states that expenses rise to meet income. It is the reason that many people wonder why their last raise didn’t make paying the bills any easier. The way to defeat Parkinson’s Law is to treat each dollar as if it is the last - to make the best possible decision for each and every dollar. Not as a miser, but as someone who is choosing to make wise decisions with their money.

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

Think Eliot Spitzer, Michael Vick and Kobe Bryant. One day they can be very respected in their fields and the next they can have a whole different perception in the eyes of the public.

With the advances in technology it is becoming more and more difficult to hide from mistakes. Society is much more transparent than it used to be. You can Google a phone number and get directions to the location, employers are checking up on Facebook and Myspace pages, and you can see what was on a website years ago. The days of being able to do something stupid and trying to cover it up are gone. So, Warren’s advice is more relevant now than ever.

“There are no called strikes in the ball game of investing.”

Yea, it would have been nice to have bought Google @ $75 during the IPO, or better yet Microsoft. But, you didn’t LOSE any money by not investing. Even if someone else made thousands while you sat on the sidelines, you still did not LOSE any money. There are plenty of stocks that you could have bought that you would have lost money.

While I agree with what Warren is saying, I have noticed that the problem for most people is that they are afraid to swing the bat. They stand up there watching opportunity after opportunity go by only later to say, “I wish I would have…” I did it for years.

I would see a company pop up and say to myself, “that would be a great stock to buy,” only to watch the price continue to rise without swinging the bat. I would feed myself excuses mostly about how I didn’t have enough money and how it was risky - both were kind of true. But you can now get started investing for as little as $100 at Sharebuilder and we all know that without risk there is no reward. So just get in there, wait for a good pitch and swing for the fences.

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Do you have any other great words of wisdom from Warren?