Warren Buffett’s Advice for Getting Rich on an Average Salary

Warren Buffett is worth over $140 billion, but he wasn’t born rich. Which is probably why he is known for giving financial advice that resonates with the working class.

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If you don’t make six figures, but still want to build wealth, here are seven Buffett core principles that can help you get rich.

1. Invest Early and Let Compounding Do the Heavy Lifting

Buffett often repeats that time is the friend of the investor. He said that starting young gives the “snowball” of compounding a long hill to roll down. Even if you don’t make a lot of money, you can start investing small amounts and increase your contributions over time.

The most powerful factor in compound interest is time. And Buffett knows this better than anyone. A majority of his wealth has come after age 50.

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2. Live Below Your Means

Buffett still lives in the same house he bought in 1958. He could afford mansions, but he values freedom over flash. For anyone earning an average salary, that means being intentional with spending.

And while he could buy entire neighborhoods several times over, there is a measure of truth for those earning an average salary. Choose your spending carefully, avoid lifestyle creep and make your budget support your investments, not sabotage them.

Living below your means is age-old advice, but it especially rings true for those that don’t have a lot of extra room in the budget.

3. Avoid High-Interest Debt

Buffett warns that credit card debt can ruin your financial life. According to Benzinga, he told Berkshire Hathaway shareholders in 2021 that borrowing money at 18 or 20 percent interest “makes no sense.” He advises paying off credit cards before any other type of investment, because the rate of return is greater than you’d make elsewhere.

So if you’re paying off debt, make paying down high-interest debt top priority. Every dollar you free from interest payments is a dollar that can start earning interest for you instead of the bank.

4. Invest in Yourself

Buffett said that your best investment is you. In the 2022 Berkshire Hathaway shareholder meeting, the Oracle of Omaha said, “Whatever abilities you have can’t actually be inflated away.”

So while life continues to get more expensive, leveling up your skills is the key to keep up and grow your income. On an average salary, that might mean improving your job skills, learning new tools, getting certifications, seeking a raise or promotion, or starting a side business.

Whatever increases your income floor gives you more freedom to invest and build wealth over time.

5. Buy Quality and Think Long Term

Buffett’s investing philosophy is simple: Buy great businesses at fair prices and hold them for years. This means focusing on quality when you make purchases or investments. Buffett is also known for saying his favorite holding period is “forever.”

For average investors, this means investing in assets that you’ll hold for decades, not days. Choosing low-fee index funds or ETFs can be great long-term holds, for example, and allows you to buy hundreds of quality companies within a single fund.

6. Keep Cash for Opportunities and Emergencies

Buffett always keeps plenty of cash on hand. It helps him stay calm when markets drop and lets him buy when others panic. In fact, his holding company Berkshire Hathaway is currently holding a record amount of cash, waiting for an opportunity.

For you, that means having an emergency fund that covers at least three to six months of expenses. And having an “opportunity fund” set aside for great deals you may come across. Cash also keeps you from relying on credit cards when life happens and lets you invest confidently during market dips.

7. Stick with Simple

Buffett avoids complicated investments he doesn’t understand. It’s why he held out on investing in technology companies for so long, and while he’ll probably never hold cryptocurrency. This has helped him succeed.

You can follow that same rule. Keep your money plan simple. Budget each month, automate savings, invest regularly, and check in a few times a year. Complexity creates confusion, but simplicity builds wealth.

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This article originally appeared on GOBankingRates.com: Warren Buffett’s Advice for Getting Rich on an Average Salary