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5 Money Habits That Keep Smart People Broke, per Buffett
Buffett says borrowed money, waiting to invest, and chasing complexity keep educated professionals broke. Five habits that matter more than IQ.
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Warren Buffett has spent decades explaining why intelligence alone does not build wealth. He has watched brilliant doctors, engineers, and executives stay broke their entire lives while people of average intelligence became millionaires next door.
Buffett credits temperament for most of the difference. Here are five money habits he has warned about over the years, the ones that keep smart people broke for decades at a time.
"When you combine ignorance and leverage, you get some pretty interesting results."
Smart people often believe they can beat the market by borrowing money to multiply their returns. The math looks great on paper. If an investment returns 10 percent and the loan costs 6 percent, the spread feels like free money.
Buffett has spent his whole career warning people about this trap. When highly intelligent investors go broke, he has observed, borrowed money is almost always the cause.
High leverage robs you of the ability to survive a bad year. Markets can stay irrational far longer than an investor on margin can stay solvent. One margin call at the wrong moment can erase years of good investment returns in a single afternoon.
His position is blunt. A genuinely smart investor does not need debt to get rich. Anyone else has no business touching it in the first place.
"By far the best investment you can make is in yourself."
Plenty of intelligent people spend their twenties hunting for clever external investments while their own skills sit idle. They study stock charts and crypto whitepapers. They never work on how they speak, write, communicate, sell, or develop their technical skills.
Buffett has told students for years that they are the most valuable assets they will ever own. Nobody can tax your own skillset away. Nobody can take it from you either.
He points to communication as the single highest-return skill a young person can build. Buffett took a Dale Carnegie public speaking course as a young man because he was terrified of speaking in front of groups. He keeps that certificate in his office today instead of his college diplomas.
Smart people who skip this step put a lid on their own income. The amount you can invest always depends on the amount you can earn. No portfolio strategy fixes a stalled career.
"Life is like a snowball. The important thing is finding wet snow and a really long hill."
Highly educated people love to wait. They want the perfect entry point. They want one more book under their belt before they put real money to work. The years slide by while they study.
Buffett considers the delay one of the most expensive mistakes a person can make. Compounding needs two ingredients: a decent rate of return and an enormous stretch of time. Only one of those cannot be bought back later.