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So you spent a 100 dollars today without even thinking twice?

We’ve all spent money that we shouldn’t have without thinking much about it. The reason is that money is relative - if you have a lot of it you tend to spend more. If you only have a little you spend little or nothing. There is a huge difference in the perceived value of 100 dollars if you only have the 100 dollars for the whole week or if you have 10 000.

The worlds wealthiest investor Warren Buffet has a secret about the way he thinks of money.

When we think about a 100 dollars we usually give value to it by thinking what we could have or do with that money. While it’s the most common way to think about money, it is also something that holds back a lot of people from becoming rich.

When Warren Buffet thinks about 100$ he doesn’t think what will he get when spending it today but he thinks what will he get from it in the future - while gaining 20% interest on the money annually.

If you decide to save 100 dollars and INVEST it with an expected annual payoff of 20%, in 5 years you would have 248 dollars and in 10 years you would have 619$. After 20 years your initial 100 bucks would be 3833 dollars.

It’s pretty tough to spend 100$ when you know that by doing that you will loose 3833$

This is an excerpt from “The Winning Investment Habits of Warren Buffet & George Soros”:

[Buffet’s wife] Susie… was a virtuoso shopper. She dropped $15,000 on a home refurnishing which “just about killed Warren,” according to Bob Billig, one of his golfing pals. Buffett griped to Billig, “Do you know how much that is if you compound it over twenty years?”

Well - it’s 575 064 dollars. (compounded with 20% which is the average pay-off of Warren Buffet’s stock portfolio)