John M. Longo - Buffetts Tips: A Guide to Financial Literacy and Life

1. Chapter 1
2. Chapter 2
3. Chapter 3

1. Chapter 2
2. Chapter 3
3. Chapter 4
4. Chapter 5
5. Chapter 7
6. Chapter 8
7. Chapter 11
8. Chapter 12

JOHN M. LONGO

AND

TYLER J. LONGO

Copyright 2021 by John M. Longo and Tyler J. Longo. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 7508400, fax (978) 6468600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 7486011, fax (201) 7486008, or online at www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 7622974, outside the United States at (317) 5723993, or fax (317) 5724002.

Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.

Library of Congress Cataloging-in-Publication Data

Names: Longo, John M., author. | Longo, Tyler J., author. | John Wiley & Sons, Inc., publisher.

Title: Buffetts tips : a guide to financial literacy and life / by John M. Longo, Tyler Longo.

Description: Hoboken, New Jersey : Wiley, [2021] | Includes bibliographical references and index.

Identifiers: LCCN 2020041943 (print) | LCCN 2020041944 (ebook) | ISBN 9781119763918 (cloth) | ISBN 9781119763727 (adobe pdf) | ISBN 9781119763710 (epub)

Subjects: LCSH: Buffett, WarrenAnecdotes. | Financial literacy. | Investments.

Classification: LCC HG179 .L5729 2021 (print) | LCC HG179 (ebook) | DDC 332.67/8dc23

LC record available at https://lccn.loc.gov/2020041943

LC ebook record available at https://lccn.loc.gov/2020041944

Cover image: Eyeglasses: bubaone/Getty Images Hair: Wiley

Cover design: Wiley

To my wife Kim and son/co-author, Tyler, the two most important people in my life.

J.L.

To my grandfather for providing me with the seed capital to make my first million.

T.L.

Many surveys have found that a large percentage of households would struggle to come up with $400 in the event of an emergency. The COVID-19 pandemic has turned this conceptual question into a very real one with potentially devastating human consequences. Financial literacy, and ultimately, financial independence are goals that everyone should aspire to. Beyond the knowledge gained, we believe that those who take the lessons of this book to heart will experience a sense of confidence and freedom in financial matters. The confidence to make good financial decisions. Freedom from the stress that comes from living paycheck to paycheck. Ultimately, the freedom to live the life you want to live and to help the people and causes that you care deeply about.

What better way to become financially literate than to use a framework inspired by perhaps the greatest financial mind that ever existedWarren Buffett's? That's the concept and desired outcome of this book. No one reading this book will become as rich as Warren Buffett, but we do aim to teach you to become financially literate, with the backbone of the book being 100 tips or strategies that are largely quotes and anecdotes from Warren Buffett. We're two of his biggest fans and Berkshire Hathaway shareholders.

For decades Buffett met with groups of college students several Fridays each year for a two-plus hour Q&A session, followed by a lunch at a local Omaha restaurant. Gorat's Steakhouse and Piccolo Pete's Restaurant (now closed) were two of Buffett's favorite places to take the students. The students also received a management-guided tour of several of Berkshire's subsidiaries, such as Nebraska Furniture Mart, Borsheims, and the Oriental Trading Company. John, a Finance Professor and money manager, led four trips with Rutgers students to meet with Buffett at Berkshire's headquarters in Omaha, Nebraska. In case you're curious, Buffett did pay for the students lunch, and a root beer float, Buffett's favorite, was often a dessert. He often also generously posed for selfies and group photos and autographed books. It seemed like Buffett had as good a time on these visits as the students and faculty in attendance.

One thing that struck John about these meetings was Buffett's wisdom on non-financial-related topics, such as the importance of communication skills, having a group of friends that would inspire you, and the significance of helping others. So, although this book is primarily focused on financially related topics, the life part of the book contains many equally valuable lessons.

A confluence of events resulted in the creation of this book. Professors are required to do research, so John is always thinking about some type of research activity. He has also taught investment-related courses for roughly 20 years, with an emphasis on value investing, which is Buffett's specialty. Over the past few years, John was teaching his teenage son, Tyler, about financial-related topics in real time. For example, they opened several financial accounts specifically geared towards minors, such as a savings account, checking account, debit card, credit card, college savings plan, and brokerage account. Additionally, Tyler had completed enough coursework in financial-related topics that he was able to make meaningful contributions to this book. Specifically, he has completed coursework in Financial Literacy, AP Economics, AP Statistics, and the Introduction to Business, Finance, and Economics program for high school students at Columbia University. There are a lot of books on Buffett and even more on the topic of financial literacy. But we believe this is the