The Best Investment You Can Make According to Warren Buffett

How diversifying my income increased my financial flexibility and pursue my passion

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“By far the best investment you can make is in yourself.”

- Warren Buffett

When you think of wealthy people like Waren Buffett, you think of their financial wealth like stocks, real estate, and swimming pools filled with gold that they dive into Scrooge McDuck style.

Few people think about how these people acquired their wealth. I’m not talking about the trust fund babies; I am talking about people who started from modest means and built their wealth from scratch.

These people invested in acquiring skills and knowledge that allowed them to earn a great living and control their time.

They invested in their human capital.

All wealth is created from income

Increasing your human capital means learning skills to make more money.

I’ve said it before and will continue saying; wealth is created from income.

Your ability to invest in stocks, bonds, real estate, or any other investment is made possible by your ability to earn an income.

The three-step formula for building financial wealth is shockingly simple.

• Step 1: Increase your income.

• Step 2: Maintain your current lifestyle.

• Step 3: Invest your disposable income in assets that increase in value over time.

Rinse, repeat.

This is generally a long, slow process. Some people try and cheat the process by swinging for the fences with risky investments like meme-stocks. Trying to get rich faster through speculative investments is like trying to get rich by buying lottery tickets.

The right way to speed up the process is by increasing the amount of money you have to invest. To do that, you gotta increase your income—while keeping your expenses from growing.

The entire wealth-building process begins and ends with your human capital, not cutting your expenses to the bone.

Frugality helps those with a solid income build wealth.

Frugality helps those with a low income to scrape by.

When it comes to building wealth, it all starts with income.

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Connecting human capital, wealth, and happiness

The research is clear, making more money increases happiness—Even beyond the mythical $75,000 threshold.

The reason is simple the more money you make:

1. The more immediate control you have over your life.

2. The more you can invest—which means you’ll have even more control over your life in the future.

Money buys happiness, but not directly.

Money buys freedom, and freedom makes you happy.

But how you make you make your money can have a huge impact on day-to-day happiness.

Some jobs that pay a ton of money come with a huge workload, lack of flexibility, and stress.

Think of the partner at a law firm who has become filthy rich but had to work 70+ hours per week for a decade to make it happen. Is that person happier than someone who is “moderately rich” but works 40 hours per week?

There are two ways to invest in your human capital.

1. Go all in on the skills required for your 9-5 and maximize your salary.

2. Diversify by making money doing something unrelated to your 9-5.

To me, the best investment in human capital is one that has three goals:

1. Increasing your income to a point where you have enough disposable income to invest and build financial wealth.

2. Allows you to do work you care about.

3. Eventually, this leads to a situation where you control your work schedule.

Some people spend $100,000 and 6 years of their life going to University and law school to become a lawyer.

• If they do this because they’re passionate about the law, then it’s a great investment.

• If they do it because “lawyers make a lot of money,” then they might have wealth but no freedom.

Notice “Doing it for the money” only checks one of the three goals of investing in human capital.

Side hustles are how people are diversifying their human capital to build wealth and buy freedom

Many people's primary motivation to invest is to build enough wealth to “Retire early.”

Early retirement typically requires a high income combined with extreme cost-cutting, aka “working long hours and feeling like you can never spend money on things you enjoy.”

That sounds miserable. Why would anybody do that?

Because they hate their jobs and want to bank as much as humanly possible in a “Short” period of time so they can leave that job that makes them miserable while maintaining financial security.

But as I have written in the past, early retirement still takes years, if not decades, even for supersavers.

A side hustle, doing work that excites you, can check all three boxes by increasing your income, allowing you to pursue work you care about, and, if you’re lucky, one day providing an option for taking your side hustle full-time.

I started Making of a Millionaire by writing about personal finance on Medium in 2018. Since then, I’ve grown my Medium following to over 80,000, nearly 9,000 subscribers on Substack, and landed a book deal with a publisher.

The best part about a side hustle like writing is that the barrier to entry is zero. Writing on Medium and Substack is free.

It does require a massive investment of time, some skill, and an unquantifiable degree of luck.

I wrote 100+ articles before building anything resembling an audience. I spent a year basically writing for free. But that investment of time paid off as it developed my writing skills, allowing me to create a secondary income that rivals my 9-5.

This has exponentially increased my financial security; having a secondary income that can cover my living expenses means that I wouldn't be scrambling to pay the mortgage even if I got laid off from my 9-5.

It has also strengthened my financial position. Since writing is a low-cost business, I invest all my profits into the stock market.

With that financial strength comes opportunity.

When you are no longer clinging to a paycheck because your life depends on it—you can better negotiate with your employer for higher pay or greater flexibility, like working from home.

If you struggle to make ends meet, increasing your income is all that matters, even if that means taking on a job you don’t enjoy. There’s nothing wrong with “doing it for the money,” especially if you have people who depend on you.

But if you can cover your expenses every month and even save a bit of money, a side hustle might be just the ticket to learning new skills, making a bit more money to invest, and with enough time and luck, creating your dream job.

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This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.