Small habit that changed his finances: Charlie Munger had no family money and 8 children to support. One habit changed his finances

Charlie Munger, one of the sharp-thinking billionaire and a close associate of Warren Buffett had often shared his words of wisdom- be it about the finance, wealth building or saving money. His approach to building wealth was rooted in a simple habit that helped him become a billionaire. Long before he became Warren Buffett's trusted business partnet, he had modest earnings, a family to support and no family money to fall back on. He revealed his financial mindset that shows his discipline that further helped him to accumulate wealth.

Charlie Munger had no family money to fall back on

In a Caltech interview, Munger spoke candidly about the financial responsibilities he faced early in his career. He recalled having “an army of children to support” and “no family money or anything to start with”, leaving him to make his own way in life." The investor had 8 children from his two marriages, which also includes his step-children. In the interview, he continued that he had concerns about the limitations of legal practice, but he also had a family depending on him. Munger said his earnings as a young man were relatively small, but he made a conscious decision to spend less than he earned.

“What happened was, my pitifully, small earnings as a young man, I kept underspending them,” he said. “I kept investing fairly boldly and fairly smartly.” Rather than waiting for a higher salary or a financial windfall, Munger focused on making the most of the money he already had. His approach combined restraint in spending with a willingness to invest the savings.

How underspending helped him build investments

Munger also described the results of following this habit over time. Looking back at his first 13 years of legal practice, he said his investments had grown considerably. “At the end of my first 13 years of practice, I had more liquid investments made than I'd made in all those years of law practice, pre-tax,” he recalled during the interview.

He added that he had built those investments in his spare time using “these little tiny sums”. His experience illustrates the principle he later discussed more broadly: wealth-building does not necessarily begin with a large income or a substantial inheritance. Consistent saving, combined with investing, can help build a financial base over time.

Charlie Munger’s money advice: Spend less than you earn

Munger returned to the same principle decades later. At the 2023 Berkshire Hathaway annual meeting, he explained that financial success often comes down to a combination of sensible spending, thoughtful investing and discipline. “Well, it's so simple to spend less than you earn, and invest shrewdly,” he said. He also advised people to avoid “toxic people and toxic activities”, keep learning throughout their lives and practise “a lot of deferred gratification”. In his view, these habits work together to improve a person’s chances of succeeding.

“And if you do all those things, you are almost certain to succeed,” Munger said. “And if you don't, you're going to need a lot of luck.” He added that people should avoid relying on luck and instead put themselves in situations where they are likely to succeed without needing unusual circumstances to work in their favour.

From modest earnings to Berkshire Hathaway

Munger’s career eventually took him far beyond his early years in law. He was born in Omaha, Nebraska and left University of Michigan to serve in the Army as meterologist during World War II. He had a degree in law from the prestigious Harvard Law School. It was in 1959, that he met Warren Buffett at a dinner party and over the decaded, the two built a long-standing business partnership. Munger joined Berkshire Hathaway in the 1970s and became the company’s vice chairman, helping shape its investment philosophy alongside Buffett. Munger died in November 2023 at the age of 99.