Who does Warren Buffett turn to for wise counsel? His longtime business partner, Charlie Munger. Buffett wrote in his latest letter to Berkshire Hathaway shareholders that he never has a conversation with Munger without learning something.
Munger is definitely a fount of wisdom. He was asked a few years ago by CNBC's Becky Quick what the secret to a happy life was. The multibillionaire responded with six "simple rules" -- and one of them is vital to investors.
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1. Don't envy
Munger's first rule for a happy life is, don't envy other people. He noted, "Envy is a really stupid sin because it's the only one you could never possibly have any fun at."
This lines up well with what former Fool.com writer Morgan Housel wrote in his best-selling book The Psychology of Money: "[T]he ceiling of social comparison is so high that virtually no one will ever hit it. [A]ccept that you might have enough, even if it's less than those around you."
2. Don't resent others
On a similar note, Munger believes that you shouldn't resent others if you want to be happy. He stated, "I cannot recommend it [resentment] highly enough to you if you desire misery."
It's possible to resent someone without envying them. However, the two are related because they focus externally rather than internally.
3. Stay cheerful
Munger stressed that everyone needs to "stay cheerful in spite of your troubles." He said, "It's a wise thing to do."
Staying cheerful requires letting go of any negative feelings toward others, according to Munger. He asked, "And can you be cheerful when you're absolutely mired in deep hatred and resentment? Of course you can't."
4. Only deal with reliable people
Munger thinks that another important way to live a happy life is to "deal with reliable people." He said, "If you're unreliable, it doesn't matter what your virtues are, you're going to crater immediately."
This echoes what Buffett has stated in the past about Berkshire Hathaway working only with reputable people. The legendary investor once said: "Lose money for the firm, and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless."
5. Do what you're good at doing
Munger phrased this rule, "Do what you're supposed to do." And what are you supposed to do? What you're good at doing. He noted:
Each of you will have to figure out where your talents lie. And you'll have to use your advantages. If you try to succeed in what you're worst at, you're going to have a very lousy career. I can almost guarantee it.
6. Don't overspend your income
I've saved the Munger simple rule that's vital for investors for last: He believes that to live a happy life, you shouldn't "overspend your income."
Why is this rule so important for investors? You won't even be able to get started with investing if your spending is greater than what you make.
Munger has also applied this same principle directly to investing. In Buffett's latest letter to Berkshire Hathaway shareholders, he mentioned what his partner said in a recent podcast: "There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is dangerous."
Leverage involves investing more money than you actually have to invest by borrowing. It's essentially the same thing as overspending your income.
Trite but true
Munger acknowledged in his comments to Quick that his simple rules for living a happy life were "so trite." But it's hard to argue that they aren't true.
