Warren Buffett and Charlie Munger reveal the 3 ways smart people can go broke

Warren Buffett that borrowing money is a way of trying to get rich a little faster but there are plenty of ways to get rich slowly and have a lot of fun while getting rich.

Business magnate Warren Buffett, who believes that investors should never borrow money to buy stocks, revealed that his longtime business partner Charlie Munger knew of three ways in which smart people can become broke, namely the 3 Ls.

“It is crazy in my view to borrow money on securities,” Buffet had said during an interview with CNBC. “It’s insane to risk what you have and need for something you don’t really need.... You will not be way happier if you double your net worth.”

The Oracle of Omaha added that borrowing money is a way of trying to get rich a little faster but there are plenty of ways to get rich slowly and have a lot of fun while getting rich.

“My partner Charlie (Munger) says there is only three ways a smart person can go broke: liquor, ladies and leverage,” Warren Buffett said. “Now the truth is -- the first two he just added because they started with L -- it’s leverage.”

He added that borrowing money also comes with a risk of going broke.

Read more: 'Don’t ask the barber whether you need a haircut': Warren Buffett on developing insight

In in his 2014 letter to shareholders, the billionaire investor and Berkshire Hathaway CEO even compared aggressive borrowing and reckless trading to gambling with one's life.

"It is madness to risk losing what you need in pursuing what you simply desire," Buffett had said . "We will never play financial Russian roulette with the funds you've entrusted to us, even if the metaphorical gun has 100 chambers and only one bullet."

Noting that the percentage probability of surviving a round of Russian roulette with a six-chamber revolver and a single bullet is a solid 83.3 per cent, Buffett said, "Neither 83.3 per cent or 99 per cent is good enough when there is no gain to offset the risk of loss."

Read more: Won't buy all bitcoin in the world even for $25, says Warren Buffett