Debt Free Life: Be Like Buffet and Don’t Lose Money!
Written by Joseph Regan on June 01, 2017.
Warren Buffet, perhaps the greatest investor of all time, stated one of my favourite quotes that we should all try to live by.
"The first rule of investing is don't lose money; the second rule is don't forget Rule No. 1."
Buffet is quite the frugal guy. He’s known for eating McDonald’s breakfasts that cost less than $5 every morning, living in the same house he purchased back in the 50’s in Nebraska, and driving a Cadillac. His lifestyle is definitely not comparable to some of the other richest billionaires on the planet, but that’s what makes Mr. Buffet so unique.
As a financial advisor, one of the biggest problems I see is debt. Debt can destroy your finances.
Credit card debt is a serious problem. Every time you use your credit card, you are taking out a small loan with an interest rate. This not only means you’re putting yourself in debt every time you use your beloved credit card, but also that the debt is growing.
Let’s say you went on a shopping spree at Apple. All the cool gadgets cost $10,000, and you used your credit card to pay the bill. However, let’s say you don’t have $10,000 to pay the credit card company back straight away. If the credit card company had an interest rate of 5% (which is quite low for credit card companies), after 15 years you would owe that company $20,789. If the interest rate was 18% (which is more in line with many credit card companies out there), and the end of 15 years you would owe them a whopping $119,737!
Credit cards aren’t the only debt traps out there. Mortgages, bank loans, and even student loans (you definitely want to talk to your kids about this – check out this article on education planning for more) can all cause serious financial damage to your finances.
Debt isn’t something to be taken lightly…before you borrow money, it’s always good to give it some serious thought. The best rule for combating debt is to stay debt free, but that can often be impossible in today’s world. Luckily, I’ve put together my three top tips for dealing with debt effectively:
Tips for Combating Debt
Don’t spend what you can’t afford. If you don’t have $10,000 to go on a shopping spree at Apple, don’t spend it!
Always read the fine print when taking out a loan. If the interest rate is really low, then it could be a safe loan. If it’s very high, you may want to think again.
Assess your circumstances. If you get accepted to Harvard and need a loan, that could very well be a great investment that would allow you to pay off that loan quickly. In this case, getting a student loan could be a great idea.
As you can see, debt can not only hamper your credit score, but also your (and your family’s) financial health. Let’s all be good investors, and try to follow Warren Buffet’s motto of never forgetting Rule No. 1!
If you need help getting out of debt or staying debt free, feel free to reach out on +86 152 2182 4499, or email me at firstname.lastname@example.org.