Warren Buffett recently hosted the annual meeting for Berkshire Hathaway. In it we learned there was one personal finance thing that Warren Buffett would do first with some money.
I think that Warren Buffett is one of the best investors in the world. But he also has a lot of very good personal finance tips, even among the coronavirus problems.
Warren Buffett would do this personal finance thing first
The advice centred around credit cards. It's in this video if you're interested. He said:
"My general advice to people is that people should avoid using credit cards as a piggybank to be raided.
"I had a woman come see me not long ago who had come into some money." He then told this story:
Female friend: "What should I do with it?'.
WB: "What do you owe on your credit card and what's the interest rate?" The friend answered something like 18%.
WB: "I don't know how to make 18%. If I owed money at 18% the first thing I'd do is pay it off. That would be way better than any investment idea I've got."
Warren Buffett then told us the woman's daughter had $1,000 or $2,000 – what should she do with it? He jokingly (or seriously?) suggested the daughter should lend it to the woman at 18%.
Financial lesson
Even one of the world's best investors thinks it's best to pay off credit cards first before investing. Don't forget that you have to pay off your credit card with post tax income.
Banks like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) earn big interest margins on their credit cards.
Warren Buffett has given a number of great personal finance lessons over the years. But before you think he's miserly, one the gems he's said is that it's not a good idea to invest all of your money and promise the family can go to Disneyland several times when you're 80 (and when the child is all grown up), it's better to go to Disneyland once when the child is young and when they'd appreciate it.
The world would be a much more stable place if everyone decided to behave financially like Warren Buffett does.
