Avoid credit card debt. That’s the advice from billionaire Warren Buffett, CEO of Berkshire Hathaway and one of the world’s richest people. The billionaire says a young person would be foolish to sell 10% of their future earnings for $50,000. He says he’s certainly glad now that he never made that deal. Yet this is exactly what many do by signing up for credit cards, then racking up a pile of debt.
“You can’t get anywhere by paying 18% or 20% on what you owe, but you can make a lot of money charging that to someone else. You don’t want to be on the bad side of that equation.”
In the video below, Buffett talks about credit card debt and what it means to young people. He also gives advice about ethics and the importance of cultivating good habits.
Buffett had saved $10,000 by the time he graduated college. He claims this money was worth more to him than the millions he made later on, because it helped him start out ahead. “But if you’re behind the game,” he says, “you’ll never get ahead.”
He says it’s easier to stay out of trouble than to get out of trouble. Further, those who aren’t in trouble can invest, and make use of interest.
“If you get into debt you’ll be in trouble the rest of your life, but if you get ahead of the game, even modestly, you’ll be way ahead compared to always paying creditors every month. So if you can’t pay for it, don’t buy it. Get yourself in a position where you can pay for anything. Then buy whatever you want.”
The takeaway? Don’t ever, ever, ever get in debt.
Buffett says in life, the things that determine someone’s course are their education and their habits. “The habits we look for when hiring people are integrity, intelligence, and energy. But if you don’t have energy,” he jokes, “we want you to be dumb and lazy.”
He suggests that students think about the person they admire most, and make a list of those things about the person that make them who they are. Cheerfulness, kindness, and so on. Then think about the person they find most reprehensible and list their traits. Selfishness, arrogance, etc. Then realize all those good things can be cultivated, and the bad things erased, if a person decides to make a habit of it.
He goes on to say avoiding credit card debt is one of the most important habits to develop.