No surprise here: Warren Buffett does not get a $ 1,400 stimulus test, and not necessarily because the investment legend’s net worth recently touched $ 100 billion.
Eligibility for one of the new direct payments is based on how much money you earn, and Buffett’s income puts him very much out of bounds. Supporters of federal regulators show that he draws a $ 100,000 salary from his company, Berkshire Hathaway, plus that he earns billions more from dividends each year.
But even though the busy businessman does not qualify for the third stimulus test (or more), he will have advice on how to use yours. Namely, Buffett gives you one big priority for the money.
According to Buffett, this is the wisest way to use stimulus cash
Buffett says that when extra money ends up in your lap, it should be your first step pay off credit card debt. Although he says ‘the world is in love with credit cards’, it’s too expensive.
At Berkshire Hathaway’s annual shareholders’ meeting last year – which was held online for the first time – Buffett shared an anecdote about a friend who came across a windfall and sought his advice on what to do with it. It turns out that she also has credit card debt at 18% interest.
The billionaire indicated that he understands that many Americans rely on credit cards because of financial problems associated with the pandemic. At the same time, he said that some people consider their plastic to be a piggy bank that should be shut down. ‘
“If I owed 18% of money, I would do the first thing with my money to pay it off,” Buffett said of telling his friend. “You can not borrow life to borrow money at such rates and be better off.”
But what if your $ 1400 incentive check is not enough to wipe out your credit card debt? You can make your remaining balances more manageable and affordable by consolidating them into a loan with a lower interest rate.
Buffett would not say that you use your stimulus check for your mortgage
Buffett is strongly opposed to carrying credit card balances: “It just does not make sense,” he said during the virtual shareholders’ meeting.
But he does not feel that way about all debt – and would not advise you to put your $ 1400 payment on your mortgage.
Although he could afford to pay cash, Buffett took out a thirty-year mortgage in 1971 when he bought a vacation home in Laguna Beach, California.
In an interview with CNBC in 2017, he calls the 30-year mortgage loan an incredibly attractive tool for the homeowner. ‘This is even more true today, with the mortgage rate still at historically low levels.
Buffett says his home loan made financial sense: “I thought I could probably do better with the money than buying a share in the home,” he told CNBC.
No credit card debt? Then invest in your stimulus test
In fact, he says he took the cash he would have used to buy the house straight and bought stock in his own company. Buffett bought about 3,000 shares in Berkshire Hathaway at about $ 40 each – an investment he grew to $ 750 million, according to the 2017 interview.
If you have no credit card debt and no other urgent need to cover your stimulus check, then take a lesson from the legend. Consider investing your $ 1,400. Maybe even in Berkshire Hathaway.
Several media outlets report that Berkshire’s share has had an average annual return of more than 20% since the 1960s, compared to only 10% for the S&P 500.
Buffett has never split his A shares (BRK.A) in his company, so the share is notoriously expensive – now closer $ 400,000 per share. But you can get a piece of Berkshire with a popular stock trading program that allows you to buy fractions of stocks with as much money as you are willing to spend.
Another way to invest your stimulus test is by opening an account with an app that allows you to build your portfolio with ‘savings change’. When you link the app to a credit or debit card, your everyday purchases are rounded off to the nearest dollar – and the difference is added to your investment account.