Warren Buffett says make it the priority of your $ 1,400 stimulus check
The IRS says it just sent out a second batch of $ 1,400 stimulus checks, with an official payment date of March 24, and says more will follow each week. About 127 million relief payments have been distributed to date, worth about $ 325 billion.
But no matter how many lots come out, investment legend Warren Buffett will never get a stimulus check.
It’s not because his net worth has recently approached $ 100 billion. Instead, his annual income – including a $ 100,000 salary and billions in dividends – puts him well above the limit to qualify for the third raise payment (and the fourth, if it happens).
Even so, Buffett is a good source of advice on what to do with your relief money. He would tell you to tackle a high priority first.
The best use of stimulus cash, according to Buffett
Buffett has some simple tips on what to do with your $ 1,400 stimulus check, or any extra cash that gets thrown at you: Get rid of credit card debt. “The first thing I would do with the money I have is pay it back,” he says.
At a 2020 online shareholders meeting for his company, Berkshire Hathaway, Buffett said a mistake is to use credit cards “like a piggy bank.”
He told the story of a friend who had stumbled across a bargain and asked his advice on what to do with it. He learned that the woman also had a credit card balance – at 18% interest.
The investment icon told him to give up the debt first. “It just doesn’t make sense,” he told shareholders, according to a transcript. “You can’t spend your life borrowing money at these rates and be better off.”
If your $ 1,400 stimulus check isn’t totally erasing your credit card debt, you can make your remaining balances more manageable and affordable by sweeping them in. a lower interest debt consolidation loan.
But don’t use your stimulus check on any other kind of debt
Although Buffett admitted at the shareholders’ meeting that “the world is in love with credit cards,” he strongly opposes postponing balances and their non-payment.
But he doesn’t think that way about all debt – and wouldn’t tell you to put down your $ 1,400 payment on your mortgage.
In a 2017 interview with CNBC, he called the 30-year mortgage “an incredibly attractive instrument for the homeowner.” This is more true than ever now, with mortgage rates still at historically low levels.
Buffett is so sold on 30-year mortgages that he took one out when he bought a vacation home in Laguna Beach, Calif., In 1971 – even though he could have paid cash.
He says his home loan was financially sound: “I thought I could probably do better with the money than have him buy the house on an equity basis,” he said. told CNBC.
No credit card debt? So invest your stimulus check
In fact, Buffett says he took the money he would have used to pay for the entire house and spent it on inventory at his own business. He bought around 3,000 shares of Berkshire Hathaway at around $ 40 each – an investment he said had reached $ 750 million at the time of the 2017 interview.
If you don’t have credit card debt or other urgent needs to deal with your stimulus check, learn a lesson from the legend. Consider investing your $ 1,400. Maybe even in Berkshire Hathaway.
Berkshire stock has posted average annual returns of over 20% since the 1960s, compared to just 10% for the S&P 500, according to multiple media outlets.
Buffett never split his company’s Class A stock (BRK.A), so the stock is notoriously expensive – approaching $ 400,000 per share. But you could get a Berkshire Shard using a popular stock trading app which allows you to buy fractional shares with as much money as you can afford to spend.
Another way to invest your stimulus check is to open an account with an app that lets you build your wallet using ‘spare currency’. When you link the app with a credit or debit card, your daily purchases are rounded to the nearest higher dollar and the difference goes to your investment account.