RSSWarren Buffet on Debt
Sep 06
Debt, General, The Bible & Money No Comments
Okay. I’ve tried to convince you through scripture and plain reason that borrowing money is an awful idea. But you just don’t seem to get it. I’ve quoted scripture and shared my experiences, but now…I’ve reached an all time low. I’m going to quote a someone who didn’t appear in the Bible.
From Wikipedia: “Warren Edward Buffett (born August 30, 1930) is an American business magnate, investor, and philanthropist. He is widely regarded as one of the most successful investors in the world. Often introduced as “legendary investor, Warren Buffett”, he is the primary shareholder, chairman and CEO of Berkshire Hathaway. He is consistently ranked among the world’s wealthiest people. He was ranked as the world’s wealthiest person in 2008 and is the third wealthiest person in the world as of 2011.”
Here are a few of his comments regarding debt, a.k.a. leverage, a.k.a. borrowing:
More smart people have gone broke through leverage than to any other activity. A smart person can’t go broke unless they use leverage. As one of my friends says: If you’re smart, you don’t need it. And if you’re dumb you’ve got no business using it. So, it just doesn’t make sense.
Good business or investment decisions will eventually produce quite satisfactory economic results, with no aid from leverage.
Borrowers then learn that credit is like oxygen. When either is abundant, its presence goes unnoticed. When either is missing, that’s all that is noticed. Even a brief absence of credit can bring a company to its knees. In 2008, in fact, its overnight disappearance in many sectors of the economy came dangerously close to bringing our entire country to its knees.
Unquestionably, some people have become very rich through the use of borrowed money. However, that’s also been a way to get very poor. When leverage works, it magnifies your gains. Your spouse thinks you’re clever, and your neighbors get envious. But leverage is addictive. Once having profited from its wonders, very few people retreat to more conservative practices. And as we all learned in third grade – and some relearned in 2008 – any series of positive numbers, however impressive the numbers may be, evaporates when multiplied by a single zero. History tells us that leverage all too often produces zeroes, even when it is employed by very smart people.
In his 2011 letter “To the Shareholders of Berkshire Hathaway Inc.,” Buffett went on to say how he learned from his grandfather the importance of having cash on hand in case of emergencies and for investment opportunities. He also talked about not using debt because he did not want to take unnecessary risks with shareholders’ money. Buffett understands stewardship.
As Christians, we are managers of God’s money. We are to use the resources wherein he intrusted us with the utmost prudence.
Take it from me…Take it from Buffett…Take it from God…Borrowing is not the way to true financial freedom.
Jamel Black
Personal Finance Coach