Collection: Warren Buffett - #230 'Credit Card Advice'
AUDIENCE MEMBER 00:00
My name is Martin Mitchell (PH). I’m from Bakersfield, California.
My question, a two-part question, is concerning debt. We know that individual debt can be devastating.
Do you — are you concerned that the American consumer is so far in debt, as a whole, as to be a problem?
And part two is, do you feel that our trade deficit with other countries is of concern to you?
WARREN BUFFETT 00:32
Well, the first question about debt, I think it’s very hard to answer about the consumer as a whole. I get letters every day from people who have problems in life. And they revolve — I mean, they’re either health or debt. And usually — frequently — the debt is connected with health, you know?
But they — it’s been very easy for them to borrow money, and they’re in over their heads, and it’s all over then.
And there’s no question that the American consumer is somewhat more indebted, in aggregate.
But it’s a very hard thing, I think, to come into conclusions about whether it poses a serious problem. You know, most people have had assets, directly or indirectly, that have gained in value enormously, particularly in real estate and some in securities.
So there’s a greater capacity to carry debt as earning power increases and assets held increases. I don’t — I can’t give you a useful answer, in terms of the world as a whole.
But I constantly give advice to young people, and those are the only people I talk to, aside from our shareholder group: just don’t start out behind the eight ball.
I mean, it’s crazy to get in debt because it’s so hard to get out of debt. And, I mean, the idea of having credit card debt — and we issue credit cards in all our businesses and, you know, so does every other retailer.
But the idea of trying to borrow money at 18 percent, you know, and thinking you’re going to get ahead in life, it isn’t going to work.
And I urge people — they can use their credit card, but I urge them to pay it off before it starts revolving because it’s just — it’s too expensive.
Charlie and I can’t make money with 18 percent money. I mean, we’re looking around for float because we don’t want to pay 5 percent for money.
And, so I’m very sympathetic to people get in debt. But once you get in it, it is hell to get out.
I mean, Charlie will have a few Ben Franklinisms to quote on that subject.
In fact, you want to give a few from Ben now? (Laughter)
CHARLIE MUNGER 02:56
WARREN BUFFETT 02:57
He’d love to, but I led him into it the wrong way.
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