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Warren Buffett is known for both his generosity and his frugality.
That might be why he pulled the plug on large cash gifts for his family after learning they were blowing through the money as quickly as they got it.
In a 2019 ThinkAdvisor interview, Buffett’s former daughter-in-law, Mary Buffett, recalled when he gifted her $10,000 in hundred-dollar bills. She reminisced, “As soon as we got home, we’d spend it, whoo!”
As the king of investing, not spending, however, the CEO of Berkshire Hathaway quickly decided the gift of shares would be a better investment for his family’s future.
With the holidays behind us, you may have been lucky enough to get some cash, as Buffett’s family used to. Tempting as it may be to spend it, follow these tips to use it in a way that the Oracle of Omaha would approve of.
1. Save
One of Buffett’s core principles is the power of compounding: where you can earn returns on both your initial investment and its accumulated growth. For example, had Mary invested her $10,000 and allowed it to grow at a 5% annual compounded rate for 10 years, it would have amounted to $16,288.95.
But finding the best possible rate isn’t always easy. If you’re willing to park your money for at least a year, you can get a rate of return over ten times higher than a typical high-yield savings account with a certificate of deposit (CD). A CD locks in your funds for a set period, providing stability and guaranteed returns, which the stock market cannot promise.
SavingsAccounts.com can help you shop around across various banks and financial institutions. The platform allows users to easily compare different CD terms, interest rates, and features to find the best options for their savings goals.
They aim to simplify the process of choosing the right CD by providing transparent and up-to-date information, helping you maximize your return while locking in financial security.
2. Invest
Beyond saving, another way to take advantage of compound returns is through investing.
Investing is higher risk than a savings account, but it can also lead to higher returns. That’s why when Buffett started gifting his family shares instead of cash, Mary Buffett wisely chose to retain her gifted shares in a diversified trust, rather than cashing them out.
But you don’t need to invest in private trusts to ensure your portfolio is diversified.
With Acorns, you get instant diversification every time you spend. Their platform helps you start saving and investing each time you make a purchase on your credit or debit card. When you spend, Acorns automatically rounds up the price of the purchase to the nearest dollar, and places the excess into a smart investment portfolio.
Sign up for Acorns today and receive a $20 bonus investment.
3. Real estate
In 2012, Warren Buffett told CNBC that if there was a way to buy thousands of single-family homes at once, and to manage them easily, he would “load up.” He also emphasized he’d take out mortgages at “very, very low rates.”
Not everyone can purchase multiple properties, nor can they tap into low mortgage rates. After all, the average rate for a 30-year mortgage was 3.65% in 2012. These days, a 30-year fixed mortgage rate is 7.13%.
There are, however, ways to invest in real estate and avoid some of the downsides of the market.
First National Realty Partners (FNRP) allows accredited individual investors to access institutional-quality commercial real estate investments — without the leg work of finding deals yourself, negotiating for mortgage rates, or managing the purchasing logistics.
FNRP has relationships with the nation’s largest essential-needs brands, including Kroger, Walmart and Whole Foods. And since the investments are necessity-based, they tend to perform well during times of economic volatility and act as a hedge against inflation.
You can engage with experts, explore available deals, and easily make an allocation, all in one personalized portal.
4. Plan for the future
Another reason Buffett’s not a big fan of cash gifts is that its value erodes over time. Buffett famously said, “If you don’t find a way to make money while you sleep, you will work until you die.”
Investing for retirement
To avoid working after retirement, you need to be prepared with the right investments and accounts. For instance, qualified Roth IRA withdrawals are tax-free. So your earnings and any growth are tax free, too.
Selecting the right account can be daunting, though. RothIRA.org connects you with pre-screened financial advisors who can guide you in choosing the best Roth IRA to meet your needs.
When you sign up with RothIRA.org, you’re custom matched with two or three advisors near you who meet your specific needs. Your financial advisors will contact you to set up your initial one-on-one consultation — for free, with no obligation to hire.
Gold for retirement
You could also turn a cash windfall into a physical asset, like gold, to diversify your portfolio. Gold has historically acted as a hedge against inflation, and many find it to be a more secure place to invest their wealth.
When you open a gold IRA with the help of Priority Gold, you get access to IRS-approved gold and silver bars and coins through your self-directed gold IRA account. You can also roll over existing 401(k) or IRA accounts into the precious metals IRA without any penalties.
If you’d like to convert an existing IRA into a gold IRA, Priority Gold offers 100% free rollover, as well as free shipping, and free storage for up to five years. Qualifying purchases will also receive up to $10,000 in free silver.
To learn more about how Priority Gold can help you save for your retirement, download their free 2024 guide on how to invest in precious metals or book a free consultation with one of their specialists.
Planning for your future
Most of Buffett’s wealth will only be shared with his kids once he passes on. His ethos is you should “give your kids enough so they can do anything, but not so much that they’ll do nothing.” Whether or not you agree, you’ll want to ensure your own wishes are honored. Platforms like LegalZoom can help.
The platform allows you to easily set up an estate plan that includes a last will or living trust, financial power of attorney, healthcare directive, and HIPAA authorization. If you aren’t sure where to begin, you can call LegalZoom for a free discovery call to help you get started on estate planning.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
