Just received your stimulus check? Not sure what to do with the money? Here’s what entrepreneur and investor Warren Buffet thinks you should do with your stimulus check funds.
Pay off your outstanding credit card debt
Buffett says whenever you get any extra money, the first thing you should do is pay off credit card debt.
The billionaire said that he understood many people were relying on credit cards because of financial difficulties related to the pandemic. However, he said most people think of their plastic as “a piggy bank that can be raided.”
“If I owed money at 18% interest, the first thing I’d do with the extra money I had would be to pay it off,” Buffett said. “You can’t keep borrowing money at those interest rates and grow financially.”
But what if your stimulus check is not enough to completely repay your credit card debt? In this case, you could make your outstanding balances more manageable by converting them into a lower-interest debt consolidation loan.
Don’t use it to pay for your mortgage
Buffett strongly advocates against carrying credit card balances. However, he doesn’t feel that way about all types of debt and wouldn’t advise you to put your check payment toward your mortgage.
Although he could afford to pay, Buffett took a 30-year mortgage in 1971 when he bought a vacation home in California. He says that his home loan made for a good financial decision. “I thought I could perhaps do better with the money than have it be an all-equity purchase of the home,” he told CNBC in an interview in 2017.
In fact, he says he took the money he would have used to buy the vacation home outright and bought stock in his own company. Buffett bought about 3,000 shares of Berkshire Hathaway at around $40 each – an investment he said had grown to $750 million by 2017.
If you’ve got no credit card debt and no other urgent needs to cover with your stimulus check, consider investing your money. After all, there’s no better way to grow your money.