Exchange Express Exchange – Warren Buffett and his main rule for financial independence

In 2004, a 14-year-old shareholder asked Warren Buffett, Berkshire Hathaway's CEO, to give his best financial advice to young people

"If I had any advice for young people," replied Buffett, "So you did not have to go into debt."

He continued, "It is very tempting to spend more than you deserve, it's quite understandable, but it's not a good idea."

This n & # 39; It was not the first time that Buffett warned other investors against the dangers of debt, and it was certainly not the last time.

] Today, asking for a credit card, a personal loan or a personal contract is too easy. Lenders want to use the favorable climate for themselves (often less than 1%), and then provide these end consumers with three or four times the tariff. (For credit cards, this can even be 25 times!)

However, it seems that consumers are only too happy to be tempted. For example, according to figures from the Bank of England, private debt rose to 200 billion pounds last year, including $ 70 billion of credit card debt.

As bady as it sounds, Buffett advises to stay out of the way. You want to be financially independent one day.

The Debt Issue

Debt has the big problem that it's pretty easy to achieve – but incredibly difficult to repay.

Those who only make a big investment can pay more than he can afford. Who spends more than it does, how does this man want to repay the money plus interest?

It can quickly become a bad habit. Most credit cards bear interest at the rate of 25% per annum, which means that the amount due will double every 2.9 years.

Many credit card companies and other types of lenders quickly lend to new customers on. For example, offers more than 0% interest. They seem to be really attractive, but they are supposed to attract you. The very high fees come later

And because the debts are easy to ambad, with interest rates but are difficult to repay, it's easy to slip into a debt spiral.

A New Bank of England Study In November 2016, 9 out of 10 pounds of credit card debt "belonged" to those who were down two years earlier. This means that most debtors actually spend more than they can afford. And those who fight like that can not save anything.

The fact is that if you want to get financial independence, you have to save money. You can not save money by trying to pay off your debts. So, the best solution is to avoid debt altogether

This may not be fun, but in the long run, I believe that the financial freedom gained through debt will certainly be helpful.

The Simple Secret Buying the Best Stocks

As Warren Buffett once said, it's not necessary to have an IQ of genius to be a great investor. All you need is simple calculations, to know what are the numbers to consider and to use common sense. In our free special report, "15 financial products that make you a better investor," we will share 15 key financial information to help you identify the stocks with the best prospects for the future. Click here for free access to this special report

The Motley Fool owns and recommends shares in Berkshire Hathaway.

This article by Rupert Hargreaves was published on July 7, 2017 on Fool.co.nz UK. It has been translated to allow our German readers to participate in the discussion.