Warren Buffett’s reading routine could make you smarter, science suggests
Marguerite Ward | @forwardist
Adam Jeffery | CNBC
Warren Buffett
Warren Buffett credits many of his great money decisions to his voracious reading habit. He says he starts every morning by poring over several newspapers and estimates he spends as much as 80 percent of his day reading.
The CEO of Berkshire Hathaway, when asked once about the key to success, pointed to a stack of books and said, “Read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.”
“I read and think,” Buffett once said. “So I do more reading and thinking, and make less impulse decisions than most people in business. I do it because I like this kind of life.”
Turns out, science shows that a Buffett-inspired reading habit could benefit you in several ways.
Americans’ net worth may not be enough to offer financial security in retirement.
Todd Campbell
TMFEB CAPITAL
May 17, 2015 at 6:03AM
This article was updated on May 30, 2017, and was originally published on May 17, 2015.It may not be the best way to evaluate your accomplishments, but knowing how your financial situation stacks up against your peers can offer up valuable insight that allows you to make changes to shore up your financial security. In 2011, the U.S. Census Department took its most recent look at wealth by age group, and the findings provide a benchmark that the average American can use to help judge whether or not he or she is on the right track.
What is net worth?
An individual’s net worth is a financial snapshot that offers insight into how much money a person would have leftover if they sold everything they own of value and paid off every debt owed.
Source: Flickr user SeniorLiving.org.
For the plus side of the column, the Census Department totals up all assets, including equity in a home, savings, investments, and retirement accounts. They even include what equity, if any, people have in their car or truck — but they don’t include things like jewelry or pension plans.
Next, they add up all the secured debt, such as home and auto loans, and unsecured debt, including credit cards, that are owed.
Once total assets and total debt are calculated, total debt is subtracted from total assets to come up with net worth. That information is broken out across various age groups ranging from people less than 35 years old to people 75 and older. Finally, because averages can be significantly influenced by both those with no assets and those with a lot of assets, the median, which separates the top half from the bottom half, is used instead.
What are the numbers?
It’s probably not surprising to discover that older people entering retirement have more money than those who are just starting out. It may be surprising, however, to learn that the average American’s median net worth peaks in the year just following retirement, and then declines from there.
It may also be surprising to learn how much of a person’s net worth is tied up in his or her home. If you exclude home equity from the net worth calculation, then the median net worth drops significantly across all age groups. For example, the median net worth for a person age 70 to 74 years drops to $31,823 from $181,078 when home equity is excluded.
Source: U.S. Census Bureau
Are American’s unprepared?
The typical American entering retirement may be in for an unwelcome surprise, because these numbers suggest they haven’t put enough money aside to reduce their reliance on Social Security, which is supposed to act as a retirement income safety net.
Generally, the rule of thumb is that retirees should plan on tapping retirement saving to the tune of 4% annually. However, following that advice means that if you’re retiring with a $100,000 retirement nest egg, you’ll only be taking out $4,000 per year. If you combine that income with Social Security income — the average retiree will receive $1,360 per month in 2017 — then you’re talking about roughly $20,000 per year in income. That’s unlikely to be enough income for most retirees to live on.
Getting back on track
If your net worth isn’t on pace to provide the income you’ll need in retirement, the best solution is to begin making changes to your financial situation today. Small adjustments in spending now can free up hundreds of dollars per month, which can then be put to work in retirement plans, or set aside in savings. Thanks to compounding, those additional dollars can really add up.
For example, the median value of stocks, mutual funds, and retirement accounts for a person age 35 to 44 is $61,500. If a 40 year old with that amount invested, invests an additional $200 per month, and earns a hypothetical 6% annualized return, then his or her account could grow to be worth $395,624 at age 65. Increase that monthly investment amount from $200 to $500 per month, and that nest egg soars to $593,137! That could go a long way toward maintaining your net worth as you’re living out your golden years.
The $16,122 Social Security bonus you could be missing If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,122 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after.
In my opinion, Before getting out of Debt, you have to ask yourself…How did I get into this debt mess? We have to STOP the bleeding first! Next, if we haven’t done so yet then we want to set up 2 VERY important pieces in your budget and make them Automatic! Tithe first 10% of your income to your church. Next at least 10% of your income needs to Pay YOU for investment purposes. This is still your money just a different pocket. Then we need to automate these. If you get paid through direct deposit and you know exactly what dates you will be paid then automatically set up AUTO BILL PAY for your tithe. Your church will give you an address. For investments, you need a separate account for this. I recommend setting up an Ameritrade Account. I like Ameritrade because it is also a bank. They have a routing number and account number so you can give to your Employer for direct deposit for your payroll and say I would like 10% of my net income to go to this Ameritrade Account (give them routing number and account number) and 90% of my net income to go to my personal bank account (and provide your routing number and account number). You can move money in and out of your Ameritrade account, but it is also ready to BUY stocks, trade options, etc. If you are looking for a first investment, you may consider an Index fund that has 500 of Top Us Companies like VFINX that since its inception in 1976, it has earned around 11% a year. Or you may consider brk.b which is Warren Buffett’s Berkshire Hathaway which has averaged even a little better. Past performance doesn’t guarantee future results but they are invested over many companies and pretty solid track records! Then, Your goal is to add to these accounts but then look for diversified ways to INVEST your money and get the BEST RATE of RETURN safely. You want this to be LIFE WORK…. LOOK for Safe Diversified High Interest Rates! Small percentage increases can mean a HUGE difference in the long term.
For many years, I thought that ALL Debt was bad! My linear mindset was Pay your house off early. Pay all your debts off as soon as possible. My perspective has changed especially when talking about using your debt to be an asset. I am not saying that it is bad to pay your house off early or to Get Out of Debt, but if you keep your head down for 30 years and not even consider alternate investment ideas than in my opinion, it will cost you. What do I mean? Bankers call assets as something you have equity in and has positive value if you were to sell it. Robert Kiyosaki changed the definition of an Asset to the World (including me) when he defined an Asset as being something that MAKES you money. So, how does this apply to debt? Here is a recent example of mine: I borrowed $25,000 recently from a Credit Card that cost 0% interest for 12 months, but had a 3% upfront fee. So, it cost me $750 for the entire year to borrow this $25,000. I placed this into another diversified investment strategy in which I have earned 10.4% within the first 4 1/2 months. It is possible that I will earn over 20% OR $5,000. Subtract the $750 that it cost me to borrow and I am left with a nice 17% return or $4,250 profit on Discover Card’s money (thank you Discover!). As Paul Harvey says, “But wait, there is more!” Now, I have treated that $25,000 like a monthly bill and paid it back $3,750 in the first month and have been and will continue to pay $2,000 a month every month thereafter. Hence, I will not be charged any more interest because it will be totally paid back in full by end of 12 month including the $750 charge. This is where it gets interesting…. if this New Investment Instrument continues to perform like it has at roughly 2.3% a month then in 14 years from now then that investment will grow to $1,114,000. and be producing approximately $25,000 a month in income. Now, we know that past performance doesn’t guarantee future results in any investment. It could be more or less; however, think about what just happened. I used Discover’s money for a short amount of time in order to set me up with a possible nice (even if it ends up being $10,000 a month income in 14 years) new income stream! Here is the question: Would you consider that Good Debt or Bad Debt? This is just one example but i consider this Good Debt for me. I could have just saved that money and started a year later, but It motivated me to take action NOW. There are many more examples of Good Debt but the goal here is to expand your mind. How can you use CHEAP MONEY to help you make more?
Just dropped my daughter off at school, headed to get coffee at Wawa and the song, “Hero” by Mariah Carey comes on. I instantly thought of my oldest daughter who has been going through some growing up pains and got a tear in my eye. I googled all the Lyrics and knew I had to send them to her. If you are going through any junk right now, Read these Lyrics then watch the video because there is a HERO inside of YOU! Always there but sometimes we forget.
This is what I texted her:
Thought of you when I heard this, this morning….. Read this then listen:)
There’s a hero
If you look inside your heart
You don’t have to be afraid
Of what you are
There’s an answer
If you reach into your soul
And the sorrow that you know
Will melt away
And then a hero comes along
With the strength to carry on
And you cast your fears aside
And you know you can survive
So when you feel like hope is gone
Look inside you and be strong
And you’ll finally see the truth
That a hero lies in you
It’s a long, road
When you face the world alone
No one reaches out a hand
For you to hold
You can find love
If you search within yourself
And the emptiness you felt
Will disappear
And then a hero comes along
With the strength to carry on
And you cast your fears aside
And you know you can survive
So when you feel like hope is gone
Look inside you and be strong
And you’ll finally see the truth
That a hero lies in you
Lord knows
Dreams are hard to follow
But don’t let anyone
Tear them away
Hold on
There will be tomorrow
In time you’ll find the way
And then a hero comes along
With the strength to carry on
And you cast your fears aside
And you know you can survive
So when you feel like hope is gone
Look inside you and be strong
And you’ll finally see the truth
That a hero lies in you
That a hero lies in you
That a hero lies in you
Now, My daughter is a tough cookie. She can recite back to you the words that Rocky gave to his son about getting back up again, but this was her text back to me:
Obviously this didn’t help my Tear situation, but I know somebody else needs to read those lyrics, listen to this song and be reminded that You have a HERO inside You! Whatever tough time you are going through, it will pass. You were designed for Greatness and Greater is HE that is in You than He that is in the world. Make it a Great Day!
These twelve short stories are all very good stories and make us think twice about the daily happenings in our lives as we deal with others!!
1. Today, I interviewed my grandmother for part of a research paper I’m working on for my Psychology class. When I asked her to define success in her own words, she said;
“Success is when you look back at your life and the memories make you smile.”
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2. Today, I asked my mentor – a very successful business man in his 70s what his top 3 tips are for success. He smiled and said;
“Read something no one else is reading, think something no one else is thinking, and do something no one else is doing.”
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3. Today, after my 72-hour shift at the fire station, a woman ran up to me at the grocery store and gave me a hug. When I tensed up, she realized I didn’t recognize her. She let go with tears of joy in her eyes and the most sincere smile and said;
“On 9-11-2001, you carried me out of the World Trade Center.”
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4. Today, after I watched my dog get run over by a car, I sat on the side of the road holding him and crying. And just before he died; he licked the tears off my face.
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5. Today at 7AM, I woke up feeling ill, but decided I needed the money, so I went into work. At 3PM I got laid off. On my drive home I got a flat tire. When I went into the trunk for the spare, it was flat too.
A man in a BMW pulled over, gave me a ride, we chatted, and then he offered me a job.
I start tomorrow.
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6. Today, as my father, three brothers, and two sisters stood around my mother’s hospital bed, my mother uttered her last coherent words before she died.
She simply said, “I feel so loved right now. We should have gotten together like this more often.”
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7. Today, I kissed my dad on the forehead as he passed away in a small hospital bed. About 5 seconds after he passed,
I realized it was the first time I had given him a kiss since I was a little boy.
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8. Today, in the cutest voice, my 8-year-old daughter asked me to start recycling. I chuckled and asked, “Why?” She replied, “So you can help me save the planet.” I chuckled again and asked, “And why do you want to save the planet?”
Because that’s where I keep all my stuff,” she said.
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9. Today, when I witnessed a 27-year-old breast cancer patient laughing hysterically at her 2-year-old daughter’s antics, I suddenly realized that,
I need to stop complaining about my life and start celebrating it again.
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10. Today, a boy in a wheelchair saw me desperately struggling on crutches with my broken leg and offered to carry my backpack and books for me. He helped me all the way across campus to my class and as he was leaving he said,
“I hope you feel better soon.”
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11. Today, I was feeling down because the results of a biopsy came back malignant. When I got home, I opened an e-mail that said, “Thinking of you today. If you need me, I’m a phone call away.”
It was from a high school friend I hadn’t seen in 10 years.
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12. Today, I was traveling in Kenya and I met a refugee from Zimbabwe. He said he hadn’t eaten anything in over 3 days and looked extremely skinny and unhealthy. Then my friend offered him the rest of the sandwich he was eating.
The first thing the man said was, “We can share it.”
