Warren Buffett is one of the most well-known and successful American investors. He became a billionaire through his business knowledge, genius for investing, and frugal nature. While you may not be able to invest with his skill, you can put Buffett’s financial advice to use—especially when it comes to your credit score.
Here are four Warren Buffett quotes to keep in mind as you work to become a more responsible borrower.
“Someone is sitting in the shade today because someone planted a tree a long time ago.”
According to financial expert Kimberly Palmer, author of “The Economy of You,” this quote highlights the necessity of planning ahead for financial peace.
If you make smart financial and investment choices today,you could be sitting on a nice nest egg in 40 years, Palmer says.
When it comes to your credit, it’s also important to set yourself up now for success. You can start building a strong foundation by using credit responsibly, including regularly reviewing your credit report, making all of your payments on time, handling a diverse mix of credit accounts, and maintaining a reasonable credit utilization ratio. Practicing good credit behavior is an important part of your financial future.
It is also important to remember that your financial actions impact others, says personal finance expert Lynnette Khalfani-Cox, also known as The Money Coach®. The person sitting under the shade of the tree in Buffett’s statement is likely not the same person who planted the tree, she says.
“The person who manages credit today will be able to impart their skills and legacy to their heirs, their kids, and grandkids,” Khalfani-Cox says.
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
Many financial and credit mistakes result from mistakes, such as missing a payment or accidentally charging more than you can afford. However, those errors can impact your credit history—and your credit reputation—for years to come. For example, a missed payment can remain on your credit report for seven years – if it is reported by the lender, and depending on how late the payment is made.
Even if you’ve paid off your credit card debt every month for years, one massive purchase or a month of overspending can set you back if you miss payments, Palmer says.
As you use your credit accounts, be sure to pay your bills on time. Your payment history accounts for 35 percent of your credit score, and payment history of late payments, a judgment, or collection can impact your credit score for years to come.
“It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.”
“If you know a certain friend is living a financially responsible life, that’s the one you should be spending time with,” Khalfani-Cox explains. “Otherwise, you may end up in the same rut as your other friend whose credit card balance is bigger than her rent.”
Support from your friends and family is very important for meeting your financial goals. If you talk about your financial journey and goals, your personal community may help you stay focused.
“I don’t look to jump over seven-foot bars; I look around for one-foot bars that I can step over.”
As with most habits and goals, you have to start small to accomplish something big.
As you work toward a solid financial future, says Khalfani-Cox, “you have to be willing to take the incremental steps and avoid unrealistic goals.” She notes that when a major milestone is approaching, such as marriage, a first baby, or a move to a new place, people have a tendency to set artificially high financial goals.
For example, someone with $60,000 of credit card debt should not set a goal to pay off his debt in the six months before he gets married.
“That kind of goal sets you up for failure and unnecessary stress,” Khalfani-Cox explains.
Instead, be realistic. If you want to employ better financial behavior, make a goal to simply order your credit report from AnnualCreditReport.com. On the report, you can see all the accounts your creditors are reporting to the credit reporting agencies, and you can ensure you are making payments to the creditors on time and make a plan to pay back your debt.
You may also want to meet with a financial professional who can help you create realistic goals and give you a sense of accountability.
You may not wind up echoing Buffet’s billionaire status, but his words of wisdom may help you keep things in perspective as you work toward a responsible financial future.
Camille Puschautz is a researcher, writer, and web producer at Think Glink Media, with a background in print and digital media. She is a graduate of the University of Dallas and Northwestern University, where she received a master’s degree in journalism. She is a regular contributor to the Equifax Finance Blog.
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