Debt-Free Riches: Warren Buffett’s blueprint for young Indians
What India’s youth is witnessing today can be called a credit boom. Personal loans hit Rs 46 lakh cr in 2024, which is 20% higher than the previous year as per data from RBI. Credit cards and Buy Now, Pay Later (BNPL) schemes, trigger instant purchases, while doing which many forget the 36-40% interest rates that come along.
Warren Buffett, the world’s most successful investor, has long warned against the dangers of debt, emphasizing discipline as the key to solid wealth. “A small leak can sink a great ship,” he wrote in 2001. For young Indians, his advice offers a blueprint to avoid credit traps and build sustainable wealth. Here’s how to apply Buffett’s wisdom in today’s credit boom.
Debt’s Hidden Dangers: Buffett’s Wake-Up Call
“I’ve seen more people fail because of liquor and leverage, leverage being borrowed money,” Buffett told students at Notre Dame in 1991. He reinforced this in his 2013 Berkshire Hathaway letter, saying, “You don’t need leverage if you’re patient.” In India, credit card debt soared to Rs 2.6 lakh crore in 2024, with defaults spiking 15%, per RBI data. Young Indians, attracted to cashback deals and BNPL apps, often splurge without realizing a Rs 50,000 credit card balance at 36% interest doubles in approximately two years.
Buffett has always warned that debt can choke one’s finances. For young India, this means avoiding loans for that new flashy gadget or the vacation with friends. Instead, save up or pay cash for big buys, keeping your money safe and your future bright. Better yet, put your money to work so that it grows while you are busy with your life.
Cash Over Credit: Buffett’s Golden Rule
“Never owe any money you can’t pay off in 30 days,” Buffett said in a 2018 CNBC interview, adding in his 1998 Berkshire letter, “Cash is trash when inflation is eating it.” In India, Rs 90 lakh crore sits in fixed deposits earning 6-7% (Per RBI, 2024), but 5.5% inflation and taxes leave you with almost nothing. Buffett’s fix? Put your money to work in assets that grow, not in debt that pulls you down.
Let try to understand this better with an example. Imagine you invest Rs 50,000 in a Nifty 50 ETF at 12% annual return. It grows to about Rs 1.55 lakh in 10 years. However, the same amount as a debt on a credit card at 36% interest becomes Rs 2.9 lakh owed in the same time. And will keep growing till you pay off the entire amount.
You see, investing in the right assets and not having a debt are connected. If you invest wisely and let compounding work its magic, you might never need to borrow. Even in case of emergencies. Even Buffett called compounding the “eighth wonder of the world” in a 1985 shareholder meeting. Invest first and then spend, the mantra form Buffett could also help you stay away from debt. Indian investors can follow Buffett’s lead by moving atleast part of their savings to stocks or equity mutual funds, letting their money beat inflation and debt in the long run.
Sidestepping India’s Credit Card and BNPL Traps
“Leverage is a very dangerous thing,” Buffett wrote in his 2008 Berkshire letter, and in 1994, he told shareholders, “If you’re smart, you don’t need to borrow.” India’s BNPL market is set to hit $20 billion by 2026 (RedSeer), but hidden fees and 30-40% effective interest rates spell trouble. A 2024 LocalCircles survey showed 25% of BNPL users struggled to repay, risking bad credit scores and stress.
Buffett’s advice is to stick to what you can afford. “You can’t get rich by spending more than you earn,” he said in 2016. For Indians, use BNPL only for planned buys and clear dues within the interest-free window. Want a Rs 80,000 iPhone? Save Rs 6,700 monthly in an equity fund at 12% to buy it debt-free in a year. This echoes Buffett’s 2003 Berkshire letter: avoid “temporary convenience for long-term pain.”
Growing Wealth Buffett’s Way: Save, Don’t Borrow
“Do not save what is left after spending, but spend what is left after saving,” Buffett urged in his 2004 Berkshire letter. In 2017, Buffett said, “The best investment you can make is in your own abilities.” For India’s youth, this means mastering financial literacy or skills like budgeting and investing. Invest in learning a new skill that could be a completely new stream of income. May be find an investing guru and learn all the facets of investing in India.
With 60% of urban youth living paycheck-to-paycheck (EY 2024), honing these skills can break the cycle of borrowing and build wealth. And instead of borrowing for luxuries, you put 20% of your income into investments that have the potential to compound your money.
A Buffett-Inspired Plan to Stay Debt-Free
“When you’re in a hole, stop digging,” Warren Buffett quipped in his 1990 Berkshire Hathaway letter, and he doubled down in 2011, saying, “You can’t make a good deal with a bad person—or a bad loan.” With India’s credit market exploding, personal loans hit Rs 46 lakh crore in 2024, per the RBI. Young Indians face tempting traps like credit cards and BNPL schemes with 36-40% interest rates. Buffett’s approach to avoiding debt can possibly keep one financially free. Here’s a practical, strategy to avoid the known traps and build potential wealth, inspired by Warren Buffett.
- Know Your Debt: List every loan you have! Credit cards, personal loans, everything. Focus on clearing the high-interest ones first, like credit card debt at 36%, before going to the cheaper loans like home loans at 8-9%. “Leverage is a dangerous thing.” as Buffett said in his 2008 letter.
- Make Saving Your Superpower: Start saving 20% of your income before spending a rupee. Invest it in systematic investment plans (SIPs) or solid stocks which are available at fair valuations. Buffett said in his 1992 letter, “Time is the friend of the wonderful business.” Start early, let your investments grow, and you’ll thank yourself when that money compounds into lakhs over time.
- Use Credit Responsibly: AlthoughCredit cards and BNPL apps might come handy many a times, but they could very well prove to be a big mistake if not used responsibly. Pay your credit card bills in full every month and don’t forget to clear any BNPL dues within 30 days to avoid any fees. Treat credit as a convenience for planned purchases, not a means for overspending.
- Build a Cash Cushion: Make it a pointto have at least six months of expenses, like Rs 3 lakh if your monthly budget is Rs 50,000 in savings. Consider saving it in a liquid fund. Follow what Buffett said in his 2001 letter: “Cash gives you options.” These savings will ensure you don’t have to borrow money from anywhere in case of emergencies.
- Invest in Quality Companies: Invest in stocks with strong fundamentals, like low debt and high returns on equity. As Buffett advised in his 2010 letter to investors, “Buy businesses you’d be proud to own for 50 years.” Investing in rock solid companies ensures your money grows, free from the risks of any debt-ridden gambles.
Practical Tools for Financial Freedom
The chains of habit are too light to be felt until they are too heavy to be broken– Warren Buffett, 1977 Berkshire letter.
Buffett’s approach isn’t just about avoiding debt—it’s about building habits. For Indians, this means starting small. Use budgeting apps to track spending, ensuring you save before you spend. Remember what the Oracle of Omaha said in his 1996 letter, “Discipline is what separates the successful from the dreamers.”
Compare Rs 5,000 monthly investment in an FD at 6% (Rs 8.3 lakh in 20 years) to an SIP at 12% (Rs 50 lakh). By avoiding unnecessary borrowing, you free up cash to invest, turning small steps into big gains.
Why Buffett’s Advice Matters in India Now
“You can’t borrow your way to prosperity,” Buffett wrote in his 2010 Berkshire letter, adding in 2020, “Debt is a silent killer of wealth.” With India’s personal debt outpacing savings (RBI, 2024), his words hit home. The credit boom fuels consumerism, but high-interest loans erode stability. By saving first, investing in solid companies, and avoiding credit traps, you can build wealth that lasts.
Try this: redirect Rs 5,000 monthly from splurges to an SIP. At 12%, it could grow to Rs 49 lakh in 20 years. Buffett’s discipline—avoid debt, invest wisely—offers a clear path. As he said in 1988, “Good businesses don’t need debt to shine.” How will you use his wisdom to secure your financial future?
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Suhel Khan has been a passionate follower of the markets for over a decade. During this period, He was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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