Thursday, March 19, 2009

Warren Buffett Wisdom

This is Warren Buffett writing in Newsweek about the economy:

The present housing debacle should teach homebuyers, lenders, brokers and government some simple lessons that will ensure stability in the future. Home purchases should involve an honest-to-God down payment of at least 10 percent and monthly payments that can be comfortably handled by the borrower's income. That income should be carefully verified. Putting people into homes, though a desirable goal, shouldn't be our country's primary objective. Keeping them in their homes should be the ambition.


Approval, though, is not the goal of investing. In fact, approval is often counter-productive because it sedates the brain and makes it less receptive to new facts or a re-examination of conclusions formed earlier.

The first passage is just personally relevant for me right now. Kate and I would like to be homeowners in less than two years so we have started to talk about how we would go about purchasing a home. Our goal is to put at least 10 percent down. With this goal in mind, we are going to be automatically limited to a price range that is feasible, meaning if we can’t put 10 percent down right away; the house is not within our income.

Buffett’s writing here strikes me as just common sense, although it isn’t very common. Many of us buy with our eyes without any consideration of our assets. I’ve been guilty of this before. However, when purchasing a home, one needs to purchase within their income. That just seems very obvious to me, but apparently not so much to many Americans who just needed to have that McMansion, even if it meant getting an adjustable-rate-mortgage to have it.

What I love about the second passage is its wisdom. Approval sedates and inures us to archaic prejudices, or a life we weren’t called to live. A “reexamination of conclusions formed earlier” is essential to learning and education. Just something to think about.

1 comment:

Anonymous said...

Indeed words of wisdom! Thanks!