Think Like a Young Warren Buffett
By Rob Wrubel, CFP®
Bill Gates fortune came by starting a small software company called Microsoft. Sam Walton went into the grocery business. Another Sam, Sam Zell, amassed his wealth by buying real estate. Warren Buffett, widely known as the world’s greatest investor, bought and sold stocks and businesses to become one of the world’s richest people.
Sometimes, I wonder what it would have been like to meet Bill Gates at 18, Sam Walton at 20, Sam Zell at 23 or Warren Buffet at 25 –any of them at an age before they were far along the path of success. How different would they have been from the families I meet, talk to at conferences and work with in my financial planning practice at those early stages?
Each of them decided, at some point, to take extra money that they earned, borrowed from others or raised by selling stock and turned that capital into a productive investment for future wealth.
Families with a member with a developmental or intellectual disability can follow the Blueprints Building Blocks to design a financial future to care for each member of the family and to leave assets in a special-needs trust to provide for a robust and fulfilling future. It starts with a decision to change and then to eliminate debt, build emergency funds and save for the future.
Building resources comes from deciding to take a portion of your income and to put it to work in an investment that can compound over time. You can invest in stocks, bonds, real estate, commodities, collectibles and your own business. None are guaranteed to help you build wealth but you won’t build wealth if you spend every dollar you earn.
We learn addition, subtraction, algebra and geometry in school. Rarely do math teachers teach about the power of compounding interest which underlies investing success.
For example, let’s say you saved $1,200 this year and invested in a mutual fund in a retirement account. If that money earns 8% you will have $1,296 dollars at the end of the year. If you earn another 8%, then you will have $1,399.68 the next year. That investment return each year gets added the original amount and then the total earned more. Over time, this adds up. After 30 years, that single $1,200 investment becomes $12,075.19. Check the math at Investor.Gov or other online sites.
It gets better when you add money each year. Add another $100 per month and you wind up with $148,015.04. Incredible. The more you save the larger the number you get.
For families with a member with special-needs, we will use several account types to create assets to fund retirement and a special-needs trust. The most important decision is to commit to a savings and investing plan as soon as possible. Do not get too caught up in which account type to use as there is a confusing group of letters and numbers in retirement and special-needs planning – IRA, 401k, 403b, ABLE and more. Work with your team to strategize how to invest and in what types of accounts to deploy for different goals. The core accounts for most people are savings, investment and retirement accounts and from there some people choose to put funds to work in real estate and businesses.
Expect to fund the special-needs trust when you pass away and not before (there are always exceptions in planning so consult with your team). If you expect to fund the trust when you pass, then you likely you have plenty of time to save and invest. In the United States, average life expectancy is around 76 years – 73.5 for men and 79.3 for women. A 30-year-old mom has 49 more years to go on average; a 50-year-old man 23 more years. In the investment world, time is one of your best friends and the earlier you can start the better to help your family member have money available to live the best life possible.
There is an expression about planting a tree that comes to mind. The best time to plant a tress was 30 years ago. The second-best time to plant a tree is today. The same goes with investing. Start today.
Warren Buffett would be just another retiree from Nebraska if he did not decide to put money into investments in stocks. I think we can all agree he has done well for himself. Think like that young Warren Buffett. Take action this week to begin an investment plan to gain financial security and comfort for yourself and to fund a trust to care for your family member with a developmental disability.
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This article is not intended as investment advice or representative of any specific investment strategy. Consult with your legal, tax, benefits and investment team before taking any action.
