Wisdom crieth aloud in the streets.
Floyd Mayweather, Jr. carries around a bag that has $1 million cash in it. He often has an entourage with him, and if he’s not carrying it, he frequently asks to no one in particular, “Where’s the bag?”
There’s a case to be made that this is dumb, and other reported & rumored things Floyd does are loathsome. But, I look for good ideas wherever I can find them and it reminded me of a piece of advice Warren Buffet received and reprinted in his 1970 Letter to Shareholders.
Dear Fred & Catherine [Buffett’s uncle & aunt]:
Over a period of a good many years I have known a great many people who at some time or another have suffered in various ways simply because they did not have ready cash. I have known people who have had to sacrifice some of their holdings in order to have money that was necessary at that time.
For a good many years your grandfather kept a certain amount of money where he could put his hands on it in very short notice.
For a number of years I have made it a point to keep a reserve, should some occasion come up where I would need money quickly, without disturbing the money that I have in my business. There have been a couple occasions when I found it very convenient to go to this fund.
Thus, I feel that everyone should have a reserve. I hope it never happens to you, but the chances are that some day you will need money, and need it badly, and with this thought in view, I started a fund by placing $200.00 in an envelope, with your name on it, when you were married. Each year I added something to it, until there is now $1000.00 in the fund.
Ten years have elapsed since you were married, and this fund is now completed.
It is my wish that you place this envelope in your safety deposit box, and keep it for the purpose that it was created for. Should the time come when you need part, I would suggest that you use as little as possible, and replace it as soon as possible.
You might feel that this should be invested and bring you an income. Forget it — the mental satisfaction of having $1000.00 laid away where you can put your hands on it, is worth more than what interest it might bring, especially if you have the investment in something that you could not realize on quickly.
If in after years you feel this has been a good idea, you might repeat it with your own children.
For your information, I might mention that there has never been a Buffett who ever left a very large estate, but there has never been one that did not leave something. They never spent all they made, but always saved part of what they made, and it has all worked out pretty well.
This letter is being written at the expiration of ten years after you were married.
The letter was written in 1940 and Buffett found it in 1970 (with the $1,000 still there haha). To modernize the advice, using an inflation calculator I found on Google, $1,000 in 1940 is equivalent to $17,623 in July 2017. Buffett’s company, Berkshire Hathaway, takes it a step further than Floyd, and keeps $20 billion. We can tailor our number to our individual circumstances. I like the advice (including the safety deposit box) precisely because it feels unnecessary and inconvenient.
Can you imagine one day waking up and getting an email from your bank, “Sorry, we got hacked. We think you had $x in your account. You’re prolly not getting it back. Hopefully the FDIC has you covered. Maybe check out Bitcoin. If the power hasn’t gone out. Peace & Blessings.”?
“Where’s the bag?” -You, next year