A few years ago, a friend faced a sudden job loss in Mumbai. And with the high rentals in Mumbai, clubbed with the astronomical cost of living in general, life became tough. So, with rent due and not much savings to fall back on, he maxed out his credit card, paying huge sums in interest for months. That is not a rare story in India honestly. We have heard it too often in India, where according to RBI, only 30% have an emergency fund. In my opinion, that’s an optimistic number. Anecdotal evidence would suggest, the number is probably closer to 10%.
That is where Warren Buffett’s wisdom comes in. The Oracle of Omaha, who has built Berkshire Hathaway into a $1 trillion enterprise, swears by keeping cash at hand for the curveball’s life throws at you. “We always maintain at least $20 billion—and usually far more—in cash equivalents,” he wrote in his 2014 shareholder letter. His current holding is nearly US$ 350 billion.
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For Indians struggling with rising costs and job uncertainties, Buffett’s approach to liquidity offers a practical blueprint for financial security. Let us see how you can build a “Cash Cushion”, Indian style, with Buffett’s timeless advice holding the torch.
Why Indians Need Buffett’s Cash Cushion Strategy
Let’s be honest. In India, life is not some smooth ride. There are challenges everywhere. For instance, the general cost of living, with inflation hovering at 5.5%. This pushes up the price of everything upward, from dal to diesel. Urban unemployment is at 7% (CMIE, 2024), and medical emergencies can cost Rs 50,000–2 lakh (IRDAI, 2024). One very viral quote rightly summed up with “An Indian middle-class family is just one medical emergency away from poverty.”
With 60% of urban youth living paycheck-to-paycheck (EY, 2024), a single crisis can spiral into debt. We have probably all seen friends or relatives borrow at astronomical interest rates for hospital bills.
Buffett’s obsession with liquidity—keeping cash serves a twofold purpose.
First, when a big opportunity comes knocking, you will always have cash in hand to make the most of it.
And secondly, when emergency strikes, you do not have to sell your assets or stocks to meet your needs.
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