Are You as Frugal as Warren Buffett?

Warren Buffett’s house in Omaha has always been the focus of intense interest and for good reason. Buffett has earned a reputation as the world’s greatest stock investor, and his long-term track record suggests that the title is well deserved. According to Forbes‘ real-time billionaire net worth calculator as of 9/10/2022, he was worth $99.4 billion.

But Buffett, now 92, also is legendarily frugal. He resides in the same house in his hometown of Omaha, Nebraska, that he bought for $31,500 in 1958. It must be said, though, that he also had a beach house in California that he bought for $150,000 in 1971. He sold it for $7.5 million, down from an original listing of $11 million, in 2018.

His tastes otherwise are simple and include McDonald’s hamburgers and cherry Coke. His lack of interest in computers and luxury cars is well documented. Underlying Buffett’s legendary success is one simple fact: Buffett is a value investor. And that is the hallmark trait of both his professional success and his personal lifestyle.

Warren Buffett’s Omaha House

The home Buffett bought for his family in 1958 for $31,500 is a handsome stone and stucco house on a tree-lined street in the Dundee neighborhood of Omaha. With five bedrooms and 2 1/2 baths, it spans about 6,570 feet.

The home’s current Zillow estimate is $1,24 million. Buffett calls it “the third-best investment I ever made.”

By way of contrast, Jeff Bezos, one of Buffett’s rivals for richest-guy-in-the-world status, recently spent $165 million on a sprawling estate in Beverly Hills, California, just to add it to the $10 million spread next door that he already owned.

The richest person in India, Mukesh Ambani, built a 27-floor high-rise as his principal residence. Buffett could afford it, or, for that matter, Buckingham Palace, which is said to be the world’s most valuable estimate at $6.7 billion. Apparently, Buffett doesn’t see the need for 78 bathrooms.

The Ultimate Luxury

Warren Buffett’s definition of personal success and luxury, revealed in an interview with CNBC, provides some insight into his philosophy. “Success is really doing what you love and doing it well,” Buffett said. ”It’s as simple as that. Really getting to do what you love to do every day—that’s really the ultimate luxury…Your standard of living is not equal to your cost of living.”

And what Buffett loves to do every day is work at Berkshire Hathaway, the multinational conglomerate that he built from the bones of an ailing cotton fabric manufacturer.

The Trappings of Wealth

Buffett is not an accumulator of the toys and other trappings of wealth. He views the maintenance and expenses associated with these things as a burden. It’s a view that extends to cellphones and computers.

When CNBC asked him what was the one thing he believed young people should be doing to be smarter about money, his primary advice was to “stay away from credit cards.”

Paying interest on credit cards probably indicates that you are living beyond your means. And it definitely indicates that you’re throwing money away on interest. Both those things are incompatible with Buffett’s philosophy.

Keeping It Simple

As a value investor, Buffett is always looking for a bargain. Even his second wedding was a simple affair.

A man who could have chosen any venue in the world married his second wife, Astrid Menks, in 2006 in Omaha at a private ceremony held at his daughter’s house. The ceremony lasted 15 minutes.

An Independent Streak

Warren Buffett loves his job. He often says that nothing is more fun than running Berkshire Hathaway, so he doesn’t spend a lot of money on hobbies, relaxation, travel, and other escapes from his day job.

Like many born entrepreneurs, Buffett had no desire to work for someone else. His ambition was to start his own company rather than complain about the one he was working for. That in itself could be a key to future wealth for like-minded people.

How to Get Rich

Buffett has a clear strategy for making money. He says, ”The first rule of investing is don’t lose money. The second rule is, don’t forget rule number one.”

It’s a strategy he employs in his personal life as well, and it begins by living far below his means. He is not interested in keeping up with the Joneses although, in his case, the Joneses probably have a private island and a jet to get there.

Despite a net worth measured in the billions, Warren Buffett has earned a base salary of just $100,000 a year for more than 25 years at Berkshire Hathaway. His total compensation in 2020 was $380,328.

The Bottom Line

For most of us, billionaire status is out of reach. But that’s not the point. If you are letting your entire income slip through your hands in discretionary spending and unnecessary expenses, you’re as far from future wealth as anyone can be.

As it turns out, people can learn a lot from the Oracle of Omaha, about living well as well as investing wisely.