He might have billions of dollars under his belt, but unlike other celebrities and financial gurus, Warren Buffett prefers to live his life simply.
The investment icon practices what he preaches about financial discipline, savings, and debt repayment.
Buffett warned a live audience of over 28 million people at Berkshire Hathaway’s annual meeting on May 1 that “substantial inflation” is hitting both retail prices and wholesale prices charged to businesses. When one of the world’s most successful investors is worried about rising prices, it’s probably time to apply some proven strategies to tighten your belt.
Here are nine ways Buffett’s frugality can help you save and spend wisely.
1. He lives in the same house he bought in 1958
While most billionaires stock up on expensive real estate, Buffett initially paid $ 31,500 for his Omaha, Nebraska home, roughly $ 288,700 in today’s dollars, and he lived there. during over 60 years.
His house is not tiny, however. The 6,570 square foot, five bedroom home has undergone many renovations and additions over the decades and is now worth around $ 1 million. He’s also protected by fencing and security cameras, and probably has a good home insurance policy.
Buffett has no plans to move, calling it “the third best investment I’ve ever made” in a 2010 letter to Berkshire Hathaway shareholders.
2. He rarely takes out loans
Buffett’s one-time mortgage was for a vacation home in Laguna Beach, Calif., Which he bought in 1971, although he certainly had the money to afford the $ 150,000-listed beach property.
He told CNBC he took out the 30-year mortgage because “I thought I could probably do better with the money than have him buy the house on equity.” He decided to use the extra money available for shares in Berkshire Hathaway – the company that brought him billions – instead.
Buffett’s argument about not locking in capital still resonates. And if you own your home, you have options to free up some of your capital by refinancing at today’s historically low mortgage rates. A change today can save you thousands of dollars a year.
3. He buys cheap breakfast
While Buffett might just hire a personal chef to cook him gourmet meals, he often eats breakfast at Mickey D’s on his way to work. He doesn’t spend more than $ 3.17 on his morning meal.
âWhen I’m not feeling so successful, I can go with the $ 2.61, which is two sausage patties, and then I put them together and pour myself a coke,â he says in the HBO documentary. Become Warren Buffett. He went on to say, â$ 3.17 is a bacon, egg and cheese cookie, but the market is down this morning, so I’m going to drop the $ 3.17 and go for the $ 2.95. “
Instead of going out for big meals or buying a latte at Starbucks every day, just make your own breakfasts and coffee. You can even be rewarded for your grocery shopping and earn money for future spending.
4. He buys marked down cars
Many billionaires and millionaires keep a collection of flashy sports cars and vintage models in their garages, but Buffett would prefer repaired automobiles that he can acquire at discounted prices.
He switched from his 2006 Cadillac DTS to a Cadillac XTS for just $ 45,000 in 2014. “The truth is, I only drive about 3,500 miles a year, so I will buy a new car very rarely.” , he admitted to Forbes.
Whether you go for a new car or a slightly used model, you shouldn’t be spending too much money on vehicles, so don’t go for the first loan you find and look for better deals. Also be sure to shop around for auto insurance rates every six months.
5. He doesn’t splurge on brands
Buffett doesn’t care much about designer costumes or the latest iPhone model – he leaned on his $ 20 flip phone for years before trading it in for the Apple smartphone in 2020. And despite the bet. to upgrade, it does not use any of the iPhones. more sophisticated functions.
Buffett avoids unnecessary spending and once said, “Don’t keep what’s left after you’ve spent, but spend what’s left after you’ve saved.” “
Put your funds in a high yield savings account so that they can earn interest and grow over time. Set aside your extra cash for an emergency or retirement fund instead of spending it all on big purchases.
6. He no longer invests with borrowed money
âI have never borrowed a lot of money in my life. Never. Never will be. That doesn’t interest me, âhe told Notre-Dame students in 1991.
Although a young Buffett has already borrowed 25% of his net worth to buy stocks, he warns investors against repeating the same mistake.
Even skilled stock traders will tell you that borrowing to invest can be risky. And with easily downloadable apps, like this one that let you invest your “spare currency” and turn your pennies into profits, there’s no real need.
7. He does what he likes
Buffett attributes part of his success to his passion for investing. âYou have to like something to do well,â he says, urging people to take jobs they love, instead of jobs that look good on your resume.
Even if you can’t quit your full-time job to focus on the things you really love, you can certainly find the time for affordable hobbies. Buffett himself enjoys card games and playing the ukulele.
And if you are looking for a way to increase your income, capitalize on your skills and hobbies and start your own side business.
8. He finds creative ways to save money
When Buffett’s first child was born, he transformed a dresser drawer into a cradle. For his second, he borrowed a cradle.
âIf you buy things you don’t need, you’ll soon be selling things you need,â says the billionaire. Buffett watches small expenses before they add up and comes up with creative solutions to avoid spending more than you need to.
Take a close look at your finances and figure out where you can cut spending. Get a library card and borrow books and movies instead of buying them. Or download a budgeting app to monitor your spending habits.
9. He uses cash, not credit
While most of us prefer the convenience of a credit card for our daily purchases, Buffett uses hard cash.
He told Yahoo! Financial editor Andy Serwer in 2019 that he uses cash “98% of the time.” If I am in a restaurant, I will always pay in cash. It’s just easier. While the method may seem a bit old-school, relying less on your credit card can help you avoid spending money you don’t have.
Using most of your available credit and falling behind in your monthly payments damages your credit score. If you are having trouble paying off your credit card debt, you might consider consolidating it into a debt consolidation loan with a lower interest rate.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.