Frugality is the quality of being frugal, sparing, thrifty, prudent or economical in the consumption of consumable resources such as food, time or money, and avoiding waste, lavishness or extravagance.
In behavioral science, frugality has been defined as the tendency to acquire goods and services in a restrained manner, and resourceful use of already owned economic goods and services, to achieve a longer term goal.
Warren Buffett is famous for being a great investor and one of the wealthiest people on planet Earth. He must go to the bathroom on a gold toilet, live in a 500 room castle and drive a different Roll Royce each day? NOPE! Actually quite the opposite. This is because he truly understands the power of True Wealth!
In fact, Buffett lives a shockingly normal life. His lifestyle is very close to a member of the upper middle class in the US. Many of his habits are squarely middle class or even enjoyed by most of the US population. He has lived in the same nice single family house in Omaha for 65 years and paid $31k for it. He drives a Cadillac sedan attainable by millions of middle class families and regularly eats at McDonalds.
I have studied Warren Buffett for decades and been a Berkshire shareholder for years. Here are the top 5 frugality rules from Buffett that could make you rich.
Offense and Defense
I believe frugality is coming back into vogue. We had years of loose pandemic money, low interest rates, low inflation and a constant barrage of “keeping up with the Kardashians”. BARF! It is all over in the Raging 20’s. Frugality is back baby!
We need to bring Frugality back like like JT brought sexy back. It is not enough anymore to make a good living and play good offense. We must also play good defense to build wealth. Otherwise it is all a waste. And if there is one thing Buffett does not like, that is waste.
Top 5 Warren Buffett Frugality Rules
1. Buy a Modest Home
As mentioned, one of Buffett’s frugality rules pertains to housing. He has lived in the same 5 bedroom house for 65 years. The house originally cost him $31,000. Buffett could have easily moved to a 100 room palace somewhere. But why? This would be a huge waste of money. Is there really a need to own and live in a hotel?
We did an overview recently on how much house can you really afford?
Housing is the biggest expense for most people. Therefore it is imperative that we get it right. Right size, right condition, right location and right lifestyle.
But Americans are notorious for buying more house than they can afford. They become house poor. The real estate business model encourages people to go bigger than what they actually need. Remember that every dollar diverted to a mortgage cannot be used for investing or other pursuits.
2. A Normal Car
Warren Buffett currently drives a 2014 Cadillac XTS.
The guy could literally buy 365 Rolls Royces and drive a different one each day. But that would be a major waste of resources and looks completely stupid. Sure, he drives a Cadillac. But the car he currently drives sells used for around $15k-$20k at the moment.
Cars are another area where Americans just seem to go nuts, spending way too much on “luxury” vehicles. And quite frankly, middle of the road cars now have so many features, I am not clear on what makes them all that different from luxury models.
3. Don’t Waste Money on a Lavish Wedding
#3 on the frugality rules list. Buffett married his second wife in 2006. They had a simple brief wedding at his daughter’s house.
The average wedding cost is now $30,000 in 2023. This is insane. For a one day party? Many people put this on a credit card and get their marriage finances off to a rocky start. I can tell you one group benefits from this really bad habit and situation: divorce attorneys.
If Buffett had a modest wedding then so can we.
4. Seek Out Sales & Deals
#4 on the frugality rules list. Buffett is notorious for saying he loves sales. He applies this to his value investing strategy and to his personal life. He is not above using a coupon. If you can score some discount on something you would have bought anyway, that is an immediate gain in net worth.
Just be careful with coupons and deals. Sometimes they can lure us into spending money we would have otherwise saved. Is the item a real necessity and is it something you would be buying anyway?
5. High Priced Restaurants
Buffett will regularly take his kids and grandkids to Dairy Queen or McDonalds. He does not opt for the 5 star steakhouse or other fancy restaurant. We need to do all we can these days to keep food prices in check. Inflation has driven up the price of food and restaurants. This is an area to enact some form of Inflation Defense System.
One options as well is to consider splitting meals or not to choose the priciest thing on the menu. And perhaps opt for fast casual takeout which can be lot less expensive than eating at a restaurant.
Frugal is not Cheap
There is a big difference between frugal and cheap. Being cheap is not being wise and thoughtful with money and not utilizing it as the tool it is. Being frugal is aligning the use of your most in the most efficient way and in accordance with your values and long term wealth.