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Despite Warren Buffett’s current net worth being $157.2 billion, according to Forbes, he is famously frugal and this is one of Buffett’s attractions. His “Value Investor” concept goes far beyond his market-beating approach to investment decisions.
Before we get into the list of some of the things that would encourage Buffett to break his frugal habits, let’s look at why this is surprising.
An example of Buffett’s frugality is his still living in the five-bedroom family home, which he purchased in 1958 for $31,500 in the Dundee area of Omaha. Berkshire Hathaway’s main office is also not on Wall Street, but in Omaha, Nebraska. Hence why he is known as the “Sage” or the “Oracle of Omaha”, Warren Buffett’s investment and financial advice is second to none.
So, Buffett is and always will be a frugal man – except for the following four things.
donate to charity or volunteer
Buffett is famously philanthropic. In 2010, along with Microsoft founder Bill Gates and 100 other billionaires, he pledged to give away the majority of his wealth to charity and good causes, according to The Giving Pledge.
Buffett has already actively given away $62 billion to charity and philanthropic causes and will give away 99% of his vast fortune before or after he dies.
In this sense, he is following in the footsteps of famous industrial giants, financial giants and philanthropists of the 19th and 20th centuries, such as Andrew Carnegie, John D. Rockefeller, George Peabody and Angela Burdett-Coutts.
Donating or volunteering your time or skills is a worthwhile investment for both you and society and unlike any activity that involves money, it won’t actually cost you anything.
his time came back
Buffett’s biggest extravagance was on a private jet for the company, primarily to save time on travel.
According to Berkshire Hathaway, he first bought it for $850,000 shareholder letter — and then went even further a few years later on a used jet for $6.7 million. Even Buffett knows this purchase is an indulgence, naming the plane “The Indefensible.”
While the purchase kind of makes sense with a lot of travel around the country, it’s dramatically more convenient and timely to have a plane that you can get on and off at will.
And when you consider that Buffett’s net worth was over $600 million at the time of the purchase, this is actually a decline in his wealth.
quality goods
Buffett’s annual Berkshire Hathaway shareholder letters have always been a source of knowledge and inspiration for investors around the world.
A 2008 paper stated: “The price is what you pay; the value is what you get.”
When referring to purchasing everyday items or more permanent personal investments, such as a house, car, furniture or clothing, Buffett wrote, his approach is: “Whether we’re talking about socks or stocks, I like to buy quality stuff when it’s marked down.”
Therefore, whenever possible, he will buy quality things, but at a discount, which is a sensible approach. The point is not to buy cheap stuff for the sake of it, because in most cases, if it is cheap, such as a pair of socks or shoes, you will need to replace it quickly compared to paying more for a better quality product.
personal or professional development
Investing in yourself is something Warren Buffett is a big supporter of.
In several interviews, he is credited as saying:
- “Invest in yourself as much as you can. You are the greatest asset you will ever have.”
- “Everything you do to improve your talents and make yourself more valuable will be rewarded in the form of reasonable real purchasing power.”
- “Whatever you invest in yourself, you get back tenfold… Nobody can tax it; they can’t steal it from you.”
Investing in yourself can mean:
- Treatment
- Health
- Diet
- learning a new skill
- learning a language
- learning to invest
- further professional development
- a postgraduate course
Taking care of your mind and body is a matter of importance to him and, therefore, worth investing in: “You only get one mind and one body. And it has to last a lifetime. Now, it is very easy to let them last for many years. But if you don’t take care of that mind and that body, they will be ruined like a car after forty years,” he famously said in a speech.
“Invest as much as you can,” Buffett said in a CNBC interview, encouraging people to invest in anything worthwhile.
books
Buffett said in an interview for Time Magazine, “I make a point of spending a lot of time, almost every day, just sitting and thinking. That’s very unusual in American business. I read and think. So I read and think more than most people in business and make less impulsive decisions.”
Anyone who has read the famous Berkshire Hathaway shareholder letters knows that they are full of literary, even Biblical, references to constant learning.
He has always been a great believer in learning, reading and hence buying and reading books. Taking time to read, think and write is important for self-development and maintaining positive mental health and this is what Buffett is advocating, and not just for learning about investing and investment strategies.