5 Things Warren Buffett Will Break His Frugal Habits For
Written by
Joel Lim
Edited by
Rebekah Evans
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Despite Warren Buffett’s current net worth of $157.2 billion, according to Forbes, he is famously frugal and that’s one of Buffett’s charms. His “value investor” concept goes far beyond his market-beating approach to investment decisions.
Before we get into the list of the few things that will encourage Buffett to break his frugal habits, let’s look at why this is surprising.
One example of Buffett’s frugality is his still living in the five-bedroom family home he bought in 1958 for $31,500 in the Dundee area of Omaha. Berkshire Hathaway’s head office is also in Omaha, Nebraska, not on Wall Street. Hence him being known as the “Sage” or “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.
Donating To Charity or Volunteering
Buffett is famously charitable. In 2010, alongside Microsoft founder Bill Gates and 100 other billionaires, he pledged to give away the vast majority of their fortunes to charity and good causes, according to The Giving Pledge.
Buffett has already actively given away $62 billion to charities and philanthropic causes and will give away 99% of his enormous wealth to charity before or after he dies.
In that sense, he’s following in the footsteps of famous 19th- and 20th-century industrial titans, financial magnates and philanthropists, like Andrew Carnegie, John D. Rockefeller, George Peabody and Angela Burdett-Coutts.
Giving to charity or volunteering your time or skills is a worthwhile investment, both in yourself and society and unlike an activity that involves money, won’t actually cost you anything.
His Time Back
One of Buffett’s largest splurges was on a private jet for the company, which was primarily intended to save time on travel.
He first bought one for $850,000 — according to a Berkshire Hathaway shareholder letter — and then went even further a few years later on a used jet for $6.7 million. Even Buffett knows the purchase is an indulgence, dubbing the plane, “The Indefensible.”
The purchase makes a kind of sense with tons of travel across the country, it’s dramatically more convenient and timely to have a plane you can jump on and off at will.
And when you consider that Buffett’s net worth at the time of the purchase was over $600 million, it’s really a drop in his bucket.
Quality Merchandise
Buffett’s annual Berkshire Hathaway shareholder letters have always been a font of wisdom and inspiration for investors worldwide.
One saying from a 2008 letter is: “Price is what you pay; value is what you get.”
When referring to buying everyday things or more lasting personal investments, like a house, car, furniture or clothes, his approach is: “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down,” Buffett wrote.
So, he will buy quality, but at a discount, whenever possible, which is a sensible approach. The point is, not buying cheap goods for the sake of it, because in most cases, if it’s cheap, like a pair of socks or shoes, you’re going to need to replace it quicker than if you’d paid more for a better quality product.
Personal or Professional Development
Investing in yourself is something that Warren Buffett is a big advocate for.
In numerous interviews, he is credited with saying:
- “Invest in as much of yourself as you can. You are your own biggest asset by far.”
- “Anything you do to improve your own talents and make yourself more valuable will get paid off in terms of appropriate real purchasing power.”
- “Anything you invest in yourself, you get back tenfold … Nobody can tax it away; they can’t steal it from you.”
Investing in yourself could mean:
- Therapy
- Fitness
- Diet
- Learning a new skill
- Learning a language
- Learning how to invest
- Further professional development
- A post-graduate course
Looking after your mind and body are important themes for him and therefore, worth investing in: “You only get one mind and one body. And it’s got to last a lifetime. Now, it’s very easy to let them ride for many years. But if you don’t take care of that mind and that body, they’ll be a wreck forty years later, just like the car would be,” he famously said in a speech.
“Invest in as much of yourself as you can,” Buffett said in a CNBC interview, to encourage people to investment in anything and everything that’s worthwhile.
Books
“I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business. I read and think. So I do more reading and thinking and make less impulse decisions than most people in business,” Buffett said in an interview for Time Magazine.
Anyone who’s ever read any of the famous Berkshire Hathaway shareholder letters knows that they’re full of literary, even Biblical and references to constant learning.
He is a big believer in always learning, reading and therefore, buying and reading books. Reading, thinking and writing time is crucial for self-development and keeping a positive mental health and this is what Buffett is advocating, not only learning about investing and investment strategies.
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