Warren Buffett\'s Frugal, So Why Aren\'t You? [ZT]

Warren Buffett's Frugal, So Why Aren't You? [ZT]

Lisa Smith , On Monday January 4, 2010

Warren Buffett, perennially ranked among the world's richest men, lives a lifestyle that hasn't changed much since before he before he made his billions. He is often referred to as the world's greatest investor, and his long-term track record suggests the title is well deserved. He is also legendarily frugal, residing in the same house in Omaha, Nebraska, that he bought in 1958 for $31,500. He is well known for his simple tastes, including McDonald's hamburgers and cherry Coke, and his disdain for technology, including computers and luxury cars. Underlying his legend is one simple fact: Buffett is a value investor. It's the hallmark trait of both his professional and personal success.

The Personal Underpinnings of Value
Warren Buffett has a clear strategy for making money. He often says, "The first rule of investing is don't lose money; the second rule is don't forget Rule No. 1." It's a strategy he employs in his personal life as well as in his profession. It begins by living far below his means.

Despite a net worth measured in billions, Warren Buffett earns a base salary of $100,000 a year at Berkshire Hathaway. It's a salary that has not changed in 25 years. A man of simple tastes, including watching sports on television and eating junk food, Buffett easily supports his modest standard of living with this salary.

His definition of personal success and luxury, which he revealed during an interview with CNBC, provides additional insight into his philosophy. "Success is really doing what you love and doing it well. It's as simple as that. Really getting to do what you love to do everyday - 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.

In keeping with his views, Buffett is not an accumulator of toys or other trappings of wealth. He views the maintenance and expense associated with these things as a burden. It's a view that he extends to cellular telephones and computers, too.

When CNBC asked him what the one thing he believed young people should be doing about money, his primary advice was to "stay away from credit cards." Paying interest on credit cards not only suggests that you are living beyond your means, but it also means that you are losing money. Both courses of action run contrary to Buffett's philosophy.

As a value investor, Buffett is always looking for a bargain. Even his wedding was a simple affair rather than a celebrity-studded gala. A man who could have chosen any venue in the world got married in 2006 in Omaha at a private ceremony held at his daughter's house. The ceremony lasted just 15 minutes.

Different Than You
Warren Buffett loves his job. He often says that nothing is more fun than running Berkshire, so he doesn't spend a lot of money on relaxation, travel and other ways to forget the misery of his day job. He had the ambition to start his own company rather than complain about the one he works for, so he took the necessary steps to put himself in a position where he would be happy. If you find yourself dreading the idea of going to work every day, do something about it. Put a few resumes in the mail or contact a recruiter.

Buffett is also happy with what he has in terms of his modest standard of living. He isn't interested in a bigger house, a newer car or owning his own island. He simply doesn't care about the Joneses and what they have.

Warren Buffett also pays attention to ongoing expenses. Cell phones, internet access, real estate taxes and maintenance expenses for toys are things he avoids to the best of his abilities.

The Bottom Line
For most people, a billion-dollar fortune seems light years away - but Warren Buffett's frugal habits are likely to seem nearly as remote to many people. If you aren't sitting on a fortune and are letting what you have slip away in discretionary spending and unnecessary expenses, you're as far from future wealth as anyone can be. As it turns out, most people can learn a lot from the Oracle of Omaha - and his legendary investing strategy is just the tip of the iceberg.