Warren Buffett might be worth billions of dollars, but unlike other financial gurus and celebrities, he prefers to live life more simply, for the most part.
The investing icon lives by what he teaches when it comes to his financial discipline, paying off debt and saving.
Buffett gave an early warning this past May about the higher prices of today when he told a livestream audience of more than 28 million during Berkshire Hathaway’s yearly meeting that “high inflation” was already hitting companies.
When an investor like Warren Buffet sends out a warning about rising prices, it is probably a good time to listen. Here are three ways Buffett’s frugality might help you spend and save money wisely.
1. He rarely takes out loans
Buffett’s Only mortgage he has ever had was on a vacation home located in Laguna Beach, CA, that he bought in 1971, although he surely had the cash to buy the $150,000-listed beach property.
He told CNBC that he had taken out the loan for the 30-year mortgage because “I thought I would probably do better with the cash than have it be locked in an all-equity purchase of the home.” He decided to use the extra money on hand for extra shares in Berkshire Hathaway — the business that made him billions.
If you do own your house today, you have options available to you to free up some of that capital by refinancing now at today’s very low rates before they increase this year, as some forecasters expect might be the case. A switch might save you thousands of dollars each year.
2. He doesn’t spend large sums of money on brands
Buffett does not much care for name brand suits or the newest iPhone model — he has depended on his $20 cell phone for years before finally trading it in for an Apple smartphone in 2020.
Buffett avoids any unnecessary spending and he once said, “Don’t save what’s left after spending, but spend what’s left after saving.”
Place your funds in a diversified investing portfolio or a high-yield savings account that will grow over time. Set aside any extra cash for retirement or an emergency fund rather than blowing it all on nonessential products.
3. He doesn’t invest with any borrowed money (anymore)
“I have never borrowed a large amount of money in my entire life. Never. Never will. I have got no interest in it,” he said to students at Notre Dame in 1991.
Although a young Buffett did once borrow 25% of his net wealth to purchase shares, he warns traders against repeating that same mistake.
Even skilled stock investors will tell you that borrowing to invest is risky. And there is no real need with investing apps that let you start investing with a small amount of cash, like the one that lets you to invest with your “spare change”.