Warren Buffett, despite currently being one of the richest people in the world, lives a surprisingly frugal lifestyle despite his wealth. In fact, his frugality is one of the reasons that we love Warren Buffet. However, contrary to popular belief, Buffett is less an advocate of extreme frugality and more a fan of simply living within your means.
As Buffett explains, there’s a fine line to be drawn when you’re deciding how much to save, how much to spend, and where to be frugal. The most important thing is to be mindful of the future, living within your means an income, and setting a good example for your children.
“You shouldn’t increase your cost of living without improving your standard of living… who is to say you should give up taking your children to Disney World and the associated happiness now for a 30-foot boat later vs. a 20-foot boat later? There are benefits to spending now. It is not always better to save 10 percent than 5 percent, but definitely better than spending 105 percent,” Buffett said at a panel at the 2008 Berkshire Hathaway Annual Shareholder’s Meeting.
Of course, that doesn’t mean that you shouldn’t save for the future; but more that being extremely frugal isn’t the answer any more than living beyond your means. No matter how you go about it, your spending habits will eventually catch up with a person, and if you’ve made wise decisions, then you’re more likely to be happier and live better than if you spent all you have. The trick is not to play the “keeping up with Jonses” game. Instead, live your own life and manage your own finances according to what’s best for your family.
“You need to live a life that is true to yourself. We don’t encourage extreme frugality. You are not a better or worse person if you live differently from your neighbor,” Buffett said.