According to the Bureau of Labor Statistics’ 2017 Consumer Expenditure Survey, U.S. consumers spend most of their income each month on just three things: housing, transportation, and food. (Average expenses for each category are $19,884, $9,576, and $7,729 respectively.)
That means when it comes to your budget, these are your three biggest “rocks” – the expense categories that will either cost you the most or provide the most opportunity to save.
Warren Buffett, despite his wealth, seems to understand this well. He’s actually known to have several unusually frugal habits.
Want to live like a billionaire? Good luck. In the meantime, here are three ways you can save like Warren Buffett:
1. Live in a home below your means
Mr. Buffett lives in a home way below his means. He actually lives in the same house he bought back in 1958. It cost him $31,500 then, or roughly $250,000 in today’s dollars. Despite the fact that he could easily afford something more extravagant, this is where he opts to stay. Don’t get me wrong, the house is 6,570 sqft so it’s not as if he’s roughing it by staying put. Still, there is a lesson to be learned here about ignoring expectations and living life on your own terms.
We’re living in the age of the McMansion. Whereas homes in the 70s averaged 1,500 sqft, homes today average roughly 2,500 sqft – that’s a substantial increase in size over the past 4 decades. Bigger homes don’t seem to make us happier though, despite what we may think. Knowing this, it’s absolutely worthwhile to reconsider your housing needs. While downsizing from your current quarters may seem drastic, it may also be the most appropriate thing for your budget and even your well-being.
2. Don’t drive a fancy car
Warren Buffett doesn’t drive a fancy car and doesn’t upgrade his vehicle for several years and you don’t need to either. According to a 2018 CNBC article, his most recent car purchase was a Cadillac XTS back in 2014. It’s retail value was roughly $45,000 and was an upgrade from his previous Cadillac, a 2006 DTS.
Ladies and gentlemen, my next door neighbors drive more expensive vehicles – no joke – and almost certainly have a big fat car note to go along with them.
If you remember one thing from this post, remember this: your car is not an investment. It’s a depreciating asset that’s costing you money every day that you own it. You should carefully consider what you actually need versus what you think you need when buying, and avoid buying a brand new vehicle unless you actually are Warren Buffett since the truth is that your new car is going to lose its shine real quick (and roughly 20% of its value over the first 12 months of ownership).
3. Eat on the cheap
Warren Buffett doesn’t spend more than $3.17 on breakfast. Granted, he eats at McDonald’s most mornings so I’m not recommending his diet (he drinks a lot of soda too), but setting a spending limit for his morning meal is something that the rest of us can learn from.
If you don’t already have spending limits in place, you should get on that asap. You can start by putting a cap on how much you eat out each month or by taking your lunch to work every day.
One of the best things you can do for your grocery budget is to learn how to cook and make the majority of meals at home.
If you have no idea what you “should” be spending on food each month you can check the USDA’s Food Plan guidance for a general idea. Using the thrifty plan, the table shows the average cost to feed my family is roughly $696 per month – we spend roughly $600 here in the midwest so it’s possible to stay below the lowest cost food plan if you set your mind to it.
In order to build a solid financial future and eventual wealth, you can’t live like you’re already rich. Instead, keep your lifestyle modest and your wants few.
According to this 2014 article, Buffett had this to say about money, stuff, and happiness:
Questions? Advice to share? Let me know in the comments!