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Warren Buffett is widely considered one of the most successful investors of all time.
From 1964 to 2021, his company Berkshire Hathaway delivered compounded annual gains of 20.1% — substantially outperforming the S&P 500’s compounded annual return of 10.5% during the same period.
Buffett’s legendary investment career has also made him one of the richest people on Earth, with a net worth of over $114 billion, according to Forbes.
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Despite his massive wealth, Buffett doesn’t live a lavish lifestyle. In fact, he still owns the same house in Omaha that he bought back in 1958 for $31,500.
Here’s a look at three valuable lessons from Buffett’s famously frugal approach to money.
Buy quality and value
Buffett’s frugality is particularly evident in his investing style.
“Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down,” he wrote in his 2008 Berkshire Hathaway shareholder letter.
In particular, Buffett is a proponent of value investing, which is a strategy that involves buying stocks that are trading below their intrinsic value.
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Get in the habit of saving
It’s not easy to save money in today’s economic climate. Stubborn inflation continues to deplete savings and living paycheck to paycheck has become the norm for many.
During an episode of the Dan Patrick Show, Buffett was asked what he thought was the biggest mistake people make when it comes to money.
“Not learning the habits of saving properly early,” he replied. “Because saving is a habit … it’s pretty easy to get well-to-do slowly. But it’s not easy to get rich quick.”
If you’re looking to save up and make the most of your money, you can do that through Acorns* — an automated savings and investment app that puts your spare change to work.
When you make a purchase on your credit or debit card, Acorns rounds it up to the nearest dollar and invests the rest in a diversified portfolio of ETFs. Plus, when you sign up*, you can get a $20 bonus to help get you started.
Read more: Thanks to Jeff Bezos, you can now use $100 to cash in on prime real estate — without the headache of being a landlord. Here’s how
Forget that Lambo
If money is no object, what type of vehicle would you drive? A Mercedes, Bentley, or perhaps the prancing horse from Maranello?
Those might be what we think of as “rich people cars,” but you won’t find them in Buffett’s garage.
“You’ve got to understand, he keeps cars until I tell him, ‘This is getting embarrassing- time for a new car,” his daughter once said in a documentary.
Luxury cars often cost more to maintain and insure than economy cars. Instead of carrying a high car payment and insurance premium every month for that flashy sports car, look for value and longevity in your next vehicle and make sure you’re not overpaying on your car insurance.
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A better way to find value?
Buying value stocks isn’t the only prudent way to invest. In an uncertain economy, veteran investors are still finding ways to effectively invest their money outside of the stock market.
Prime commercial real estate, for example, has outperformed the S&P 500 over a 25-year period. With the help of First National Realty Partners*, these kinds of opportunities are now available to retail investors,not just the ultra-rich.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.