Warren Buffett Said He Practices But Doesn't 'Advocate Extreme Frugality'—'Spending 105% Of Your Income Leads To All Kinds Of Problems'

Warren Buffett is one of the wealthiest people on the planet, but he’s also famously frugal. He’s lived in the same modest house in Omaha, Nebraska, since 1958. He still drives affordable cars, eats McDonald’s regularly, and often uses a flip phone instead of a high-end smartphone.

Despite being the CEO of a trillion-dollar company, Buffett avoids flashy spending and prefers simple pleasures.

“Charlie and I have always been big fans of living within your income,” Buffett said during one of Berkshire Hathaway’s (NYSE:BRK, BRK.B)) annual meetings with late Charlie Munger, longtime business partner and former vice chairman of the company. “If you do that, you’ll have a whole lot more income later on.”

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He emphasized that good financial habits often start at home. Kids tend to mimic what they see. If parents constantly try to “increase their cost of living without necessarily their standard of living,” children may grow up thinking that lifestyle inflation is normal.

At the same time, Buffett cautioned against taking things to the extreme. “I practice, but I don’t advocate extreme frugality.” His point: moderation matters. It’s important to balance saving with meaningful spending.

“There are plenty of people that I don’t advise to save,” Buffett said. For families living on modest incomes who already have a 401(k) and Social Security, he believes enjoying life now may be just as important. “Who’s to say whether it’s better to defer a dollar of expenditure on your family on a trip to Disneyland or something that they’ll get enormous enjoyment out of so that when you’re 75, you can have a 30-foot boat instead of a 20-foot boat?”