Frugal Living

Wealthy people live in mansions, right? Not necessarily. Many wealthy investors in my network live in modest homes they purchased decades ago. These are people with tens of millions and often hundreds of millions of dollars in their investment portfolios.

So, why would a wealthy person want to live in a modest house? And, what are the greater benefits of living a materially modest lifestyle? Could such a lifestyle also contribute to financial freedom and financial peace of mind?

I think so. Because, when wealth is a way to measure economic progress and a tool to improve the well-being of others (whether they be our family, friends, and our community), then our wealth brings purpose and meaning to our lives.

But, when our wealth is simply used to consume ever more material resources, then our wealth leads us to moral dead ends.

What about Warren Buffett?

Warren Buffett’s House Is the Same One He Bought in 1958. Even though he’s one of the wealthiest people in the world, Buffett doesn’t see the need to make changes.

He lives in the same residence in Omaha that he bought in 1958 for $31,500, the equivalent of roughly $285,000 in 2020 dollars.

If you want to live like Buffett, consider buying less home than you can afford. Instead of paying pricey mortgage payments, you’ll be able to put more of your money toward building your investment portfolio instead.

Frugal Living & Financial Freedom

Almost everyone wants to become financially free, even wealthy people.

Its ironic, many wealthy people still don’t feel financially free. Because they often fret about money and wonder how they can gain more. Even though gaining more wealth might make their life worse, not better.

“A big pile of shit is lot worse than a small pile of shit.”

If you haven’t taught your kids how to manage money, or put an estate plan in place, or written an investment policy; then having more money will simply make your problems worse, not better.

It turns out that its easier to achieve financial freedom when your financial life is simple and your lifestyle is frugal, not lavish.

Frugal living can lead to financial freedom in a few ways:

• Reduced Expenses: Frugal living involves making conscious choices to reduce expenses in different areas of life. This could include cutting back on unnecessary purchases, finding cheaper alternatives, and reducing overall consumption. By doing so, you can save more money, which can then be used to reduce debt, invest more, and focus your time on succession & philanthropy.
• Debt Reduction: Frugal living can also help reduce debt. By cutting back on expenses and living within your means, you can allocate more towards productive investments (instead of interest expenses). As you pay off debts, you’ll have more disposable income to save, invest, or spend as you wish.
• Growing Wealth: Frugal living can help you grow your wealth over time. By saving and investing your resources instead of keeping up appearances, you can build a financial cushion that provides more freedom and flexibility in your life. You can then dedicate your wealth to generating an income that supports your modest lifestyle.
• Less “Stuff”: Before purchasing something new to bring into your life, consider how it will help you reach your goals. Oftentimes, we purchase things because we think they will make us happy or will improve our lives. But, the reality is that most of the “stuff” we have is useless and contributes to the clutter in our homes. So this means limiting the “stuff” in our lives will support both frugal living and sustainability (emotional, economic, & environmental).

Living a frugal life can be difficult for many of us to understand. After-all, isn’t one of the main benefits to being wealthy is that you can buy whatever you want?  Otherwise, what’s the point of all our wealth in the first place?

Well, it turns out that living a modest frugal lifestyle makes it easier for us to achieve financial peace of mind. And having financial peace of mind makes us feel good!

Financial freedom means you can have more control over how you spend your time.

The true benefit of being wealthy is the freedom it affords us. Not to consume more resources for your own pleasure, but to steward those resources in the most effective ways; so, we can provide the greatest benefit to others.