Warren Buffett has a net worth of roughly $87 billion, but you wouldn’t know it from the house he lives in.
Buffett originally bought his Omaha, Nebraska home in 1958 for $31,500, which is roughly $250k in today’s dollars. It’s 6,570 square feet, had 5 bedrooms, and 2.5 bathrooms.
Despite his $87 billion net worth, Buffett’s home is worth only $653k today. His house is a testament to his frugal lifestyle, and that lifestyle built a net worth beyond anybody’s dreams.
Focus on Appreciating Assets
Warren Buffett has lived in the same Omaha house since 1958, and that $653k house is only 0.0008% of his $87 billion net worth.
Many people spend too much money on their home because they justify it as an investment, which is a massive mistake. Spending too much on a home will make you house poor. By committing too much money to your home payments, you blow up any chance of saving later.
According to the 50/30/20 rule, you should spend no more than 50% of your after-tax income on needs such as housing, utilities, groceries, transportation, and insurance. Ideally your housing expenses will be less than 30% of your take home income, and less is more.
Warren Buffett takes this to another extreme by owning a house that’s 0.0008% of his net worth. Instead of parking his money in a home, his net worth sits in appreciating assets, namely his company Berkshire Hathaway.
The Benefits of Frugal Living
Warren Buffett is not worth $87 billion simply because he owns an affordable home. He lives a frugal mindset, and low homeownership costs is just one part of that.
Buffett is the master of saving money – in addition to housing, he scrutinizes expenses in other needs and wants like his car, groceries, dining, and shopping. He once bought Bill Gates a lunch at McDonalds with coupons.
The more you cut your expenses, the more cash goes straight to your hierarchy of savings. Buffett has shown that this number can become a monster over time.
Warren Buffett’s House – The Bottom Line
Homeownership is a great aspiration – the median net worth of homeowners is 46x the median net worth of renters. While homeownership is better than renting on average, your goal should be to dedicate as little money as possible to your home.
Warren Buffett’s house is a testament to this – his home is worth only $653k despite his $87 billion net worth.
If the greatest investor in the world doesn’t treat his house as an investment, you definitely shouldn’t treat your house as an investment either.