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Billionaire investor “Warren Buffett” is famous for his simple living and frugal habits, even with his huge wealth. He’s lived in the same modest house in Omaha since 1958 and drives an older Cadillac, showing his preference for saving over splurging. The “Oracle of Omaha” credits much of his financial success to avoiding unnecessary spending and credit card debt.
Buffett believes that people with less money often make financial mistakes that worsen their money troubles. He thinks that by changing certain spending habits and behaviors, lower-income Americans can get a better handle on their finances.
Here are the nine biggest financial mistakes Warren Buffett says people with less money often make, along with his advice on how to improve your financial situation:
01
of 11Neglecting Personal Development
Warren Buffett really believes in always investing in your own growth and learning. He says it best:
Invest in as much of yourself as you can. You are your own biggest asset by far.
Buffett thinks that spending time and money on improving your skills, knowledge, and abilities can seriously increase how much you can earn over time. He believes that getting better at things you’re good at is a smarter investment than just buying stuff.
This billionaire got super good at investing not by getting pricey degrees or courses, but by reading a lot and teaching himself every day. He focused on understanding business, finance, and world markets better.
Buffett points out that many people who don’t have a lot of money miss out on growing themselves. They don’t use all the free or cheap learning resources out there, like libraries or online stuff. Instead of just watching TV or scrolling through social media, he suggests using that time to learn useful skills – like coding, writing, marketing, or accounting.
He also recommends reaching out to successful people for advice. Chatting with someone who’s already where you want to be can really speed up your own progress, and it might just cost a coffee. The main thing is to find activities that make you better at what you do and understand more. If you keep making time for these personal growth activities, it can really pay off with better job chances and the potential to earn more money.
02
of 11Relying Just on Credit Cards
Buffett really warns against using credit cards too much, especially if it means living beyond what you can afford. With interest rates often soaring past 15% or even 20%, credit card debt can get out of hand super fast. He explains that when your regular income just covers your basic needs, using a credit card for extra stuff you don’t really need can trap you financially. The interest adds up quickly and starts eating up more and more of your future income.
Even if at first it seems like you can handle your credit card debt with the minimum payments, a sudden unexpected expense can make your balance grow faster than you can pay it off. Buffett has seen how this can trap families in huge debts that end up taking all their future earnings.
I’ve seen more people fail because of liquor and leverage – leverage being borrowed money. You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing.
His advice? Live within your means. Spend less than 80% of what you earn after taxes, and only use credit cards if you can pay the whole balance each month. If you don’t have the cash, it’s always better to use a debit card instead.
If you’ve got credit card debt that’s building up interest, try to pay it off fast before it gets even bigger. And if you’re really deep in credit card debt, it might be a good idea to get help from a non-profit credit counseling agency. They can help work out a plan to pay it off and maybe even get your interest rates lowered.
03
of 11Frequenting Bars and Pubs
Buffett reminds us that while it’s totally fine to go out for drinks with friends now and then, spending too much time and money in bars and pubs can really mess up your budget. He puts it simply:
If you tell me how much you spend sitting on a bar stool each month, I’ll tell you how close you are to bankruptcy.
He points out that it’s easy to rack up a big bill at the bar. A couple of drinks, some snacks, maybe pizza later, and tips – before you know it, you could be looking at over $100 per person. Do that a few times a week, and you’re spending as much on going out as you are on groceries!
Buffett suggests looking for cheaper ways to have fun and hang out with friends. Why not invite people over for a potluck dinner, meet up in a park, or have a board game night at home? He believes in creating meaningful connections without always spending a lot on fancy food and drinks.
Of course, it’s cool to celebrate special occasions with a night out. But turning every weekend into a bar crawl can be too much for many budgets to handle and can lead to debt. Better to keep those nights out as something special, and stick to more budget-friendly fun most of the time.
04
of 11Chasing Latest Gadgets
Warren Buffett is known for using dated and cheaper tech in his personal life, preferring function over form when it comes to gadgets. He jokes about it, saying:
The computer is amazing in all kinds of ways, but I checked my initiation date with the American Association of Retired Persons, and the form required that you give them your date of birth. I put in the actual year I was born—1930—and the computer sent back a little card saying I was too young to join.
He doesn’t chase after the newest iPhone or tablet. Instead, he uses his gadgets until they just can’t do what he needs anymore. Buffett is happy with his old flip phone and computer.
Sure, if your job is all about having the best tech, then getting the latest gear makes sense. But Buffett thinks most people buy way more tech than they really need. He points out that folks who don’t have a lot of money often spend too much trying to impress with fancy gadgets or keeping up with trends. But cheaper tech would be just fine for stuff like checking emails, streaming shows, or doing schoolwork.
So, Instead of blowing your budget on the newest Macbooks, iPads, or VR headsets, Buffett says you should focus on more important financial stuff. Like paying off debts with high interest or saving for emergencies. He suggests only splurging on expensive tech if your finances are really solid.
05
of 11Overspending on Clothes
Warren Buffett keeps it simple with his fashion choices, often seen in classic business suits rather than flashy designer clothes. He thinks spending a lot on fancy clothes isn’t as smart as investing in things like stocks or real estate.
So, Buffett suggests setting a reasonable budget for clothes and sticking to basic, versatile pieces instead of chasing every new trend. Go for quality items in classic colors and materials that you can mix and match for lots of different looks. If your go-to pieces start to wear out, replace them with something durable and ethically made, rather than cheap, fast fashion that falls apart quickly.
By keeping your clothing expenses down and focusing on a capsule wardrobe of essentials, you can put your money towards smarter financial goals instead of trying to copy the latest runway styles. Create a timeless, versatile look that works for you year after year.
06
of 11Buying New Cars
With , Warren Buffet still drives a 2014 Cadillac XTS that he bought used. He chose a car that’s reliable but not too flashy for his wealth. He puts it simply:
The truth is, I don’t need a fancy car, big house or a bunch of TVs. I just need a roof over my head and food to eat.
When it comes to big buys like cars, he advises looking for used ones that are known for being safe and reliable, instead of the latest models with all the fancy extras. Even though used cars might cost a bit more upfront, you skip the huge drop in value that new cars face as soon as they leave the dealership.
A new car can lose over 30% of its value in just the first year. Buffett thinks buying the newest model is like watching your money disappear when you could have put it into stocks, bonds, or property instead.
If you have enough money to buy flashy new cars without hurting your finances, and they make you happy, Buffett says go for it. But he’s seen too many people with average incomes wreck their financial stability by trying to keep up with huge car payments that eat up a big chunk of their income.
In Buffett’s view, the smartest choice for most people is to go for used cars that are dependable and get you where you need to go. Cars are for getting around, not for showing off.
07
of 11Unused Gym Memberships
Warren Buffett, sharp as ever in his nineties, isn’t the kind to shell out for a fancy gym membership. He sums it up well:
“Price is what you pay. Value is what you get.”
If you’re paying for a gym membership but hardly ever go, you’re definitely not getting your money’s worth.
Buffett points out that unused gym memberships are a common way people who are struggling financially still waste money. It might seem like a good idea to sign up for a nice gym close to your place, with all the best equipment, but think about it: are you really going to go often enough to make that $50+ a month worth it?
He suggests that if you’re not totally sure you’ll stay motivated or have the time to work out regularly, why not start with free workout videos at home? Or maybe just get a few basic pieces of equipment. You can get a lot out of simple, effective home workouts.
Once you’ve got into a solid routine with these options, then maybe think about a gym membership – but only if those extra gym features will really make a difference and keep you on track. Otherwise, that expensive yearly contract just ends up being money down the drain instead of an investment in your health. So, if you’re not using it, maybe it’s time to cancel that gym membership.
08
of 11Unnecessary Subscription Services
Buffett is big on keeping an eye on those recurring expenses. He recommends regularly checking your subscriptions and cutting anything that’s not really worth what you’re paying every month. As he puts it:
“If you buy things you do not need, you will soon sell things you need.”
In today’s world, where everything’s online, it’s easy for subscription fees to sneak up on you. They just keep taking a little bit out of your account every month, even for stuff you don’t use much. Think about everything from your fancy TV packages to streaming services, cloud storage, and those box subscriptions that keep showing up at your door.
Each charge might seem small, but put them all together, and they start to eat up a big chunk of your budget. Buffett suggests taking time every few months to really look at what you’re paying for. Ask yourself: Am I actually using this? Is it necessary?
If you haven’t used a service in ages, maybe because the excitement’s worn off, cancel it. That money could be going towards something more important, like saving for an emergency or paying off debt. It’s all about stopping those sneaky subscription costs from messing up your budget.
09
of 11Over-Reliance on Skincare Products
The 91-year-old investment guru keeps his skincare routine pretty simple and has been doing the same thing for years. He once said in an interview:
“I use Noxema skin cream, that’s what I use every morning when I shave.”
While the beauty industry is always coming up with more and more complex products and promising youthful looks in a bottle, Buffett doesn’t buy into all the hype or the steep prices.
From his point of view, good skincare doesn’t have to be complicated or super expensive. Sticking to a basic but effective routine is usually enough, and he thinks it’s better to focus on securing your financial future rather than spending loads on looking good.
Buffett notices that a lot of people try to show off wealth with fancy makeup, skincare products, and clothes, but they might be better off saving and building real wealth for more security down the line.
He gets that looking neat and tidy can be important for work and social stuff. But getting too caught up in trying to look perfect all the time, and spending a fortune on the latest beauty trends, can take money away from more important things like basic needs and growing your savings.
Find a skincare routine that works for you without breaking the bank. Remember, being consistent with something simple is often better than chasing the latest $400-an-ounce miracle cream. Put as much effort into growing your financial knowledge as you do into picking your skincare products.
10
of 11Gambling
The billionaire investor is all about weighing odds and probabilities, and that’s why he really warns against gambling. He puts it bluntly:
“If you gamble full-time, if that’s all you do for a living, you’ll go broke.”
Sure, buying a lottery ticket once in a while or hitting the casino during a vacation might be fun for some folks, but Buffett says making gambling a regular thing or trying to earn money from it is a recipe for financial disaster.
Even with sports betting, where you might think you can use your knowledge to shift the odds a bit, he points out that in the long run, over hundreds of bets, you’re still likely to lose.
Gambling just doesn’t mix with building or keeping your wealth. The losses tend to add up, leaving you with less to bet, and can even lead to addiction and serious debt problems.
Instead of chasing those big, unlikely wins, Buffett suggests the slower, more reliable route: regularly putting money into retirement accounts, paying off debts quickly, and learning smart ways to grow your wealth over time.
It might not be as exciting as dreaming of hitting it big, but Buffett’s advice is to stick to a steady, sure way of building wealth. In the long run, that approach is always the winner.
11
of 11Smoking
Buffett kicked smoking out of Berkshire Hathaway almost 30 years ago because he didn’t want his employees dealing with secondhand smoke. And as someone who’s big on health and smart with money, he definitely thinks people should quit smoking. He puts it simply:
“It costs a penny to light a cigarette, but it can cost thousands of dollars in health care expenses – a cost people who smoke help pay through rising insurance premiums.”
Besides the extra money you spend on higher insurance because of the health risks, he points out that smoking a pack a day can burn through over $2,000 a year.
When you think about the lifetime costs of smoking – higher insurance, buying cigarettes, maybe needing counseling to quit, medicine, and dealing with illnesses caused by smoking – Buffett estimates it can add up to over $500,000.
So, instead of seeing smoking as a non-negotiable part of a tight budget, Buffett suggests thinking about whether it’s worth more than saving money and building wealth. Quitting smoking not only helps your health but also frees up a lot of cash that could be used for your future.
