The Frugal Billionaire

scrooge-35232scrooge1I just love people who pursue frugality for frugality’s sake … like it’s an end, rather than a means to an end.

For example, take this really interesting post on Grad Money Matters where he points to a bunch of rich old men who live like misers:

Some of the world’s wealthiest people … also happen to be some of the most frugal.

  • Despite having a net worth of $62 billion and being the world’s richest man, famously frugal investor Warren Buffett still lives in the same home he bought for nearly $31,500 some 50 years ago.
  • John Caudwell used to ride his bike 14 miles to work everyday and cut his own hair because he didn’t want to be bothered going to the barber despite having amassed a fortune of over $2.2 billion. Caudwell also purchased all of his clothing off the rack at British retailer Marks & Spencer.
  • Jim Walton, member of America’s richest family and Wal-Mart scion, reportedly drives a 14-year-old Dodge Dakota despite having a net worth of $16.4 billion.
  • Retail Tycoon Frederik Meijer, worth $2 billion is known to drive cars with very high MPG and prefers to only stay in budget motels.
  • Gene Burd, a 76-year-old journalism professor at the University of Texas has donated over a million dollars to financial foundations but walks 6 miles to work everyday, lives in a very tiny apartment, picks up pennies on the ground, and wears shoes that he found in the trash.
  • Ingvar Kamprad built a $33 billion fortune after founding Ikea but the Swedish tycoon drives a 15-year-old Volvo, tries to avoid wearing suits, and flies coach. It’s also said (surprise, surprise) that Kamprad furnishes his home entirely with affordable Ikea furniture.
  • Indian billionaire Azim Premji worth upwards of $17.1 billion drives a Toyota Corolla and stays in the company guesthouse rather than 5-star hotels when he’s traveling on business. At a lunch honoring his son’s wedding he even served the food on paper plates.
  • We would be amiss to not mention some of the highest earning dead celebrities who are perhaps the most frugal of this list due to their inability to spend 🙂 For example, top earning dead musician, Kurt Cobain made about $50 million last year. Elvis Presley made $42 million despite having died in 1977 and, in third place, Peanuts creator Charles M. Schulz earnings were about $35 million.

*About the author: This list was compiled by Lewis Bennett, writer for an Individual Voluntary Arrangement (IVA) site.

I have a word to describe this kind of behavior: sick.

You need to ask yourself two questions:

1. Did these people become rich solely because they were frugal?

2. Is their current level of frugality sensible, given their net worth?

There’s no doubt in my mind that you will NOT become rich unless you learn how to delay gratification, but that is not the same as NO gratification. If you can afford to spend on a reasonable lifestyle and you choose not to, you MAY be just as ‘sick’ as the person who lives beyond their means and spends uncontrollably.

On the other hand, if you simply have no interest in the ‘trappings’ of life, that’s entirely a different matter … but, one then wonders why you bother with the whole “let’s get rich” thing, anyway?

But, here’s what I suspect really happens:

1. Some rich people are so driven by the process of making money that they never know when to stop … some take one step, one chance, one risk too many and lose their money, while others just keep going on and on and on, driving themselves – and, their families – to an early grave. There are exceptions of course: those like Warren Buffett who so enjoy what they are doing that they would be doing it even if they were not paid.

The ‘antidote’ is to work out your Life’s Purpose and if it’s to make money … then go until you drop! If not, pursue the financial path until you have acquired enough money to live your Life’s TRUE Purpose, then stop … and, live!

2. Some learn the lesson early that you need to delay gratification and live frugally if you want to avoid spending all the fruits of your labor (rather than reinvesting in your future) but become so driven by the process of saving money that they never know when to stop …

… in my opinion, there’s NO lesson to be learned from a multi-millionaire or billionaire who lives like a miser … other than they are great counterpoint to those billionaires who live overly and ridiculously flamboyantly.

To me the ‘right’ path is simple: live comfortably within your means … whether that is a $50k a year lifestyle or a $50 million a year sustainable one.

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13 thoughts on “The Frugal Billionaire

  1. I think for me, a sense of balance between all of these factors is what i’ve really tried to strive for in my life. The other major factor that I believe plays a big role in all of this is a person’s values.

    When it comes to things that I value the most, such as fine guitars, cars, etc.. I tend to go for the best that I can afford. Perhaps I may even look a little foolish to the financial community when I want to spend a little more on these personal values. But on the same token, when it comes to something else in my life, It may not be something that is very high on my values list, or interest list, so I might buy something that others may feel is “cheap”, or I may look like a miser. I think this is also something to consider with this discussion.

  2. Elvis overtook Cobain this year to become the No. 1 deceased earner once again. Cobain never made the Top 10.

  3. I don’t think it’s sick, it’s just their habits. If they was always a cheap person money has not changed them.

    But what can I say, Im not a billionaire,lol

    What confuse people is that they think they have to be cheap to make millions, not true

  4. Perhaps they have discovered the value of simplicity. They seem to be both free of want and free of fear. I am not sure if this is the case with all of them—but I admire their ability to keep desire for things at bay.

  5. I don’t think it’s sick either. It might just have been those same habits that allowed them to amass such large fortunes. Oprah is always saying how she saves things like the ends of bread and uses them somewhere. It’s just a way of thinking and being.

  6. I thought Warren Buffett only had his original home until I found out about his one in Irvine Cove, most pricey for Orange County, CA.

  7. @ Sandy – You see nothing ‘unusual’ about somebody who has over a $1 Billion (and, is earning more at the rate of hundreds of millions a year) who saves the ends of bread?

    If you go without, but you can afford it … in my mind that’s the same as going with, but you can’t afford it. Two sides of the same coin.

  8. excellent post. thanks for typing that. I agree that when you hit the billion dollar mark, the scrimping can stop.

  9. @ David – Thanks! But, I didn’t just type it: there was a LOT of cutting/pasting and a LITTLE thinking that went into it, as well 😛

  10. “in my opinion, there’s NO lesson to be learned from a multi-millionaire or billionaire who lives like a miser”

    You are wrong. The idea of being frugal just to save money and keep it to yourself is sick. However, that is different from the idea of living the simple life even though you have the means of affording luxry, with the idea of giving away what you have earned to the less fortunate. Warren Buffet pledged 85% of his fortune to charity. But then those who are worried about their own comfort woudln’t understand this or learn anything from billionares who live the simple life.

    “one then wonders why you bother with the whole “let’s get rich” thing, anyway?”

    Well, who said that was their initial dream? Have they said their dream was to amass wealth? They got rich doing what they did.

    A world that truly idolizes luxury will always wonder why people who are wealthy live the simple life.

  11. I like Scott’s answer here. I am not interested in certain things (possessions) so No matter my income level at any stage of life, I wouldn’t be spending on those things.However, there are things that are quite important to me , and thats what I would chose to spend my money on. Now , as for wearing shoes from a dumpster, when you have millions or even billions, this is just plain stupid. No one says you need to buy 200.00 or 2,000.00 shoes, but come on , at least buy some shoes right?

  12. I saw a UK documentary about Warren Buffett and it appears that he has the same small house forever and rarely changes is car. When he does buy a new one he get a hail-damaged one. He’s rich because he’s tight with his cash.

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