Warren Buffett Finally Explains Why Being Cheap Leads to Happiness

Warren Buffett's house in Omaha (bought in 1958).

Every year, thousands of investors flock to Omaha to hear the wisdom of Warren Buffett and Charlie Munger. For as long as six hours, with only one break for lunch, the two business legends take questions from investors, the press, and analysts. 

Appropriately for a shareholder meeting, the focus is the business of Berkshire Hathaway  (NYSE: BRK-A  )   (NYSE: BRK-B  )  but it's not the only topic they discuss. This year, Buffett discussed frugality, happiness and money in response to a question from a shareholder from Chicago.

Following are my notes on the Chicago shareholder's question, along with responses from Buffett and Munger.

Warren, has your personal frugality helped shareholders? Charlie, do you think Warren's frugality has hurt shareholders?

Warren: First of all, let's ask who's the more frugal.

Charlie: On personal consumption, Warren is more frugal. Warren lives in the same house he bought for a very modest price and has lived there for a very long time.

Warren: I bought it in 1958 and you moved into yours in 1960. He designed his own house. He did not pay an architect, right?

Charlie: I paid $1,900 [for the architect], which was 30% of the market rate.

Warren: There are things money can't buy. I don't think standard of living equates with cost of living beyond a certain point. Good housing, good health, good food, good transport. There's a point you start getting inverse correlation between wealth and quality of life. My life couldn't be happier. In fact, it'd be worse if I had six or eight houses. So, I have everything I need to have, and I don't need any more because it doesn't make a difference after a point. When you get to 10 times or 100 times or 1,000 times, it doesn't make a difference [in quality of life].

Charlie: Frugality is basically how Berkshire happened. I look out over this audience and I see a lot of understated, frugal people. We collect you people.

Warren: Forget about it this weekend! (laughs) The more you buy, the more you save at these prices, folks! (laughs)

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 08, 2014, at 10:40 AM, MissDisplaced wrote:

    Warren's both right and wrong.

    Money DOES buy happiness in the form of security, and being able to do what you WANT to do in life, not what you HAVE to do. 99% of Americans are doing what they have to do simply to survive, which means working crappy jobs for low pay.

    But he's right on about possessions. Having more of those will not necessarily make you any happier, though I sure wouldn't mind having a house and boat in the Caribbean!

  • Report this Comment On June 08, 2014, at 10:58 AM, lm1b2 wrote:

    Only a rich person can make a statement like that,i do wonder what they think of Christs statement that a rich man has as much of a chance of entering heaven as a Camel going through a eye of a needle ?

  • Report this Comment On June 08, 2014, at 1:57 PM, peterwolf wrote:

    Gosh Warren, if all that money isn't making you happy then how about giving it to me and I'll see what I can do about it.

  • Report this Comment On June 08, 2014, at 3:55 PM, wowgoner wrote:

    Cannot agree more! Enough is enough! More is a burden! A reliable car is enough, why a luxury one? For example. The rest can be invested for fun and security.

  • Report this Comment On June 09, 2014, at 6:17 AM, laurieh wrote:

    Just curious of readers - who would you rather have lunch with? Frugal Warren Buffet or over the top Donald Trump?

  • Report this Comment On June 09, 2014, at 7:00 AM, dbtheonly wrote:

    laurieh,

    Buffett, hands down. Trump would try to figure out how to stick me with the check.

    peterwolf,

    You are not happy with what you have now. Will having more of that suddenly make you happy?

  • Report this Comment On June 09, 2014, at 11:21 AM, deckdawg wrote:

    "Only a rich person can make a statement like that,i do wonder what they think of Christs statement that a rich man has as much of a chance of entering heaven as a Camel going through a eye of a needle ?"

    When this statement is read in its context, it is all the more surprising. The next verse (MK 10:26) says that his disciples were, in King James speak, "astonished out of measure." "Who can be saved, then?" they asked. We tend to imagine His disciples were rather poor (maybe they were, I don't know). But they didn't say, "Oh good, we're poor, so we're a shoo in". No, they were completely flabbergasted that Jesus said it was extremely hard for rich folk to enter the Kingdom.

    Jesus then says, with men this would be impossible, but with God all things are possible. So, I suppose with God Warren could enter the Kingdom if we wants to. (I don't know if Warren is interested in God, Jesus, and their Kingdom.)

    By the way, us folks in the developed world are all extremely rich by third world standards.

  • Report this Comment On June 09, 2014, at 11:57 AM, Tiger69 wrote:

    Buffett, as always, is wise. Beyond the basic needs of nutrition, shelter, health and security, wealth is what you make with your life. Friendship, kindness, generosity with give you much more happiness at some point than doubling your wealth. I spent my first 60 years acquiring things until I realized that they were beginning to own me. Since then, I have enjoyed making life simpler be disposing of things and making unexpected, and often anonymous gifts to people whom I liked or those in need. I feel wealthy in that I can chose, pretty much, what I want from life now. By third world standards, I am still very wealthy. But, not so when I compare myself with professional peers with similar education. But, if I were to, unexpectedly, come upon a million $, the only pleasure it would give me would be to give it away. (But, it definitely would not go those self-pitying people who say, "If you have too much, then give it to me". It probably wouldn't help them a bit. It all comes down to whether you are at peace with your life. If so, the most pleasure comes from sharing with others.

  • Report this Comment On June 09, 2014, at 1:15 PM, TopAustrianFool wrote:

    Yet, Mr. Buffet for some reason seems to have the need to continue buying politicians left and right. If enough is enough why isn't he content with his money? Why does he need to get involve in politics? Oh right! He is talking about money, power is another matter...

  • Report this Comment On June 09, 2014, at 1:52 PM, brianm7902 wrote:

    @Tiger69...you are a wise man.

    I am content with my life...sure I'd like to work more and make a bit more to provide security to my children when I find a spouse and decide to have some...but once I reach that point, I only want to accumulate wealth in order to donate to causes which I support.

  • Report this Comment On June 09, 2014, at 2:14 PM, gzyv15a wrote:

    It's funny how a multibillionaire could make a statement like that. I wonder if all his money were gone, would he feel the same way.

  • Report this Comment On June 09, 2014, at 2:35 PM, jon364 wrote:

    True, but he's one of the few that do what he preaches.

  • Report this Comment On June 09, 2014, at 4:47 PM, yardomd wrote:

    This is true.

    Think about it like this:

    Nobody gets rich by wasting money.

  • Report this Comment On June 10, 2014, at 1:20 AM, Astormchaser wrote:

    People that get it are happy despite their income level. The problem is we learn through peer pressure , peer envy, family, and the Media that there is some set level of standard of living that we must maintain , which causes people to extend themselves beyond their earning potential.

    There is this unattainable illusion that there is some level of material wealth that we need to attain to be happy, and we become indentured servants to banks and jobs to live in that illusion.

    Perhaps warrens statements would be better received if uttered by an enlightened monk with no material positions?

  • Report this Comment On June 10, 2014, at 6:10 PM, sesquipedaliman wrote:

    hahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahaha

    you could tell he stopped being serious after he made a joke about non-frugalists.

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