Just because you have money doesn’t mean you should be spending money frivolously. Even those who are ridiculously wealthy, like Warren Buffett, embrace this concept.
According to a HBO documentary 'Becoming Warren Buffett,' the billionaire investor has a morning ritual. Every day he goes to the McDonald’s drive-thru and decides just how extravagant his spend will be and the spend does vary between $2.61, $2.95 or $3.17. This can be loosely called his “breakfast market barometer.” When he is feeling good about the markets on a given day he goes all out and orders a bacon, egg and cheese biscuit with a coke for $3.17. He cuts back when things look a little rocky. The point being made you can spend a little more when things are going well and less when they are not.
The concept goes beyond living beyond your means. Clearly Buffett could have two breakfast specials if he wanted to. And intuitively, we all get that we should spend less than you make. The challenge we are faced with is life can get in the way. The car breaks down, the roof leaks or you lose your job when you least expect it. When things happen in the moment, you need to alter course – in the moment. Spending has to stop or be altered to deal with the reality of today.
Buffett lives a fairly frugal lifestyle and it is hard for most of us to relate; however, when life throws you a curveball, it make sense to alter your financial course accordingly. Small changes can make a big difference.
CTV's Chief Financial Commentator Pattie Lovett-Reid offers a financial tip of the day during the month of February for Your Money Month.