Warren Buffett became one of the world’s wealthiest people by following principles that sound almost comically simple: live below your means, invest the difference in quality businesses, and let compound interest do the heavy lifting over decades. The uncomfortable truth is that these strategies work just as well today as they did when Buffett started in the 1950s. The math hasn’t changed. What has changed is how much it psychologically hurts to follow them.
The core of Buffett’s approach has always been about maximizing the gap between what you earn and what you spend, then investing that gap wisely. He famously lived in the same modest Omaha house for decades, drove used cars, and avoided lifestyle inflation even as his net worth climbed into the billions. This wasn’t about deprivation for its own sake. It was about understanding that every dollar spent on consumption is a dollar that can’t compound over time.
The strategy still works because the fundamental mathematics of compound growth haven’t changed. If you invest money in productive assets and reinvest the returns, your wealth grows exponentially rather than linearly. A person who saves $500 monthly starting at age 25 and earns a modest 7% annual return will have over $1.1 million by age 65. Someone who waits until 35 to start needs to save nearly $1,000 monthly to reach the same target. The power of time in the equation is enormous.
But here’s where modern life makes Buffett’s approach feel borderline masochistic: the nominal cost of everything has exploded. When Buffett bought his Omaha home in 1958, he paid $31,500. The median home price in America today exceeds $400,000. A new car that might have cost $3,000 in the 1960s now runs $48,000. College tuition has increased at rates that vastly outpace inflation. Even everyday expenses like groceries, childcare, and healthcare consume a much larger share of median income than they did generations ago.
This creates a brutal psychological dynamic. Buffett could live frugally in the 1950s and 60s while still enjoying a middle-class American lifestyle. He had a nice house, drove a functional car, sent his kids to good schools, and still had plenty left over to invest. Someone trying to follow the same principles today faces a different reality. Living significantly below your means often requires what feels like genuine sacrifice.
Consider a young professional earning $75,000 annually in a mid-sized American city. After taxes, they’re taking home around $55,000. If they want to save and invest 30% of their income like Buffett recommends, that’s $16,500 annually for investing, leaving $38,500 for everything else. Rent alone might consume $18,000 to $24,000 of that. Add a used car payment, insurance, utilities, student loan payments, and groceries, and there’s not much breathing room. Following Buffett’s principles here means living with roommates longer, skipping vacations, eating at home constantly, and saying no to social activities that cost money.
The pain is amplified by what economists call “relative deprivation.” In Buffett’s era, most Americans lived relatively similar lifestyles. Today, social media creates constant exposure to how others are spending their money. Your coworkers are posting vacation photos from Europe. Your college friends are buying houses and new cars. Instagram influencers are showcasing luxury experiences. Following Buffett’s approach means watching others consume while you defer gratification, and doing so in an environment that constantly reminds you of what you’re missing.
Yet the strategy works precisely because it’s painful. The difficulty of living below your means in a high-cost environment is what creates the selection effect. Most people won’t do it, which is why most people don’t build substantial wealth. The gap between earnings and spending is where wealth comes from, and that gap only exists if you resist the pressure to spend everything you make.
There’s also the question of investment opportunities. Buffett famously found incredibly undervalued stocks in the mid-20th century, buying wonderful businesses at reasonable prices. Some critics argue those opportunities don’t exist anymore. This is partly true and partly excuse-making. While you probably can’t buy Coca-Cola at 1988 prices relative to its earnings, you can still invest in low-cost index funds that capture the growth of the entire economy. The average annual return of the S&P 500 over the past century is about 10% before inflation. That’s still enough to build substantial wealth if you give it time.
The real challenge isn’t that the strategy doesn’t work. It’s that the mental fortitude required to execute it has increased. When saving 30% of your income means living in a way that feels genuinely constrained rather than just modestly prudent, the temptation to rationalize away the strategy becomes overwhelming. It’s easy to tell yourself that your situation is different, that Buffett had advantages you don’t, that you’ll start saving more later when you earn more.
But this is where understanding the actual mechanism matters. Buffett’s wealth didn’t come from his salary or even primarily from picking the absolute best stocks. It came from starting early, living below his means for decades, and letting compound growth do the work. He gave the strategy time to work. Most people know they should save and invest. Very few actually maintain the discipline for thirty or forty years.
The nominal cost of living being higher doesn’t change the underlying principle. It just makes the principle harder to stomach. You can still build significant wealth by saving a substantial portion of your income and investing it in productive assets over a long time horizon. You just have to be willing to live in a way that might feel uncomfortably frugal relative to your peers and relative to what modern American life seems to demand.
This is why Buffett’s strategies persist as theoretical knowledge that most people never actually implement. Everyone knows they “should” save more and invest for the long term. But when following through means driving a 12-year-old car while your coworkers lease new BMWs, or living in a small apartment while your friends buy houses they can barely afford, the emotional cost feels steep. The strategy works, but it extracts its price in daily choices that accumulate over decades.
The question isn’t really whether Buffett’s approach still works. It demonstrably does. The question is whether you’re willing to endure the psychological discomfort of being the person who lives differently from everyone around you, in an environment where the baseline cost of existing has never been higher. The math is the same. The discipline required is the same. Only the stakes feel higher, because choosing to save means saying no to things that seem normal rather than extravagant.