Warren Buffett: 5 things poor people waste money on without realizing it

Warren Buffett, the “Oracle of Omaha,” is renowned for his ability to grow wealth through careful and disciplined investing. Despite being one of the richest people in the world—his net worth regularly sits in the tens of billions—Buffett is famously frugal. He still lives in the same house he bought in 1958, chooses a simple breakfast on his way to work, and avoids the big, flashy purchases you might expect from a billionaire.

In fact, one of Buffett’s most quoted remarks on money is: “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”

That might sound simple, but it’s the foundation of his entire philosophy. When people say “lose money,” they often imagine risky stock bets or gambling. But “losing money” can also mean blowing your income on stuff you don’t need or overspending on unnecessary extras. It’s the little daily habits that can quietly drain your bank account.

Let’s take a look at five things that poor people (and honestly, lots of middle-income folks, too) waste money on without even realizing it—along with insights from Warren Buffett that show a better path forward.

1. Impulse Buys and Unnecessary Shopping Sprees

Ever found yourself walking into a store for one item, only to leave with a cartful of products you didn’t plan on buying? Or maybe you went online for something small, got sidetracked by a sale, and ended up spending double what you intended. This is a classic example of wasteful spending.

Buffett famously said, “If you buy things you do not need, soon you will have to sell things you need.” The logic is simple: Wasted money on impulse buys means less money for essentials like rent, groceries, or savings. Or worse, you might rack up credit card debt, which brings even more financial strain.

How to fix it:

  • Make a list before you shop, and stick to it.
  • Wait at least 24 hours before making any non-essential purchase.
  • Compare prices (offline and online) to make sure you’re getting the best deal.

None of these tips are rocket science, but they’re surprisingly effective. By controlling the urge to “buy now and think later,” you’re giving yourself a chance to decide if you actually need something.

2. Letting Small, Recurring Costs Add Up

It’s easy to notice a big splurge—a giant TV or the latest designer gadget—because the price tag is staring you in the face. What’s trickier are the small daily or monthly costs that add up over time. Think subscription services you don’t use, daily coffee shop runs, or overly expensive phone plans.

Buffett often repeats the importance of value over price, saying: “Price is what you pay. Value is what you get.” If you’re paying for Netflix, Hulu, Amazon Prime, and half a dozen other streaming services at once but only using one or two of them, you’re not getting real value for your money. Each individual subscription might look cheap, but together they could be costing you hundreds or thousands each year.

How to fix it:

  • Do a monthly “cost audit.” List out all your subscriptions (streaming, phone plans, gym memberships, music services) and see which you actually use. Cancel any that don’t provide true value.
  • Track daily expenses. Even small purchases, like bottled water or snacks, can add up to big sums over a month.
  • Negotiate or shop around. Whether it’s cable, insurance, or cell phone plans, don’t just accept the first offer—call and ask for discounts, or compare alternatives.

You might be surprised how much money you recapture once you start trimming the fat.

3. Relying on (and Misusing) High-Interest Debt

Credit cards can be convenient. They can also help build your credit score—if you manage them carefully. But many people use their plastic for everyday expenses they can’t truly afford, racking up debt month after month at interest rates that can hit 20% or higher.

In Buffett’s view, high-interest debt is one of the biggest wealth killers. He once remarked: “If you’re smart, you’re going to make a lot of money without borrowing.” While this doesn’t mean never borrow for anything, it does suggest we should be extremely cautious about using high-interest credit for non-essentials.

How to fix it:

  • Pay off credit card balances in full each month. If you can’t, prioritize paying down this debt as quickly as possible—interest is a silent thief in the night.
  • Avoid payday loans or high-interest personal loans if at all possible.
  • Build an emergency fund so you don’t need to rely on high-interest credit if unexpected expenses pop up.

Credit can be a tool, but it’s also a trap if used the wrong way. Every dollar you spend on interest is a dollar you can’t save or invest.

4. Keeping Up with Lifestyle Inflation

A new car, the latest smartphone, brand-name clothes—these aren’t necessarily evil, but too often, people buy them just to keep up with the Joneses (or to display a certain status). When your income goes up a little, it’s tempting to splurge on nicer things. This might feel good short-term, but it eats away at your money in the long run.

Buffett is a living example of someone who keeps lifestyle inflation in check. Despite his fortune, he’s stuck to a modest home for decades. He drives reliable cars, not necessarily the flashiest or most expensive. He once observed: “Someone’s sitting in the shade today because someone planted a tree a long time ago.” That’s a metaphor for saving and investing early and often—giving you the financial shade (i.e., security) you’ll want later in life.

How to fix it:

  • Set savings goals first. Once you get your paycheck, pay yourself (your savings, investments, and future) before allocating money to lifestyle upgrades.
  • Don’t increase your spending just because your salary went up. Instead, consider raising your investment contributions.
  • Ask yourself why you’re buying a particular item. Is it for real utility, or just to impress others?

Learning to live below your means, even as your income grows, is one of the best ways to build wealth over time.

5. Not Investing in Yourself and Your Future

Many people assume they have no money left to invest once the bills are paid. But often, the real problem is that wasteful spending eats up what could have gone toward real wealth-building. If you never invest—whether in the stock market, in your own education, or in a business idea—you can end up treading water financially, never moving forward.

Buffett repeatedly emphasizes the importance of self-improvement, saying: “The most important investment you can make is in yourself.” This can mean formal education, online courses, or learning new skills that boost your earning potential. In addition, setting aside even small amounts of money every month for an index fund or other investments can reap big rewards in the long run, thanks to compound interest.

How to fix it:

  • Pay yourself first. Automate a transfer into a savings or investment account right when your paycheck arrives.
  • Build your skills. Whether it’s public speaking, coding, a second language, or something else, investing in knowledge can open doors to better opportunities and income.
  • Start small if you have to. Even $50 or $100 a month in a broad-market index fund can grow substantially over time.

When you put money into yourself or assets that appreciate, you’re giving yourself a shot at escaping the “paycheck to paycheck” grind.

Conclusion: Turning Wasteful Spending into Wealth

It’s easy to assume that money troubles come solely from not earning enough. Indeed, income matters—a person barely getting by on minimum wage faces extra challenges. But as Warren Buffett’s tips highlight, many money problems stem from daily habits and choices. From impulse buying to letting debts snowball, these pitfalls silently sabotage wealth-building.

Buffett’s philosophy can be summed up by another one of his well-known quotes: “Do not save what is left after spending; instead spend what is left after saving.” In other words, prioritize your future first. Don’t treat savings like an afterthought. If you work on plugging these money leaks—impulse purchases, unnecessary subscriptions, high-interest debt, trying to impress others, and not investing in yourself—you’ll free up capital that can grow and work for you over time.

Remember: the difference between those who remain stuck financially and those who break free often isn’t a lottery ticket or a huge salary. More often, it’s about everyday discipline—slowly but surely forming habits that let your money work for you. In Buffett’s world, a dollar saved today could turn into many dollars tomorrow. And that simple choice—learning where your money goes and redirecting it to better use—can be the seed that eventually grows into your own financial “shade tree.”

By identifying these five hidden money-wasters, you’ll be better equipped to build a stable financial foundation. Take Warren Buffett’s words to heart: Don’t let your money slip away in ways you barely notice. Instead, use it to create opportunities for a brighter, wealthier future.

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Picture of Ethan Sterling

Ethan Sterling

Ethan Sterling has a background in entrepreneurship, having started and managed several small businesses. His journey through the ups and downs of entrepreneurship provides him with practical insights into personal resilience, strategic thinking, and the value of persistence. Ethan’s articles offer real-world advice for those looking to grow personally and professionally.

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