Lesson 4: Reduce Friction to Increase Your Savings | Paula Pant

Business magnate and investor Warren Buffett is credited as once saying, “Do not save what is left after spending, but spend what is left after saving.” But what exactly counts as saving? Is it just putting money into a retirement account every month? According to Paula Pant, host of the Afford Anything podcast, saving can also include building an emergency fund and paying off high-interest debt. In this video lesson, Pant explains how to do so by implementing an “anti-budget” and automating your willpower.

Adopt an anti-budget

Traditional budgeting is the calorie counting of money. Like tracking every morsel of food you eat, it involves painstakingly tracking your spending. This can be hard to stick to over the long term.

Instead, take an “intuitive eating” approach to managing your money. Follow the anti-budget formula:

Decide how much you want to save. (“Save” means anything that improves your net worth.)

Pull that amount off the top of your monthly income.

Live on whatever is left over.

Over time, you’ll tend to intuitively adjust your spending to your new baseline.

Don’t rely on willpower

It’s folly to assume that we can muscle our way through making smart decisions with our money. Instead, automate your financial decisions so you don’t have to think about them. For example, you can automatically direct a portion of your paycheck to your retirement, debt payments, or investments.

For anything you can’t automate, try to form a habit around it. For example, if you form a habit around making coffee every morning, that muscle memory will be stronger than using your willpower to avoid the coffee shop.

Form new habits in 2 steps

Start small: If you want to do 100 pushups a day, start with one pushup. Once it becomes a habit, it can grow from there. The bigger a habit, the more of a lifestyle change it is, and the more likely you are to fail.

Tie it to an existing habit (aka “habit linking”): There are certain things you do that are already habits (e.g., brushing your teeth). Ask yourself: What personal finance habit can I tie to an existing habit? Can I check my bank account every time I brush my teeth?

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About Paula Pant:

Paula Pant is the host of the Afford Anything podcast, an award-winning show with more than 24 million downloads. It was named by the New York Times as one of “7 Podcasts Your Wallet Will Love.”

She is also the founder of Afford Anything, a personal finance brand with more than 75,000 newsletter subscribers.

She is a Knight-Bagehot Business and Economics Journalism Fellow at Columbia University.

Pant is frequently featured in financial media including Money Magazine, the Washington Post, Oprah.com, CNBC, Fortune, Marie Claire, Marketplace Money, Men’s Health, Real Simple, Outside Magazine, Cosmopolitan, the New York Times, and more. She’s spoken at the “Talks at Google” series and guest lectured at Georgetown University. She lives in New York City.