Learn from the world’s biggest thinkers.
Introducing our latest Big Think Class.
Paula Pant explores smart financial decision-making.
It’s oh-so-easy to chase shiny, fast rewards like a big stock market win, a skyrocketing cryptocurrency, or an app promising easy street. But financial independence is a life-long process, says Paula Pant, host of the Afford Anything podcast. Like a tree, real strength comes from the roots, not the flashy leaves or fruit. Healthy finances start with understanding what you value most and what you truly want to afford, then making long-term plans to support those priorities. With a stable, value-driven approach and some discipline, a world of freedom can open.
Although financial decisions look different for everyone, Pant stresses one universal truth: every choice comes with a trade-off. Choose wisely, and you may not be able to buy everything, but you can buy anything.
Learning objectives:
Clarify your financial priorities.
Identify ways to increase your earnings and lower your costs.
Direct your savings effectively.
Determine your risk profile.
Guard against bias in financial decision-making.
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Lessons:
Lesson 1: Take an Adaptable Approach to Money
“Enough is enough!” Maybe you’ve heard this exclamation from a frustrated parent or hollered this phrase in exasperation yourself. It’s redundant and seems obvious — until you realize how subjective the word “enough” is.
Enough of what? Enough of what? And how much is enough? Enough coffee for someone else might not be enough for you.
Lesson 2: Start with Your Values
In British author Roald Dahl’s classic novel "Charlie & The Chocolate Factory", Veruca Salt is a spoiled girl who insists her parents buy whatever she wants right NOW! In the book, she demands one of Wonka’s nut-sorting squirrels; in the 1971 film, she demands a goose that lays golden eggs. Neither attempted purchase ends well. Things usually don’t when you indulge in every desire, especially monetarily.
Lesson 3: Mind the Gap
If you’ve ever ridden the London Underground, you’ve heard a recording of a sweet voice warning you to “mind the gap” as the train doors open. The space between the train and the station platform is small, but not paying attention to it can be dangerous. The gap between what you earn and what you spend can be scary, too.
Lesson 4: Reduce Friction to Increase Your Savings
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?
Lesson 5: Improve Your Net Worth
Some experts say you should save 10% of your monthly income. Paula Pant suggests saving 20% if you can. But whatever amount works best for you, you have to direct it effectively to maximize your investment. In this video lesson, Pant explains how to increase your savings rate and prioritize where your savings go.
Lesson 6: Avoid the #1 Money Mistake
Credit cards come with spending limits. But those thresholds are rarely in sync with what you actually have in your bank account. And Paula Pant, host of the Afford Anything podcast, has seen far too many people lose sight of that disconnect and charge their way into debt.
Lesson 7: Make Sense of Investment Tools
Some people balk at the idea of starting a 401(k), assuming it has to be invested in stocks. Others see an HSA and think it must be designed for bonds. Paula Pant says they’re mistaking the vessel for the contents. After all, would you skip your morning coffee if you didn’t have a mug but had plenty of pint glasses? Or refuse champagne on New Year’s Eve if it was served in a shot glass instead of a flute? In this video lesson, Pant elaborates on how to apply this drinking analogy when considering different types of investment accounts and assets.
Lesson 8: Use a 5-Point Investment Strategy
Investing often gets compared to riding a roller coaster. One day you check your numbers and whoooooosh! You’re at the top, basking in the view. The next day, you check again, and aaaaaahhhhhhhh! You’re hurtling down faster than you were prepared for. A week later, you’re slowly climbing back up. But according to Paula Pant, the ride doesn’t have to be quite so scary and unpredictable. In this video lesson, she offers a 5-point strategy to keep your stomach settled through the twists and turns of investing.
Lesson 9: Hack Your Employer's Tax-Advantaged Medical Accounts
FSA? PPO? HMO? HSA? Sometimes your employer’s open-enrollment period for selecting benefits can feel like you’re drowning in a bowl of alphabet soup. There are so many abbreviations floating around. What do they all mean?! Never fear! Paula Pant offers a life-preserver of good advice to help you stay afloat. In this video lesson, she breaks down the difference between flexible spending accounts (FSAs) and health savings accounts (HSAs) and how you can best use them to your financial advantage.
Lesson 10: Plan for Volatility and Risk
Some people love skydiving. Some are willing to give a bad relationship another chance. Some are even up for rolling the die with old Chinese food at the back of the fridge. And some want nothing to do with any of these scenarios. Everyone has a different risk tolerance. When it comes to allocating your investments, Paula Pant says you should also assess your capacity to withstand volatility in the market (i.e., the events you can’t control). In this video lesson, she discusses how to determine your general “risk profile” and apply it to your portfolio.
Lesson 11: Recognize the 5 Cognitive Biases that Can Hurt Your Financial Future
We all know biases can impact our social interactions and behaviors. We worry (rightfully) about implicit bias in the workplace and our communities. But how might biases play into and adversely affect our personal financial decisions? Are you avoiding stocks because a relative was taken down by a market crash? Or continuing to invest in a crumbling company because you really liked its product? In this video lesson, Paula Pan walks through five cognitive biases that may be influencing your financial choices and why you should watch out for them.
