Lesson 5: Improve Your Net Worth | Paula Pant

Some experts say you should save 10% of your monthly income. Paula Pant, host of the Afford Anything podcast, 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. Increase your savings rate Aim to invest at least 20% of your income. This includes: Making debt payments beyond the minimum required Contributing to retirement savings Contributing to investment accounts Building up your emergency fund Some experts suggest saving less, but 20% will compound over time to give you more flexibility and cushioning. If you’re not earning a lot of money, don’t feel pressure to save more than 20%. If you’re nowhere near 20%, aim to increase your savings rate by 1%. For example, if you’re currently saving 3%, increase to 4%, hold for a month or two, then increase to 5%, then 6%, and so on. If you do this consistently over time, you’ll reach 20%. It’s ok for this to take a few years. Money management is a lifetime practice, not a quick hit. Harness the “Hierarchy of Savings” Direct your savings as follows: Employer Matching Program (401k or 403b): Contribute enough to your retirement account to get the maximum match. If you get a dollar for every dollar you put in, you immediately double your money risk-free. High-Interest Debt: Immediately pay off any debt that has a double-digit interest rate. Basic Emergency Fund: Save enough cash to cover at least one month’s expenses. Additional Retirement Account(s): Contribute enough to cover your expenses if you become too ill or too old to work. Beyond that, the hierarchy becomes personal choice and may include: A health savings account (HSA), if eligible College savings plans Taxable brokerage accounts Savings for a down payment on a home ---------------------------------------------------------------------------------- Go Deeper with Big Think: ►Become a Big Think Youtube Member Get exclusive classes and early, ad-free access to new releases without leaving Youtube. https://www.youtube.com/@bigthink/membership/ ►Become a Big Think Web Member Get the entire Big Think Class library, premium print issues, live events, and more. https://bigthink.com/membership/ ►Subscribe to Big Think on Substack Get all of your favorite Big Think content delivered to your inbox. https://bigthinkmedia.substack.com/subscribe/ ---------------------------------------------------------------------------------- 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.