There’s one simple, counter-intuitive trick that can unlock so many doors for you. It goes against everything you’ve been taught your entire life. Especially if you grew up in America. We’re taught that hard work -- putting your head down and grinding -- is what it takes to get ahead.

That’s true in a lot of realms. Here’s the secret: it’s the exact wrong way to try and manage your money.

Trying to control your spending, save for the future, and manage all the other aspects of your personal finances won’t work if you try to grind through the tough decisions. It will backfire. You have to be lazy.

Why Active Management Fails

When I say active management, I want to get out of the way that I’m not necessarily talking about active portfolio management. There is room in a lot of people’s lives for an excellent, fee-only financial advisor to handle their retirement savings and other investments for them.

But the same isn't true for your personal finances. The decisions you make on a day to day basis need to be on auto-pilot, managed passively to see yourself succeed. This is true due to a couple of key quirks in how the human brain works.

We Think We’re Better (Or Smarter) Than We Are

Our brains are complex, resource-intensive machines. To save time and conserve energy, they tend to operate on something called heuristics. That’s a fancy word for short-cuts our brains take.

Most of the time, these heuristics are fantastic. They allow you to not have to spend hours agonizing over every single decision you make in a given day. But they do sometimes fall short. They cause you to make bad decisions without even realizing it. The good news is that they tend to fall short in the same, predictable ways. 

One way we get tripped up isn’t so much a heuristic, but it is a quirk of the brain. It’s called the Dunning-Kruger Effect. It argues that the knowledge needed to be good at something is often the same knowledge necessary to know you aren’t good. In other words, most people think they’re top performers because they don’t know enough to know how bad they are.

While this makes for awkward encounters and performance reviews in the office, it also pops up in money management. People think they have a handle on their money, but they’re $10,000 in credit card debt. Or they’re confident they can stick to a budget without even knowing how much they’re spending every single month. Happens all the time.

So how do you combat Dunning-Kruger? The first step is to stop any time you catch yourself thinking “I know what I’m doing. I’m great at this!” Take a step back. Are you actually great? Or is there some blindspot you have, some information you’re lacking?

The Experiencing Self

Nobel Prize-winning psychologist and economist Daniel Kahneman first introduced the concept of the Experiencing Self versus the Remembering Self. We experience things in the moment differently than we remember them, but we make decisions based on our memory. We are a lot better at answering questions at the moment than questions after the fact.

What does this have to do with your money? A lot. You can only make decisions based on your memories of your experiences, but your experiencing self is out there acting in ways that you won’t remember after the fact. You are your remembering self, and your experiencing self is a stranger living your life. That screws a lot of stuff up.

You fail to create an accurate spending plan or fail to stick to the budget you do create. Your memory is inaccurate. You look back at the end of the month dissatisfied with where you ended up financially, but you can’t remember how you got there.

The only way to overcome this cycle is to introduce a third piece to the equation: The Planning Self. By relying on the decisions that the planning self makes in advance, the experiencing self can stick to achieving your financial goals. They won’t be derailed by their thoughts in the moment, or by their emotions, or by their inaccurate memories of the past.

The planning self can step back and think about where you want to be with your money. The planning self can determine your Hearthstones. Only by living through the lens of the planning self can you unlock your financial potential. And the planning self thrives on laziness.

What I Mean By Laziness

When we think of laziness, we tend to think of some deadbeat laying on the couch in their parents' basement, never accomplishing anything. While that’s a form of laziness, that’s not what I’m talking about here. Laziness in the context of your money means setting up systems once so you never have to think about them again. 

Rather than spending hours every month agonizing over your spending and your budget, you spend some time now setting everything up. Then, you let the systems work their magic. You can spend less time each month tracking your budget, and more time out there living a life that excites you.

Move Slowly

We’re in this for the long haul. You need your money to work for you throughout your life, so you shouldn’t rush to any decisions with it. To set up a money system that lets you be lazy, you have to move slowly. In the beginning, you have to think through every step you’re taking. Make sure it fits with your financial goals and your ideal vision for your life. 

If any expense doesn’t fit, you can cut it out. You’ll start to get a picture of how you want your money to work. Don’t rush here. You’re creating a system that will work with minimal tweaking into perpetuity. If you do it right, you can spend 30 minutes a month on your budget and financial goals from now until you leave a massive inheritance to the next generation. It takes slow, intentional work now to set up your money system.

There are a few key components of the system that can and should look the same for everyone. I’ll get to those in a second. At the end of the day though, this system is yours alone. The exact numbers and percentages can’t be dictated to you, you have to decide them for yourself. 

What works for me won’t necessarily work for you. We have different values and goals for our money and our lives. Your financial system needs to reflect that.

Automate Savings, Investing, Bills

One constant will hold true across all successful financial systems: automation. Your computer will never get tired. It’ll never have a long day and decide it isn’t in the mood for the food it prepped a few days ago. A successful system will use automation to your advantage.

There’s a good chance you don’t intend to overspend. You either fail to plan, fail to stick to the plan you do develop, or fail to account for something beyond your control. 

Let’s talk about the last one a little more. Big, unexpected expenses can wreck most budgets, especially if you live paycheck-to-paycheck. Which most people do. A broken-down car or a busted pipe leads to running up a credit card bill and promising to pay it off later. “What could I do? I never saw this coming,” you say to yourself. 

The truth is though, you did. Your planning self knew eventually your car would break down. You knew that everyone’s pipes burst at some point. You can put a system of automation in place that prepares for these emergencies in advance. When they do happen they’re not emergencies anymore. They’re inconveniences.

To create a system that allows you to be lazy with your money, you have to automate 3 things: savings, investing, and bills. Your paycheck should hit your account every month (or 2 weeks, or however often you get paid) and divvy itself up. There are some rules of thumb you can follow, but the exact numbers will be up to you.

Savings is where you tackle those unexpected expenses. You set aside a little bit for car emergencies, a little bit for plumbers, a little bit for all the other expenses you know you’ll have. You just don't know when. 

Savings is also where you get to plan your goals. You can save for your dream vacation or the perfect new watch. The key is to automate it. Send a part of every single check to a savings account at a separate bank. Yes, the separate bank part is crucial. Then when you need it, it’s there and you don’t have to stress. How great is that?

Investing should be handled the same way. Set up automatic transfers to your retirement or investment accounts, then don’t touch it. Make sure it’s invested the way you intended. Then leave it alone. Think of investing as saving for goals that are a long time in the future. Like 5 years or more in the future.

It’s also critical to automate your bill payments. Once you build enough of a buffer in your checking account, you can set up all your bills to draft when they’re supposed to. You never have to wonder if your water will be shut off because you forgot to pay it. You can get out there and live the life you want, knowing you’ll be able to shower when you get home.

Once these 3 are automated, it creates a new phenomenon with your money. See, once you have all those covered, all the remaining money in your checking account is for you to spend on whatever you want.

You don’t have to feel guilty about spending extra money on dinner, or on a new shirt. Your money is hitting your financial goals for you. It's on auto-pilot. You can use the rest to live a life that excites you right now.

Conclusion

Once you reach this point with your money, you’re free. Sure it takes some time and work upfront, and it’ll be several months before you work out all the kinks. It’s better to spend a few months now sorting everything out so that you can spend the rest of your years living a life that excites you. I promise it’s worth it.