The 3 smartest ways to cut costs and grow your savings during a pandemic, according to a personal finance guru

For most people, Sethi says it's wisest to reevaluate your top three expenses that you have the ability to cut back on. This will often be rent, which you can try to negotiate down during this time, eating out, and sporadic spending on clothing and material items that you may want, but don't truly need.

"There's no need to go rummaging around to save on $3 expenses, because you can get the bulk of your cost-cutting wins from those three big items," Sethi shared.

During the pandemic, it's easy to cut down one a big-ticket item: eating out. Why? Because most restaurants and bars are closed.

"What's amazing is that it almost seems effortless at this moment to save money on it," Sethi said. "That tells us that cutting back is not so much about willpower, as it is about setting up the right systems long term."

Sethi shared a lesson from his book that he calls the "85% solution." If you're targeting an area of your finances that you want to improve, it's better to get 85% of the way there and move on, instead of only being satisfied if you achieve 100% success, which can be disheartening and undermine those accomplishments.

"Somebody wrote to me once and told me, 'Every week, I tell myself I'm going to go for a run three times a week, and I never do it.' I wrote back to her and said, 'Why don't you just go for a run once a week?' She writes back: 'Once a week — what would that accomplish?' In other words, she'd rather dream about running three times a week than actually run once a week," Sethi said.

He explains that the same mentality can negatively affect attempts to gain control of your finances. "Many of us would rather dream about having perfectly organized expenses and perfect asset allocation, when in reality, if we just get 85% of the way there, if we just pick those three big expenses and cut those down, we would get most of the same benefits."

"Money is about so much more than math," Sethi explained, adding that finances can have a big impact on your emotions and sense of meaning.

"Start off with quick wins, wins that you can achieve," he said. "You also want to pick something that over time is going to be meaningful. If you really decide to optimize by buying the cheapest salt shaker, you may have saved 13 cents over the course of your life, but that doesn't mean anything to anybody."

"Most of us have been taught in America that we have to try harder with our money. We have this almost puritanical belief that if we just try harder to save, it'll work. But of course that hasn't worked for the last 50 years. Right now, we see that sometimes putting yourself in a situation where you're almost forced to save money can be really powerful."

"Many people overestimate how much they need for a one year emergency fund," Sethi said. "They'll often say, 'I make $60,000, that means I need $60,000 in an emergency fund — that's going to take me forever.' But that's not true."

To determine how much your emergency fund should be, calculate the minimum expenses you need to survive, which means cutting out anything that would be more than vital spending to have a roof over your head, basic necessities, and food. For individuals, that might mean considering moving to an apartment with cheaper rent, or adding a roommate to help with your mortgage. This may still be a substantial number, but it will be more approachable than thinking you need to save an entire year's salary.

This fund will take time to build, which Sethi says is perfectly normal: "Once you start to see that number grow, you're going to feel much safer and much better equipped for whatever comes our way."

"We're in the riskiest economy in our lifetimes, that's why playing defense first is really important. You want to live to fight another day."

Sethi said that too many people distract themselves trying to determine which high-yield savings account is the best one, when, realistically, small differences in interest rates do not make a meaningful difference.

"The yields on these savings accounts are not that high anymore — that's fine, that's normal. You do not really make money from having your money in a savings account," Sethi explained. "A common mistake that people make with their emergency fund is spending a month researching the right account. Don't worry if it's a 1.3% or 1.4% interest rate — if you run the math, you're talking about $2 to $3 a month, maybe. Just find a simple high yield savings account, pick it, and go with it."

What does make a huge difference, however, is setting up automatic withdrawals of money from your paycheck into the savings account.

"Automation is one of the best decisions you can make in your entire life, ever, bar none," Sethi said. He explained that if you don't automate your savings, you're depending on "the better angels" of your own nature to remember to manually contribute every month. And despite all good intentions, most people will forget to do this.

"The data shows us that when you automate contributions to a retirement account or savings account, that money grows because we forget about it and let the system take over. A big finding in personal finance that more people should listen to: Systems over willpower. That is profoundly important," said Sethi.

Although he doesn't use too many tools, if you are looking for an app to get a better handle on your day-to-day expenses, Sethi suggests You Need A Budget (YNAB). Another popular option is Mint, which allows you to link your bank accounts and keep track of bills and other spending.

For businesses, there are exceptions to how they should keep spending during the pandemic. You can streamline costs by shelving exploratory or experimental projects that don't directly impact revenue and profits, but don't give up on marketing.

"In the 2008-2009 recession, we saw that many business owners' first temptation was to cut back on marketing, and those that did often experienced a slow decline in their business. Savvier business owners often made the decision to continue investing in marketing, even while they streamline in other areas, and those businesses tended to perform better," said Sethi.

Advertising rates are lower during the crisis, and consumers still want to spend their money, albeit in different ways. This provides a perfect opportunity for entrepreneurs to get creative in their outreach efforts, especially through email newsletters or social media. "Marketing is how people are going to know about you," Sethi explained. "If you continue investing in marketing, that can be one of the best long term decisions that you make."