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As a personal finance consultant, Michela Allocca, author of “Break Your Budget”, shares five financial habits she avoids and what she does instead to manage her money more effectively, with a net worth of over $700,000.
She emphasizes the importance of not letting shopping mistakes cost you. “There is no bigger waste of money than buying something that you don’t use or don’t wear,” she says. She ensures to return unsuitable items, even if it’s inconvenient, to get her money back.
Allocca also avoids traditional savings accounts with low interest rates, opting for high-yield savings accounts instead, which provide higher interest rates, typically 3-4%. She keeps her savings separate from her checking account to avoid the temptation to spend and to “keep the money out of sight, out of mind”.
Allocca swears by using credit cards for all her purchases, citing rewards and purchase protection as benefits. “Credit cards have that extra layer of protection and make me feel safer with everything I put on that card,” she says. However, this should only be used if one can avoid carrying a balance, charging no more than one can afford to pay off in cash, and paying the bill in full every month.
She also advises against shopping for things you don’t need, as it’s not saving money, it’s just spending. Instead, she recommends unsubscribing from store emails and limiting social media exposure to influences who promote discounted products.
Finally, she emphasizes the importance of tracking expenses, believing it’s one of the most powerful financial habits one can build. “Tracking your expenses will change your life,” she says. By regularly reviewing her spending, she has gained clarity on where her money goes and has become more financially confident, making spending decisions easier and aligning her spending with her goals. “There is no bigger waste of money than spending on things that don’t align with your values.”