As a personal finance consultant, Michela Allocca helps young professionals get “the basics right” when it comes to managing their money.
In a recent video posted to YouTube, the 29-year-old author of “Break Your Budget” identified five financial habits she avoids — and what she does instead to manage her money more effectively.
With a net worth of over $700,000, these are some of the habits she swears by to keep her finances on track.
1. Don’t let shopping mistakes cost you
It’s easy to buy something that doesn’t fit, doesn’t work or isn’t what you expected, especially with online purchases. Returning it, though, can feel like a hassle between printing shipping labels, packing up the item and mailing it.
Even so, Allocca makes it a point to return items she doesn’t use — even if it’s inconvenient. “I have no issue paying a $5 or $10 restock fee, or walking to a FedEx or a UPS” to “get my money back,” she says.
While it can be easy to let a purchase slide once it’s in your hands, “there is no bigger waste of money than buying something that you don’t use or don’t wear,” says Allocca. By not returning it, “you’ve essentially flushed that money down the toilet.”
2. Don’t use a traditional savings account
Allocca avoids traditional savings accounts offered by major banks, which typically have extremely low interest rates — some offer as little as 0.01%. “Basically, that’s nothing,” she says.
Instead, Allocca recommends switching to high-yield savings accounts, which are commonly available through online banks. These accounts function just like traditional savings accounts, but provide significantly higher interest rates, currently around 3% to 4% compared with the 0.54% average for traditional accounts.
She also prefers keeping her savings separate from her checking account to avoid the temptation to spend. High-yield savings accounts are often not tied to checking accounts, which helps keep the money “out of sight, out of mind,” she says.
3. Don’t use a debit card
Allocca exclusively uses credit cards for all her purchases instead of debit cards, citing two major benefits: rewards and purchase protection.
Whether the rewards are travel points or cash back, they help stretch “the dollars that you’re already spending even further,” she says. Credit cards also provide better fraud protection, making it easier to dispute unauthorized charges or resolve billing issues.
“Credit cards just have that extra layer of protection and make me feel safer with everything that I’m putting on that card,” she says.
However, this advice comes with a “big, fat disclaimer.” Credit cards should only be used if you can avoid carrying a balance, Allocca says. That means never charging more than you can afford to pay off in cash and paying your bill in full every month.
4. Don’t shop sales for things you don’t need
Sales might seem like a way to save money, but that’s not always the case. If you buy something you don’t need just because it’s discounted, “you’re not saving any money, you’re spending money,” Allocca says.
To avoid unnecessary purchases, she recommends unsubscribing from store emails and texts. Curating your social media feeds can also help limit exposure to influencers who are paid to promote discounts. In doing so, “you’re not constantly tempted to buy things that you don’t need,” she says.
Allocca focuses on buying only what she truly needs, ensuring her spending aligns with her financial goals. “This doesn’t mean that I don’t buy things that are on sale, but I’m not making a purchase just because something is on sale.”
5. Don’t forget to track your expenses
Allocca believes keeping a detailed record of your spending is one of the most powerful financial habits you can build. “Tracking your expenses will change your life,” she says.
By logging and reviewing your purchases — whether through a budgeting app, spreadsheet or even a notebook — you gain clarity on where your money goes, which informs your day-to-day spending decisions.
By regularly reviewing her spending, Allocca has identified what truly adds value to her life and what doesn’t. “It’s made me more financially confident” and made spending decisions easier because she already knows what she can afford, she says.
This habit also ensures that her spending aligns with her goals, whether that’s saving for an emergency or funding a vacation. “There is no bigger waste of money than spending on things that don’t align with your values,” she adds.
Want to up your AI skills and be more productive? Take CNBC’s new online course How to Use AI to Be More Successful at Work. Expert instructors will teach you how to get started, practical uses, tips for effective prompt-writing and mistakes to avoid. Sign up now and use coupon code EARLYBIRD for an introductory discount of 30% off $67 (+ taxes and fees) through February 11, 2025.
Plus, sign up for CNBC Make It’s newsletter to get tips and tricks for success at work, with money and in life.
