Michela Allocca, a personal finance consultant and author, has amassed a net worth of over $700,000 by adhering to a set of financial habits that prioritize strategic spending and saving. As the author of "Break Your Budget," Allocca shares her insights into managing money effectively, emphasizing the importance of aligning purchases with personal values and goals. Her approach involves avoiding traditional savings accounts in favor of high-yield alternatives, using credit cards for their benefits, and meticulously reviewing spending habits.
Allocca advocates for the meticulous tracking of expenses as a fundamental practice for financial success. By keeping detailed records, individuals can gain a clearer understanding of their spending patterns and identify areas where they can cut back. This method ensures that spending aligns with one's financial objectives, allowing for more strategic allocation of resources.
One of Allocca's key recommendations is to avoid traditional savings accounts offered by major banks due to their low interest rates. Instead, she advises switching to high-yield savings accounts, which offer interest rates ranging from 3% to 4%, significantly higher than the 0.54% typically available in traditional accounts. This shift enables savers to maximize returns on their deposits without additional risk.
Allocca exclusively uses credit cards for all her purchases, citing rewards and purchase protection as two major benefits. She emphasizes the importance of paying off the balance in full each month to avoid interest charges and maintain financial health. Allocca believes that credit cards provide an added layer of security, stating:
"Credit cards just have that extra layer of protection and make me feel safer with everything that I’m putting on that card"
Another crucial element of Allocca's financial strategy is returning items she doesn't use, even if it requires some inconvenience. She is willing to pay a $5 or $10 restock fee or walk to a FedEx or UPS location to ensure she gets her money back. Allocca explains:
"I have no issue paying a $5 or $10 restock fee, or walking to a FedEx or a UPS"
This practice underscores her belief in the value of keeping only what truly adds value to one's life and finances.
Allocca advises against falling into the trap of buying items simply because they are on sale. She asserts that purchasing discounted items that are not needed is not saving money, but rather wasting it. Allocca highlights the importance of intentional spending:
"There is no bigger waste of money than spending on things that don’t align with your values"
By focusing on purchasing only what she genuinely needs, Allocca ensures her spending aligns with her financial aspirations.
As a personal finance consultant, Allocca uses her expertise to guide young professionals in mastering the basics of money management. Through her YouTube channel and book, "Break Your Budget," she shares practical advice and strategies to help others achieve financial independence.