By Mike Winters -
CNBC
When it comes to growing your wealth, sticking to some strict rules can go a long way.
Michela Allocca knows it.
Alloca is a former financial analyst who managed to accumulate a net worth of more than $500,000 by the age of 28, according to documents reviewed by CNBC's
Make It
.
In 2022, she left her job to pursue her side hustle as a personal finance advisor full-time.
In a recent TikTok post that has had nearly a million views, the
Break your Budget
author shared practical tips on how to grow her money, based on her own experience.
These are
the five common monetary practices
she avoids:
High-yield savings accounts are preferable to the traditional ones typically offered by big banks, as they offer better annual interest rates.Getty Images
1. Buy on sale
While most people think of sales as a way to save money, they can also be an excuse to splurge on things you normally wouldn't have bought, Allocca said.
"Sales are designed to create FOMO," Allocca said on TikTok, referring to
Fear of Missing Out
.
"They're designed to push you to buy."
Buying something you don't need at 50% off is still using money you weren't planning to spend in the first place, he said.
[Do you pay a lot for your mortgage? That can be a good thing when filing your taxes.]
Allocca still buys things she needs when they're on sale, but she's mindful of avoiding unnecessary spending on anything else.
2. Impulsive spending
According to a 2023 study, almost all American adults said they spend impulsively.
64% said that they have regretted the impulsive purchases they have made.
Because
it's so easy to regret purchases
, Allocca tries to avoid them altogether.
In her place, every time he feels the urge to buy something, he adds it to a list on her phone, which creates a space between her, "the immediate impulse and the desire to buy something," she explained. he.
As a rule, he recommends giving yourself four or five days to think about the purchase.
At that point, "you probably forgot about it," she said.
"As a culture we feel very uncomfortable denying ourselves what we all like to call 'little whims,' but not everything can be a little whim," Allocca said.
3. The use of savings accounts
Allocca prefers high-yield savings accounts to the traditional ones usually offered by large banks, as they offer better annual interest rates.
Today, high-yield savings accounts can be found offering APY (
Annual Percentage Yield
) of around 5%, while traditional accounts offer interest closer to 0.6%, according to the latest data. recent Bankrate.
Many online banks and credit unions offer high-yield savings accounts, so it's not difficult to find them.
[The economy grew thanks to personal consumption... which was financed with debt]
"All my cash savings are in a high-yield savings account," Allocca said.
"If you're not using a high-yield savings account,
make 2024 the year you open one
. There's no catch and no drawbacks. It's literally just a place for your cash to earn a little of extra interest".
4. Postpone the investment
It can be easy to stop investing, especially in your 20s, when retirement seems far away and you haven't opened an account yet.
“There were probably two years after I graduated that I didn't really invest in, because I was nervous, I was scared, I didn't feel like I knew what I was doing,” Allocca said.
That said, "not knowing what you're doing when it comes to investing is no longer an excuse, because there's a lot of information out there," he said.
[How a healthy economy can make your money grow, if you have a 401(k) retirement account]
Plus, opening a new investment account is pretty easy once you know what you want, whether that's creating a 401(k) retirement account through a company, or signing up for a brokerage account to invest in index funds.
Whatever you choose,
it's important to start investing as soon as possible
, even if it's just $50 a month to start.
This way, your money will have more time to grow.
The effect of compound interest is greater the longer you have funds invested, meaning that younger people will get more out of their money if they start investing early.
5. The use of debit cards
Allocca does not use debit cards.
Instead, you make almost all of your purchases with travel credit cards.
In this way, you accumulate points that you can use to buy plane tickets or make hotel reservations.
However, because credit cards charge high interest that can quickly lead to more debt, pay off your card balance every two weeks.
"I never buy anything I can't afford
," he said.