Tiffany Aliche knows what it’s like to make one mistake that turns your financial life upside down. She started her Budgetnista blog after overcoming a $35,000 financial setback that taught her a lot about getting out of debt — and staying that way. Today, Aliche has helped millions of readers through her blog, books, and courses on reaching financial wholeness.
As with any financial expert, of course, portions of Aliche’s advice will work for some readers more than others. But we’ve found five of her best pieces of personal finance advice that really hit the mark.
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1. Understand the “why”
There are plenty of things we all use every day that don’t require much in-depth knowledge — microwaves, wireless routers, and shampoo, just to name a few. But when it comes to managing your finances, knowing why you should (or shouldn’t) do something can make a big difference.
For example, it’s one thing to tell people they should start saving for retirement early. But it’s another matter entirely to explain that the sooner you open an IRA, the more you can grow your money through the power of compound interest.
Financial literacy can not only help you figure out the right path, but also show you how to stay on that path. A good financial education can also give you the power to adapt your journey over or around any obstacles that come along — and they will come along.
2. Start small and work your way up
Another great tip from Aliche’s teachings is that you should start small and work your way up to the big stuff. This can apply to everything from paying down debt to building a budget.
For example, Aliche is a big fan of the snowball method for paying off debt. In fact, she used it herself to tackle thousands of dollars in credit card debt. Basically, you put all of your debts in order from the smallest balance to the largest. You’ll make your minimum required payment on each debt, then put any extra money in your budget toward paying off your smallest debt.
Because the debt is small, it shouldn’t take long to pay off. This gives you a nice boost of confidence early on and encourages you to keep going. After you pay off one debt, you’ll roll those payments over to the next debt, and so on, until you’re out of debt completely.
Aliche also applies a similar concept to budgeting. She suggests that everyone should know their Health and Safety Budget (the absolute minimum you need to ensure your personal health and safety) as well as their Noodle Budget (what your budget would look like if your finances dictated you live on ramen noodles). From there, you can add in additional needs — then wants — until you have a budget that matches your financial goals.
3. Divide and conquer — automatically
Many financial gurus are fans of automated savings (when your bank automatically moves money from your checking account to your savings account at regular intervals). But Aliche takes this concept a step further by suggesting you automatically divide your paychecks right from the start.
One of the great things about receiving your paycheck via direct deposit is that you can actually control where it goes — and it doesn’t all have to go to the same place. You can actually have your employer split your paycheck for you, sending different amounts to two, three, or even four different bank accounts, each with its own purpose.
With this method, you could have your check automatically split into accounts for bills, emergencies, long-term savings, and everyday spending. This makes it easy to see where you stand at any given time.
4. Build credit, not debt
When Aliche found herself under a mountain of credit card debt, she didn’t swear off plastic for the rest of her life. Instead, she learned how to make them work for her rather than against her. That’s because she knows that credit cards can be a powerful credit-building tool — when used correctly.
The strategy Aliche mentions most is to use your credit cards every month to pay a small bill (streaming services, gym dues, etc.). Then, pay off that card in full well before the due date. You can even automate the whole process by setting up automatic payments with the retailer and your bank.
Those on-time payments will get reported to the credit bureaus, boosting your credit score. Why does it work? Because creditors care more about whether you pay your debt on time and in full than they do about how much money you actually spend every month.
5. Forgive yourself
No matter how much financial knowledge you gain, you’re going to make mistakes. It happens to everyone — even so-called experts.
You need to forgive yourself for your past financial missteps.
For one thing, wallowing in your own mistakes is bad for your mental health. For another, it doesn’t do a single thing to actually fix the problem.
Instead of focusing solely on what you did wrong, learn from it. Take a little time to figure out the how and the why of what went wrong. This can help you avoid the same mistake in the future. But once you’ve analyzed the problem, forgive yourself and move forward.