Why You’re Broke: 5 Rules to Finally Take Control of Your Money

KEYPOINTS

• 01

  Shame gets in the way of solutions, so say it out loud

  Tiffany Aliche, known as 'The Budgetnista', says shame thrives when you keep things to yourself. While she hid her losses, she couldn't see the skills she still had: budgeting, saving and side hustling. The fix is to tell someone. Once you do, you find out you're not alone, and 'me too' turns into 'let's get to work'.

• 02

  Fear makes bills look scarier than they are

  Citing an African saying, 'fear makes the wolf bigger than he is,' Aliche says unopened mail is rarely as bad as you imagine. But leaving it does let the wolf grow. Mel admits she still leaves her bills in a stack unopened despite being able to pay them, and that she shops when she's stressed.

• 03

  A budget is a plan for saying 'yes', not a punishment

  Aliche compares a budget to a parent saying 'yes, after dinner' or 'yes, when your homework is done'. It finds a safe way to say yes to what matters. She calls it a 'money list'. Step one is to write down, without amounts, everything you spend on. Step two: estimate monthly spending from bank statements. Step three: total your monthly income from all sources. Step four, the 'tears and tissues' step, is subtracting one from the other.

• 04

  Sort expenses into B, U and C to see whether you earn too little or spend too much

  Mark 'B' for bills, where someone comes after you if you don't pay: rent or mortgage, car loan, student loans, credit cards. Add 'U' to bills that vary with usage, like electricity, water and phone data. Everything else is 'C' for cash or choice: eating out, grooming, entertainment, and groceries after essentials. If most money goes to Bs and Us, you have an earning problem, so cutting further won't solve it. If most goes to Cs, you have a spending problem.

• 05

  Use automation instead of relying on discipline

  Aliche says over-consumption is the norm, with shoppable social feeds and influencers who got the product free. So rather than fighting human nature, she 'budgets without a budget'. Ask payroll to split your direct deposit across four accounts: a spending checking account with your debit card, a bills checking account with no debit card, and two high-yield savings accounts at FDIC-insured online banks, one for emergencies and one for goals.

• 06

  Aim to live on about 70% of your income

  Her target is for spending plus bills to come to no more than about 70% of income, with the rest going to saving and investing. She says she once lived on 200% of her income and now lives on 20–30%, so treat 70% as something to work toward, not a reason for shame.

• 07

  Choose the debt payoff method that fits you

  First make a debt list: who you owe, how much, the due date, the interest rate and the status. Snowball: pay off the smallest balance first for early wins. Avalanche: pay the highest interest rate first. 'Tsunami', her own: pay off the debt that stresses you most first, such as money owed to Grandma. In every version, you pay the minimum on everything else and roll each freed-up payment into the next debt.

• 08

  It's possible to save too much

  Aliche's hot take: emergency savings should cover about three months of expenses for a stable job like her mother's nursing job, six for her engineer sister, and up to a year for an entrepreneur like her, but no more. Beyond that, the money should be invested. 'Not every belt is a Gucci belt; some are seat belts.' Mel admits she probably keeps too much in savings because of her past losses.

• 09

  Credit scores respond quickly to the right moves

  Aliche says payment history is about 35% of your score and amounts owed about 30%, so automating bills and paying down debt covers roughly 65%. Length of credit history also matters: having no credit is like a new driver with no accidents, untested rather than safe. She calls credit 'tips and tricks, not discipline'.

• 10

  Spend on what you need and love

  Before you buy, ask whether you need it, love it, like it or want it. Needs are your Bs and Us. Loves still bring you joy a year later. Likes fade in about six months. Wants are instant gratification. She tries to spend in the need and love categories, like a planned trip to Johannesburg, Namibia and Botswana, rather than on another Target T-shirt.