A TikTok star paid off $17,000 in credit card debt by ‘stuffing cash’ – here’s how it could get your finances back on track

A TikTok star paid off $17,000 in credit card debt by ‘stuffing cash’ – here’s how it could get your finances back on track

Lily W., a 22-year-old nurse who goes by the name @lilyrnbudgets on TikTok, says she’s successfully paid off $17,000 in credit card debt since she started ‘money trading’ her earnings in 2019.

While Lily – who asked that her surname be withheld to protect her privacy – was in nursing school, she had no full-time job and racked up a lot of credit card debt. credit.

“When I started working…I realized very quickly that I needed [a way to control my spending]. And I found money on YouTube,” she says.

Now she’s amassed over half a million followers on TikTok who watch her do just that.

You may have come across this budgeting phenomenon on your FYP (For You Page, for the uninitiated) on TikTok, or on YouTube. The immaculate acrylic-nailed influencers count the money and file it in personalized binders, labeled with spending categories like groceries, rent and travel.

With prices rising rapidly in these categories — and just about every other — here’s how this old-school budgeting hack turned TikTok trend can help you keep your costs in check.

Don’t miss

How does cash stuffing work?

Money stuffing is by no means a new phenomenon – money icons like Dave Ramsey have long advocated the method of budgeting, also known as the envelope system.

“My grandma used to do it,” says Elaine King, a certified financial planner based in Miami, Florida.

The idea is simple: you take your cash paycheck and divide it into envelopes according to your budget for different needs, including spending and saving.

Let’s say you have a budget of $200 for groceries this week. You will take this money out of your “grocery” envelope and take it with you to the store. If your invoice exceeds $200, you will be required to return certain items.

King says paying in cash feels more tangible than paying with your credit card, especially if you’re just typing with your phone. With digital payments drawn from a large pool of funds, it’s not immediately obvious that you’re going over budget.

She compares stuffing cash to children putting coins in a piggy bank: “You have to touch it and feel it.”

Make it work for you

King recommends beginners start with the 50/30/20 rule: 50% for your needs, 30% for your wants, and 20% for your financial goals.

“I always tell people to go through your bank statements and see how much – say, you’ve spent on groceries – over the last three to six months, and give yourself a comfortable amount that you know you’re not going to. not go,” adds Kuburat, a 27-year-old Canadian TikTok influencer (@itsmisssk), who started the money stuffing in early 2021. She also asked that her last name be withheld.

She says you can adjust your budget from month to month depending on your situation. If you go over budget, she recommends putting the extra money in your emergency fund or keeping it as a buffer in your bank account.

Kuburat’s goal was to save $13,000 Canadian, but she ended up saving thousands more. It also helped her start her own business, ItsMissK, where she sells budgeting materials and provides local budgeting coaching.

Lily says her top spending categories include groceries, spending on her dog Scooby, and beauty purchases, including nails and hair. She decides how much money to budget in each category based on her current salary and priorities.

She regularly contributes to her 401(k) plan at work, plans to open a Roth IRA in the future, and puts at least $50 each in her emergency fund and personal savings every two weeks.

Youth budget to meet rising costs

Kuburat says his savings were hit hard when the COVID-19 pandemic started.

“Everything is expensive now – food, gasoline. But when you budget…it gives you a better idea of ​​how much you are going to have to put aside each time,” says Kuburat.

The consumer price index rose 8.6% in May compared to the same month last year; this is the largest increase since December 1981. Gasoline prices continue to hit new highs and food prices are expected to climb 7-8% this year.

Whether or not you use the envelope method, King suggests finding ways to cut spending where you can, like taking public transit or carpooling to cope with soaring gas prices. . Buying groceries in bulk can also be cheaper, so you can split the purchase with a friend.

“I think the message here is that planning works,” she says.

People spend less when paying in cash

It’s backed by research. In fact, a 2001 study by Drazen Prelec and Duncan Simester of MIT found that shoppers spend up to 100% more when paying with credit rather than cash.

Fast forward to 2018, and research has shown that Americans are still willing to spend up to 83% more when using a credit card, in some cases.

Credit cards are useful tools, but it’s important to use them responsibly. Banks and lenders look at your credit history and score when you apply for a mortgage, loan, or insurance.

On the other hand, cash limits you. If you only have $50 on hand, you can’t spend more than that amount, while it may be easier to overspend when you can just swipe your credit card and worry about the balance later. By only spending the money you have, you can avoid fees such as bank overdraft fees, which are usually around $35.

King recommends using your credit card for fixed expenses, such as your monthly cell phone bills or car payments, but recommends being cautious when it comes to variable expenses.

“The sky is the limit. You could really go above and beyond.

What to read next

  • Get the latest personal finance news straight to your inbox with the MoneyWise newsletter.

  • “There is always a bull market somewhere”: the famous words of Jim Cramer suggest that you can make money no matter what. Here are 2 powerful tailwinds you can take advantage of today

  • Biden’s gas tax waiver could save you $6 a month, fueling calls for inflation stimulus checks instead

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.