When Jasmine Taylor lost her job, she turned to a budgeting strategy called “cash stuffing.” She used the trending method along with her stimulus check to pay off nearly $80,000 of debt. She stuffed cash into envelopes for different spending categories and documented her journey on TikTok.
Her serious life hack
Using cash stuffing, Taylor paid off nearly $80K in debt over two years. She used the money to pay off her medical debt and credit card balance. She also started a business, Baddies & Budgets, that sells binders, planners and envelopes.
Cash stuffing is a budgeting method that divides cash into envelopes earmarked for different spending categories, such as groceries, gas and variable expenses. It’s a lot more flexible than other savings strategies and gives a sense of accomplishment by seeing your savings grow in your envelopes.
This strategy involves daily transfers of funds from your checking account to your savings, with any surplus set aside in designated envelopes for future expenses. It’s a simple but effective way to save money, according to financial experts and debtors who have tried it.
She shared her journey
Taylor shared her story on social media, and it quickly went viral. She was able to pay off $23,000 in student loan debt and wipe out her credit card and medical debts. She then used her spring 2021 stimulus check to start a full-time business, selling binders and other saving tools.
While some people spent their first-round stimulus checks for expenses like food, clothing and rent, others saved them or used them to pay down existing debts. About three-quarters of households spent their first-round payments primarily for expenses, according to a recent survey from the Census Bureau.
Stimulus checks do not have to be reported on a tax return, though they are subject to penalties. They also may not be immune from garnishment for other reasons, such as child support or private debt collection.
Banks can’t get in the way
Banks cannot refuse to release stimulus checks if the recipient is behind on loans, but they can freeze accounts and refuse to give them back unless a court order authorizes it. A stimulus payment can be halted during the bankruptcy proceedings if it’s linked to a Chapter 7 or Chapter 13 filing.
Despite that, legal aid lawyers say they are concerned that a growing number of indigent people will still be targeted for garnishments. In Texas, as in many states, a new garnishment can be issued even if the bank has previously frozen the account.
That’s because the state lacks strong consumer protections for bank account garnishments. That’s a major hole in the debtor-friendly state’s law, and one that could be exploited by predatory debt collectors as they try to steal the money from struggling households during this unprecedented crisis.
The Texas Supreme Court has extended the ban on new bank account garnishments until after May 25, but many people have already frozen their accounts. Debtor advocates and other experts say Texans will be particularly vulnerable to debt collection activity as they await the arrival of their stimulus checks and struggle to make ends meet while waiting for their paychecks.
