Just like low-rise jeans and jelly shoes

plus Smell-O-Vision + Pitbull
͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ 
August 28, 2024 • Issue #250
Dollar Scholar

Hi y’all —

I’m back! Vacation was nice, but I missed you — and my nightly routine of lighting a candle, eating Ben and Jerry’s, and scrolling through TikTok until I can’t keep my eyes open. There’s nothing I love more than going down an internet rabbit hole right before I fall asleep.

Lately, I can’t stop watching people with budget binders. One user, mothertherese_, has racked up millions of views showing off her strategy for dividing up the cash she earns from her server shifts at Texas Roadhouse. Still in uniform, mothertherse_ cheerfully zips 10s and 20s into clear envelopes labeled “gas,” “rent,” “apartment things” and so on, all clipped into a baby-pink binder.

She’s not alone. Across TikTok, budgeting has become an ~*aesthetic activity,*~ complete with fun fonts, glitter and the ASMR of shuffling crisp bills before the camera.

It makes me wonder: Why are budget binders so popular, and is using them a good idea?

Priya Malani, the founder and CEO of Stash Wealth, tells me that she understands their appeal. “People are craving stability at a time when headlines read as anything but,” she says, and physically being able to hold my hard-earned money goes a long way towards making me feel financially secure.

As we learned in Issue #143, using paper currency is a vastly different experience than using digital currency (or, God forbid, thoughtlessly tapping my phone at a register). When dealing with actual dollars, Malani says, spenders often feel a greater responsibility toward their money. This makes it harder to quote-unquote “waste,” which is a good thing if I’m trying to cut down on unnecessary expenses.

Just one clarification...

“Similar to low-rise jeans and jelly shoes, systems like budget binders and cash-stuffing are not ‘new,’” Malani says. “They’re a resurfacing of a trend that had a chokehold on the population for a phase and then disappeared as quickly as they came.”

As flashy as my #fyp makes them seem, budget binders are just the latest twist on the cash envelope system, made popular by controversial money guru Dave Ramsey decades ago. The idea is that you can keep track of precisely how much money you have by relying on physical cash in labeled envelopes. You can actually see how much you have left, and once that stash runs out, you’re not able to buy anything else in a specific category for the month. It can help you avoid overspending and going into debt (a major Ramsey no-no).

“What’s old is new again,” quips Jeremy Zuke, a financial planner with Abundo Wealth.

[Stuffing several cats back into my pocket] Oh, you said CASH only? Who the hell carries cash anymore

Regardless of whether I call it a budget binder, envelope system or cash stuffing, the core motivation is a good one. Zuke points out that Americans tend to under-save in general — some 37% of people say they can't afford an unexpected expense over $400 — and this can be a remedy.

“Anything that encourages saving behavior, even if that's a really beautiful binder you just love, is good in and of itself,” he says.

It can also help me be more intentional about spending. By breaking my expenses into hyper-specific categories and assigning each dollar a purpose, I’m less likely to waste that money on random impulse purchases.

Zuke was particularly heartened by the budget binder videos that showed folks having a “Christmas” envelope. Every January, he says, his clients admit they’ve been blown off course by the holidays — when in reality, the holidays happen at the same time every year. They just need to plan better.

In this sense, budget binders can be a smart “temporary mindfulness exercise,” Malani says. If my credit card bills are out of control or I’m spending recklessly, drilling down and reviewing my cash flow can definitely help me reset.

“A cash-based budgeting system is certainly better than no system at all,” she adds. But it’s not necessarily a great long-term approach.

In the past, Malani says, the cash envelope method worked well for folks because they didn’t have choices. We were a cash-based society; this strategy “rose to the top because it was the only option,” she says.

In the year 2024, however, we have alternatives.

By keeping my money in cash in a binder (or envelope), I’m missing out on Federal Deposit Insurance Corporation insurance, or FDIC insurance, which protects up to $250,000 per depositor, per bank, per account type, in the event of a collapse. There’s no insurance on a binder — I could lose it, someone could steal it, etc.

I’m also forgoing any rewards I might accrue if I were spending via credit card instead. Credit cards offer a slew of their own protections, as well, including the ability to dispute charges and shield me from liability in case of fraud.

If I’m using budget binders for long-term savings goals, like some of the creators on TikTok, I’m not earning interest, either. Zuke points out that this is a particularly big mistake right now, when interest rates on high-yield savings accounts are higher than normal due to the economic environment.

The bottom line
(but please don't tell me you scrolled past all of my hard work)

Budget binders aren’t new — they’re a reprisal of an old trend often called cash stuffing. And while they may work well for some people and for some purposes, they're not the safest way to spend and save in the long term.

Ideally, I want to make the most out of my money, and there are better ways to do that.

“Just because these systems are effective doesn’t mean they are, mathematically, the most efficient,” Malani says.

Dollars
via Giphy

Smart MONEY MOVE
an account that actually grows my money? yes, please

SavingsInterest rates are at a 23-year high right now, offering an unprecedented opportunity to boost your savings. With some high-yield savings accounts offering rates up to 5%, your money can actually start making its own money. That means you can go ahead and plan that dream vacation to Santorini or set up that rainy-day fund you’re always talking about.

Check out Money’s list of top-rated high-yield savings accounts.

ADVERTISEMENT

Receipt of the week
check out this wild celebrity purchase
Pitbull
via Instagram

Rapper Pitbull bought the naming rights to Florida International University’s football stadium, paying $6 million over the next five years to establish Pitbull Stadium. He’ll also create an anthem for FIU and distribute his vodka brand there. “When this idea came about, it came about just like a Miami-Dade County, 305 idea would come about — nobody would believe in it,” Pitbull said in a statement. “All we had to do was, just like we say in Miami, take it to the house." Dale!

Internet gold
five things I'm loving online right now
1
Smell-O-Vision is back, this time with AI. A $180 device called MovieScent says it will use artificial intelligence to pick scents — options include “Ocean” and “Forest” — to spray during relevant film scenes. Cool, but let me know when they figure out how to share the scent of Pizza Planet.
2
Veep is having a moment due to recent developments in the 2024 presidential race: On July 22, the day after President Joe Biden announced he was suspending his campaign, HBO reportedly saw a 353% surge in viewership of the seven-season sitcom. Art imitates life imitates art? 
3
How to have the perfect Sunday, according to actress Jessica Alba. (Spoiler: It includes Wordle, bugs and Bridgerton.)
4
The Summer Paralympic Games start today in Paris, where over 4,000 athletes will go head-to-head in 549 medal events. Here’s the daily schedule, and here’s the story behind the TikTok account you must follow.

401(k)ITTY CONTRIBUTION
send me cute pictures of your pets, please
Croatia Kitty
via me
Here is a cute cat I saw while traveling in Croatia. I don’t know her name, but she did tell me she subscribes to the cash-fluffing method of budgeting.

See you next week.

P.S. Do you use a budget binder or cash envelopes? What’s the schedule for your perfect Sunday? Would you invite a bear to your party? Send feedback to julia@money.com, and your comment may appear here in a future issue!

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