Cash stuffing may seem like a recent trend, but it’s actually a new name for an old money management trick. That old money management trick is called envelope budgeting. Envelope budgeting is when you portion out your income in the form of cash. Then, you take the cash portions and stuff them inside separate envelopes, which all represent different spending categories for the month (groceries, gas, entertainment, etc.).
These envelopes are supposed to help you limit the amount you spend on a certain category. Once you’ve emptied out the envelope, you’re done using it for the month. You’ll have to wait until it’s time to refill the envelope to buy more things in that category again. So, if you made the mistake of draining your funds for clothes shopping within a few days, you’ll have to wait a long while before you can browse your favorite stores once more. You’ll have to practice restraint because spending impulsively could land you with an empty envelope far too early in the month.
Before you start following the cash stuffing strategy (aka. envelope budgeting), you should know about some disadvantages that come with it. What are those disadvantages?
Cash stuffing isn’t the most secure money management method. You can easily lose it, or worse, have it stolen. While it’s true that your digital funds aren’t 100% secure either, they are harder to lose than paper bills. Your bank account will have more security features and backup plans, even in the case of fraudulent transactions. Once cash is lost, it’s lost for good.
If you intend to do cash stuffing, make sure that you store your envelopes in one well-secured location (for example, a locked safe). It should not be out in the open. It should only be available to you, along with any of the main spenders in the household (for example, your significant other).
Cash isn’t king in this modern era. Plenty of your expenses will need to be made digitally, whether that is through a debit card, credit card or wire transfer. So, cash stuffing can’t be an all-encompassing financial strategy. You will only be able to depend on it for certain types of expenses, like groceries.
With cash stuffing, you will have to carefully track your spending. It will help to write down the amount that you have left in your envelope every time that you make a withdrawal. This sounds simple enough, but if you make an error in your calculations or forget to check your envelope, you could have a lot less cash than you assumed. It is much easier to track your expenses with a budgeting app than doing it all on your own.
Many budgeting apps sync with your financial accounts, including your checking, savings and credit card accounts. This means that you can get real-time updates about your transactions. You’ll know exactly how much you’ve spent and how much you have left in the categories without having to do any calculations on your own.
Some budgeting apps will even sync with outstanding loan accounts! For example, maybe you get into a situation where you feel the need to visit a website like CreditFresh and apply for a personal line of credit so that you can cover an emergency expense. If you get approved for this line of credit, you can use the borrowed funds to handle the expense shortly. Then, you can repay what you borrowed through a straightforward billing cycle. Your budgeting app could help you track that billing cycle so that you don’t miss any repayments.
A Compromise for Cash Stuffing
If you like the idea of cash stuffing, but you don’t like the disadvantages of it, there’s a solution. You can download a budgeting app that follows the envelope budgeting method, using digital funds instead of cash. Apps like Goodbudget, RealBudget and Mvelopes are all options for this.
And if you’re willing to take on the disadvantages and stick to cash stuffing, you should do it. It’s your money! Manage it the way that works for you.