Is ‘cash stuffing’ the best money management method for 2023?

Written by Leah Sinclair

As we approach the new year, getting our finances in order is key – and cash stuffing may be a method to try in 2023. 

The New Year is officially upon us and that means new goals to set, with money often at the forefront of it all.

With the prospect of colder weather meaning more time spent at home using water, heat and electricity, to food shopping, socialising every now and again and the day-to-day expenditures that can come with living in a busy metropolitan city, money management is becoming even more of a necessity in 2023 as we think about how to save and spend more efficiently amid the cost of living crisis – and one trend many people are beginning to embrace is called ‘cash stuffing’.

What is cash stuffing?

’Cash stuffing’ is a money management trend that is gaining in popularity, particularly on TikTok, and is described as a system of managing your money by ‘stuffing’ cash into envelopes with different purposes. While cash stuffing is making waves online right now, the idea behind it is based on an accounting concept called zero-based allocation budgeting, which has been around for years. But why is it rising in popularity right now?

“People are increasingly worried about the cost of living, and cash stuffing feels like a way to take more control over your spending,” says May Fairweather, a financial coach and financial therapist. “It’s also a throwback to how our grandparents would have managed money – a reassuringly time-honoured approach that isn’t affected by modern technology.”

How does cash stuffing work?

Fairweather says that for those who want to give cash-stuffing a go, they must take an amount of money out of the bank in cash and divide it up into categories based on their plans for that money.

“You might have an envelope for groceries, another for rent, one for transport, one for leisure and fun, and so on. When you want to spend something, you grab the right envelope and take cash out of it,” she says. “If the envelope is empty, you have to decide: do you move money from another envelope or just not spend?”

Fairweather says that there are apps that create a digital version of cash stuffing, which is useful for the kinds of spending that aren’t usually done in cash, like paying bills or clearing debt.

However, for some people, an app lacks the physical reminder of money you can touch, but she says: “The principle of splitting your money up based on its intended job is the same.”

Why should people try cash stuffing?

Cash stuffing is a great way to tackle overspending in key areas such as eating out or shopping – and if you know you’ve got a tendency to go a bit overboard, Fairweather says this is a great way to stick to a budget by leaving your cards at home and taking exactly what you need.

“Start small by figuring out your biggest problem area and making an envelope for that first,” she advises. “Once you’re in the habit of checking your envelopes before you agree to go to the cinema or get a takeaway, you can start to add more envelopes to your system.”

For those who aren’t keen to carry cash, this can still be replicated digitally. “If you want to use a digital version of cash stuffing, you can open a separate bank account and only transfer the amount you plan to spend,” she says. “Make sure all your bills are being paid from your main account and only carry cards for your spending account when you go out. That way you won’t accidentally dip into your bills without realising.”

Cash stuffing: Envelope budgeting illustrates the fact that if you overspend in one place, you’re reducing the amount you have to spend somewhere else

What are the main benefits of cash stuffing?

While the cost of living crisis continues to affect our finances whatever strategy we employ, cash stuffing definitely has its advantages.

“Cash stuffing makes very clear the reality of personal finance,” says Fairweather. “You can only spend money once, on one thing. A big pile of money in a bank account might look reassuring, but if you’ve not thought about all the different things you need that money for, you are likely to assume you can afford whatever you want.

“Envelope budgeting illustrates the fact that if you overspend in one place, you’re reducing the amount you have to spend somewhere else. Money is finite, and cash in an envelope makes that really concrete and clear.”

The financial therapist adds that making money tangible and visible can help people “gamify” their budget.

“You start to challenge yourself to cut out as much unnecessary spending as you can so that you can shift money out of your spending envelopes and into savings.”

Despite the positives, cash stuffing can come with challenges of its own for those who find envelope budging stressful.

“Some people find envelope budgeting stressful for exactly the same reason that it’s powerful: it shows the reality that money is finite, and that not everything can be covered at once,” she warns. “It might feel constraining and like you have no freedom to be spontaneous.

“Using actual cash also has its obvious downsides. Some things simply can’t be paid for in cash, either because they cost too much or because it’s not a payment method option,” she says. “Cash also has risks – it can be stolen, lost or left at home by mistake. The solution to this might be to use electronic envelope budgeting, either by using multiple bank accounts with separate purposes or a budgeting app that lets you keep an eye on all your money across all accounts and formats.”

Another thing to bear in mind with cash stuffing is that if you use cash for everything, you risk missing out on the protections provided by credit and debit cards.

“You won’t be earning any interest on money that’s sitting in an envelope,” admits Fairweather. “Cash stuffing is probably not the perfect solution for everyone, but it can be part of the solution. Anything that increases your awareness of your spending and provides an immediate reminder of your priorities will help with cutting down unnecessary spending.

“Changing something up and making it more interesting will keep you focused on managing your finances.”

And at a time when managing our finances becomes an even higher priority trying something new might be the next best step.

Speak to a financial adviser registered with the Financial Conduct Authority before taking any financial advice, and think carefully before making any decision. 

Image: Getty

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