This story is part ofan online community dedicated to financial empowerment and advice, led by CNET editor Farnoosh Torabi, host of the Large and So Money podcast.
Have you heard about the “cash stuffing” trend that has hit TikTok?
A recent study found that “cash stuffing,” where you stuff dollar bills into envelopes, bundles, liquor bottles, or just about anything else, is growing in popularity with Gen Zers and Millennials. The act of hiding dollar bills in creative placesduring the spring. Researchers at Credello, a personal finance platform, found that more than half of young adults routinely use cash to manage their money, build savings and pay off debt.
And it warms my heart.
As a personal finance expert and parent, I know firsthand how using cash can encourage more financial discipline than credit. I practiced this technique in my early adulthood and only spent what I carried in my wallet. Since cash has real, physical limits, I didn’t spend that much. It helped me wipe out thousands of dollars in credit card debt in a year.
A 2021 MIT study found that parting with cash at the register and swiping your credit card causes a higher degree of “pain.” That’s actually a good thing. While credit cards have an intangible, “deal with it later” quality, when we use the almighty dollar, we only pay what we can afford, which can improve our chances..
But in our hyper-online world, where digital payments are the norm and nearly half of consumers use mobile wallets like Apple Pay and Venmo to make transactions, what does a successful cash-only strategy involve? Is it feasible?
So Money podcast listener and newsletter subscriber Ricky recently asked: I’m having a hard time sticking to a budget and I’d like to start cash stuffing… How can I do an all cash budget if I have a credit card balance that I need to pay off?
I’ve got some best practices (and pitfalls) for Ricky and anyone else looking to “cash things in” on the savings path.
1. Develop a realistic strategy
While some extreme cash hoarders may try to pay for everything using dollar bills, that’s not possible for most of us, given how many merchants and services prefer or even require digital payments.
Top-up cash works best for variable monthly expenses like food, gas, or utilities, where you can better control personal spending.
Once you know what bills and payments you’ll be using your cash for, make a plan. Understanding why and how cash stuffing can help your goalsor spending more consciously is an important first step to setting yourself up for success.
For example, if your hope is to save a certain amount each month, that might mean putting cash aside each time you get paid in its own labeled envelope (and putting that envelope out of sight).
Or, if you want to use cash padding to better manage your spending, you can set aside a limited amount of cash each month for essentials like groceries and fuel, then use the rest to pay off some of your debt each month.
With Ricky, you can technically only have a cash budget when. You can either pay off your credit card balances each month at the issuer’s physical branch or ATM, or pay from a virtual checking or savings account.
2. Calculate how much cash you need each month
While this requires some tracking, it’s important to know how much cash you’ll need on hand. I recommend reviewing past bank statements to see how much you tend to spend on each variable category, such as groceries, gas, utilities, clothing, and entertainment. From there, commit to a spending limit or savings goal and allocate that amount to the appropriate envelope.
Note that unlike variable expenses, many fixed monthly expenses such as rent or mortgage, credit card balances, loans, or even a Netflix account often require some form of online payment.
Pro tip: Put 10% of each paycheck into a “savings” envelope to make sure you always end the month with extra money.
3. Skip the loan
One of the big reasons people use cash is to rely less on credit cards to pay for expenses. And as the Federal Reservetrying to control inflation is a good idea sooner rather than later.
While top-up cash can limit the temptation to overspend in physical stores, it can’t stop you from overspending online. So if you find yourself needing to pay digitally for something that would normally fall outside of your cash-flow system, be sure to review your plan and come to terms with the cost.
Also consider removing credit card numbers stored on your phone or on websites, which make it all too easy to buy on a whim. It takes extra time and effort to enter your card details before making a purchase, which can help reduce the temptation to spend.
4. Plan to spend more time shopping
When I think about how a cash-only budget will affect my daily life, I find it uncomfortable on many levels. First, I imagine going to an ATM to withdraw cash. Then, if the cash strategy is for spending, I consider going to the grocery store in person, which takes more time than ordering groceries online and paying with a credit card.
A cash-only system means more trips and a move away from the instant shopping model many of us were used to during the pandemic. And that’s not a bad thing, it’s just something to plan for.
5. Keep your receipts
Having a paper trail of your cash purchases is important, especially for big-ticket items that you may want to return or simply have as proof of purchase. Cash transactions are not tracked online like credit card purchases. Always receive a receipt in print, email or text after purchase.
6. Know that you are making compromises
Paying cash can help you curb your overspending and build up savings while paying off a significant amount of your debt. But you also give up some benefits.
For example, if you use a credit card and pay off the balance in full each month, you may earn points or rewards that you wouldn’t if you paid with cash. You also don’t earn interest on your savings. And if you misplace your cash, there’s no way to get it back.
Some credit cards also offer purchase protection, which allows you to get a return or refund if your purchase is stolen or accidentally damaged. Unless you buy a warranty, buying cash won’t give you the same peace of mind.
Finally, deciding not to use credit cards in any way can prevent you from building awhich is very important if you want to buy a house, rent a car or even move into a new apartment.
For more money tips check out. Find some ways to save more money and learn what to do if you this month.