"Cash stuffing" is all over TikTok — but is it a good way to budget your money? (2024)

FAQs

Is cash stuffing a good way to save money? ›

Bottom line. Cash stuffing might appeal to consumers who prefer simplicity or have problems with impulse control. But the risk of having all that cash around — not to mention missing out on interest and card rewards — should make you think twice before labeling all those envelopes.

The basic premise of cash stuffing is that you set aside cash for different budgeting categories at the beginning of each month. The goal is to spend no more than that cash you've set aside for each category.

A cash stuffing challenge is like envelope budgeting, but in reverse. You challenge yourself to put a certain amount into each envelope, not to spend, but to save.

A cash budget is a company's estimation of cash inflows and outflows over a specific period of time, which can be weekly, monthly, quarterly, or annually. A company will use a cash budget to determine whether it has sufficient cash to continue operating over the given time frame.

Because keeping money in cash is all about stability and liquidity. And if you were to find yourself in a scenario where you need money now — say you lose your job, or have to manage a financial emergency — you want a stash of money in accounts you can quickly and easily access.

In fact, when you want to watch your spending, it's a good idea to use cash instead of credit cards because it can be harder to part with physical money. While this strategy doesn't build savings overnight, it's a solid approach for slow-and-steady savings growth.

Start by determining your take-home (net) income, then take a pulse on your current spending. Finally, apply the 50/30/20 budget principles: 50% toward needs, 30% toward wants and 20% toward savings and debt repayment.

In the 50/20/30 budget, 50% of your net income should go to your needs, 20% should go to savings, and 30% should go to your wants. If you've read the Essentials of Budgeting, you're already familiar with the idea of wants and needs.

The cash budget is divided into four sections: Cash receipts: lists all cash inflows excluding cash received from financing. Cash disbursem*nts: consists of all cash payments excluding repayments of principal and interest.

It works like this: Gather 100 envelopes and number them from 1 to 100. Each day, fill up one envelope with the amount of cash corresponding to the number on the envelope. You can fill up the envelopes in order or pick them at random. After you've filled up all the envelopes, you'll have a total savings of $5,050.

How does the $1 challenge work? ›

Match each week's savings amount with the number of the week in your challenge. In other words, you'll save $1 the first week, $2 the second week, $3 the third week, and so on until you put away $52 in week 52.

The 100-envelope challenge is pretty straightforward: You take 100 envelopes, number each of them and then save the corresponding dollar amount in each envelope. For instance, you put $1 in “Envelope 1,” $2 in “Envelope 2,” and so on. By the end of 100 days, you'll have saved $5,050.

The benefits of a cash budget

Ensuring the business has enough cash can help it retain valuable customers, confirm they receive its products on time or verify it can pay all of its employees without delay. A cash budget also can help businesses achieve the right level of liquidity to optimize their processes.

Another disadvantage of using a cash-only budgeting system is that it limits your flexibility and opportunities. You may not be able to take advantage of some opportunities that require credit or debit cards, such as online shopping, travel, or emergencies.

A cash budget is a financial statement that outlines a company's expected cash inflows and outflows over a period of time. It could be a weekly, monthly, quarterly, or annual budget. The objective of a cash budget is to forecast future cash balances and to predict potential deficits and surpluses.

Money stashed at home also runs the risk of being stolen. In spite of these concerns, Roberts noted that money experts recommend having an emergency cash stash at home in case there is a need to evacuate, when banks are closed or there is a power failure and ATMs won't work.

“It [varies from] person to person, but an amount less than $1,000 is almost always preferred,” he said. “There simply isn't enough good reason to keep large amounts of liquid cash lying around the house. Banks are infinitely safer.”

You may also feel unsafe carrying cash, as it's harder to track it when it's lost or stolen. It can be cumbersome to get started: Getting all the envelopes ready and allocating money into categories can take some time to set it all up, especially if you haven't created a budget before.

The longer you hold onto a massive sum of cash, the more you'll notice the significant impact it has on your financial future. Alva said many individuals find themselves without enough funds to retire and reduced purchasing power for their long-term goals.