This story is part So moneyan online community dedicated to financial empowerment and advice, led by CNET Editor at Large and So Money podcast host Farnoosh Torabi.
A recent study reveals that “cash stuffing,” where you stuff dollar bills in envelopes, binders, liquor bottles, or just about anything, is a hot trend among millennials and millennials. Hiding dollar bills in creative places went viral on TikTok in the spring. Researchers from Credello, a personal finance platform, found that more than half of young adults regularly use money stuffing to manage their money, accumulate 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 greater financial discipline than credit. I practiced this technique in early adulthood. Because money has real physical limits (I only spent what I had in my wallet), I didn’t overspend. It helped me clear thousands of dollars in credit card debt within a year.
A 2021 MIT study found that parting with cash at the checkout rather than using your credit card causes a higher degree of “pain.” It’s actually a good thing. Although credit cards have an intangible, “deal with them later” quality, when we use the almighty dollar, we only pay for what we can afford, which can improve our chances of stick to a budget.
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 transact, what does it take to successfully implement an online strategy? cash only? Is it doable?
So Money podcast listener and newsletter subscriber Ricky recently asked: I’m having trouble sticking to a budget and would like to start stocking up on cash… How can I set up an all-cash budget if I have a credit card balance that I need to pay off?
I have some best practices (and pitfalls) for Ricky and anyone looking to “cash in stuff” to save.
1. Be realistic when developing your strategy
While some extreme money eaters may try to pay for everything using dollar bills, that’s not feasible for most of us, given how many merchants and services prefer – or even require – digital payments.
Cash stuffing works best for expenses that vary from month to month, such as food, gas, or household supplies, where you can exercise better control over spending in person.
Once you know what bills and payments you’ll be using your money for, make a plan. Understand why and how stuffing money can help you achieve your goals either save more money or spending more consciously is an important first step in setting yourself up for success.
For example, if your hope is to save a certain amount each month, that might mean setting aside that amount in cash each time you get paid in its own labeled envelope (and putting that envelope out of sight).
Or if you want to take advantage of the cash cramming to better manage your expenses, 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 the debt each month.
In Ricky’s case, you can technically have a cash-only budget when pay off credit card debt. You can either pay off your credit card balance each month at the issuer’s physical branch or ATM, or pay virtually from a checking or savings account.
2. Calculate the amount of money you will need
Knowing how much money you will need each month or how much you need to save to reach your goal will require tracking. I recommend looking at past bank statements to see how much you tend to spend on each variable category, like groceries, gas, utilities, clothing, and entertainment. From there, commit to a spending limit or savings goal and allocate that amount to the corresponding 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: Hide 10% of every paycheck in a “savings” envelope to make sure you always end the month with an extra.
3. Detach credit
One of the main reasons people choose to use cash is that they rely less on credit cards to pay for their expenses. And like the Federal Reserve keep raising interest rates to try to curb inflation, it’s a good idea to bring down outstanding debt balances sooner rather than later.
While stuffing the cash can limit the temptation to overspend in physical stores, it can’t stop you from overspending online. So if you need to digitally pay for something that would normally come out of your cash-stuffing system, be sure to review your plan and reconcile the expenses.
Also consider deleting credit card numbers stored in your phone or on websites that make it too easy to buy on a whim. Having to enter your card information before making a purchase requires extra time and effort that can help reduce the temptation to spend.
4. Expect to spend more time shopping
When I think about the impact of a cash-only budget on my daily routine, it seems awkward to me on many levels. First, I imagine going to an ATM to withdraw money. Then, if the cash strategy is to spend, I think of going to a grocery store in person, which takes more time than ordering groceries online and paying by credit card.
A cash-only system means taking more trips and moving away from the instant purchase model many of us have become accustomed to during the pandemic. And that’s not a bad thing – it’s just something to be expected.
5. Save your receipts
It’s important to have a written record of your cash purchases, especially for expensive items that you may want to return or simply have as proof of purchase. Cash transactions are not tracked online like credit purchases. Always receive a printed, emailed or texted receipt after a purchase.
6. Understand the trade-off you are making
Paying cash can help you cut down on overspending and save while significantly reducing 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 can earn points or rewards that you won’t earn by paying cash. You also do not earn interest on your savings. And if you misplace your money, there’s no way to get it back.
Some credit cards also offer purchase protection, which allows you to receive a refund or reimbursement if the item you purchase is stolen or accidentally damaged. Unless you’re buying a warranty, buying cash won’t give you the same peace of mind.
Finally, deciding not to use credit cards in any form could prevent you from building a strong credit scorewhich is crucial if you are looking to buy a house, rent a car or even move into a new apartment.
For more financial advice, see the TikTok Money Tips You Should Always Avoid. Find ways to save more money with some of our favorite savings challengesand learn what to do if you you can’t afford to pay your credit card this month.