TikTok, the popular video platform, has become the go-to place for learning new things. According to reports, it’s even beaten out Google as the primary search engine within specific age groups. You can even find financial advice among all the food recipes, do-it-yourself (DIY) tutorials, and fashion must-haves.
The piece of financial advice that has been taking the platform by storm is the practice of cash stuffing. Cash stuffing, or the envelope method, is a budgeting system where you only pay for specific things with the cash you have set aside for certain expenses. So, for example, you receive your paycheck. You first pay your fixed bills, like rent, phone, insurance, etc. Then, you divide the rest of your money (in cash) between envelopes for each budget category, like food, hobbies, clothing, etc. Now, whatever cash you put in those envelopes is all you are allowed to use, enforcing the budgeting idea behind the practice.
Similarly to everything else you learn online, you should always do your own research and confirm that the method works. This strategy is especially true when it comes to finances. And while cash stuffing looks attractive with envelopes full of green, is it truly the best way to save and budget? Continue reading to learn the pros and cons of this trending practice.
Cash Stuffing Pros
The most obvious pro of using the cash stuffing method is forcing yourself to spend only the money in each designated envelope. That allows you to avoid the mindless swiping of credit and debit cards that can create massive debt. And since the money is physical, you form a connection with it and notice when it dwindles, as opposed to numbers going down in an account you aren’t always watching.
Cash Stuffing Cons
In this day and age, using cash is almost obsolete. And that’s because we have found convenience in having a single plastic card that holds all our money. With that being the case, most people would have to go to the ATM to take out the cash necessary for the envelope method. It just adds extra steps that could be time-consuming and potentially dangerous. Having that much cash on your person or at home makes you more susceptible to theft.
Additionally, when you hold all this cash, you are missing the opportunity to make money on your money. Savings accounts, specifically high-yield savings accounts, offer competitive interest rates that will put your savings to work to create more of it!
If you enjoyed this article, you might also like to read about good and bad debt.
Life Insurance Questions?
We hope that this information on cash stuffing is useful to you.
If you’d like to learn how we can help you plan your retirement, call Empower Brokerage at (888) 539-1633 to speak to one of our Life and Annuity experts or leave a comment down below.
See our other websites: