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Master Your Finances with O1ne Mortgage: Exploring Cash Stuffing and Other Budgeting Methods

If you follow financial influencers on TikTok, you may have come across the term “cash stuffing” as a way to curb overspending and pay off debt. This budgeting method involves dividing your cash into various spending categories, often using envelopes. While it has gained popularity on social media, cash stuffing is rooted in the traditional envelope budgeting system. Here’s how it works and how to determine if it aligns with your financial goals.

How Does Cash Stuffing Work?

Cash stuffing begins with identifying your monthly income and expenses. Review your bank and credit card statements or track your spending for a month to understand both essential expenses (like rent, food, and car payments) and nonessential expenses (such as dining out, entertainment, and travel). Remember to allocate some savings each month.

Next, withdraw enough cash to cover the expenses you can pay with cash for the chosen period—whether it’s a week, two weeks, or a month. Place the cash in envelopes labeled with your spending categories and write the total amount on each envelope. For example, you might have $400 for groceries, $200 for dining out, $100 for clothing, and $200 for entertainment. Use the appropriate envelope when making purchases and return any change to it.

Many people use cash stuffing for categories where they struggle to control spending. For instance, if dining out is a weak spot, restrict yourself to using cash for those outings. Digital versions of cash stuffing are also available through budgeting apps like Goodbudget and Qube Money.

Pros and Cons of Envelope Budgeting

Pros of Envelope Budgeting

• Reduces Impulse Buys: Handling cash makes you more conscious of your spending compared to using credit cards.
• Simplicity: No need for spreadsheets or apps; just check your envelope to see how much you have left.
• Prevents Debt: You can only spend the cash you have, avoiding credit card debt.

Cons of Envelope Budgeting

• Inconvenience: Frequent trips to the bank and handling cash can be time-consuming.
• Risk: Carrying cash can make you vulnerable to theft, and lost cash is gone forever.
• No Rewards or Protections: Credit cards offer rewards and purchase protections that cash does not.
• Limited Use: Cash is not always accepted, especially for online payments and some businesses.
• Complications for Couples: Sharing envelopes can lead to confusion.
• No Interest Earned: Unlike savings accounts, cash in envelopes doesn’t earn interest.

Other Budgeting Methods to Consider

If cash stuffing isn’t for you, consider these popular budgeting methods:

Zero-Based Budget

This method accounts for every dollar you earn and spend, aiming for your income and expenses to balance out to zero at the end of the month. It’s ideal for those who are detail-oriented and have predictable income and expenses.

50/30/20 Budget

This flexible system allocates 50% of your income to essential expenses, 30% to nonessential expenses, and 20% to savings or debt repayment.

Two-Account Budget

Divide your paycheck between two checking accounts: one for essential bills and the other for discretionary spending. Use a savings account for your emergency fund and future goals.

Cash stuffing can be a short-term strategy to get your spending under control. Once you have a handle on your expenses, you can switch to a different budgeting method.

The Bottom Line

If you decide to try cash stuffing, don’t completely abandon credit cards. Using them responsibly can help build your credit history. To avoid debt, put one or two small monthly expenses on your credit cards and pay the balance in full and on time each month. This can help boost your credit score without incurring interest. Experiment with different budgeting methods until you find one that works for you. The key is to stick to it.

For any mortgage-related needs, call O1ne Mortgage at 213-732-3074. Our team is here to help you achieve your financial goals with confidence.

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