One problem with credit cards is that unless you consult your online account two or three times a week, it’s hard to keep track of spending. So, many Gen Z consumers have started using a “new” budgeting trick that turns out not to be new at all.
It’s called “cash stuffing.” Lily W., a 22-year-old who offers personal finance advice on TikTok, says she lived on credit cards while attending nursing school. When she graduated, her balances totaled $17,000.
Lily, who goes by the handle @lilyrnbudgets, recently told Yahoo News that she paid off the entire $17,000 in just three years, thanks to cash stuffing. Instead of buying things with a credit card, Lily has switched to a cash system, which she explains in this video.
Actually, cash stuffing is an old-school system used by many older generations at some point in their lives. Personal finance radio personality Dave Ramsey advocates much the same budgeting system to his listeners, only he calls it the “envelope system.”
The envelope system lets you separate cash into different envelopes for different spending. After labeling each envelope with a category of spending, you go to a bank or ATM and withdraw the budgeted amount and place the cash into each envelope.
Limit some spending categories to cash
When you head to the supermarket, you leave your credit card in your wallet and take the amount of cash you think you’ll need. When you return, you replace any unspent money. At the end of the week, before you put the next week’s cash in the envelope, you take any leftover money and put it in savings.
The system might not be necessary for every spending category and may prove most helpful for the categories where you tend to go overboard.
The secret to this system’s effectiveness is the tight control it exerts over spending, making you think long and hard about every purchase. Because when the money in an envelope is gone, spending in that category has to stop until the following week.