Many years ago, when I was trying to pay off my debts and get my finances under control, I used the “envelope method”.
This was essentially a way of going back to cash and avoiding using my credit or debit cards to transact.
Each week, I calculated how much I could spend on my day-to-day needs. This included groceries, petrol, entertainment, clothes and other expenses.
I then had envelopes for each expense category.
I would withdraw the money for the week based on my budget and fill each envelope with cash. This was a powerful way to stay in control and it made my money tangible.
Today, people are calling it “cash stuffing” and it has become a huge TikTok trend. While this can be a great motivator, you also need to be aware of some of the risks involved.
According to Tyrone Lowther, the head of Budget Insurance, there are some issues associated with working with cash:
- 1. Combine this with other budgeting techniques: Since it’s not advisable to keep large sums of cash with you, consider using this technique only for certain expenses, while applying other pro-budgeting tips to manage the others and save some money.
- 2. Don’t shout about it on social media: As much as cash stuffing is a social media trend, you don’t want the world – and opportunistic criminals – to know that you’re keeping large sums of cash with you.
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- 3. Invest in a safe and store your cash subtly: Keep your envelopes in a good quality safe, installed by professionals. It’s also a good idea to ensure that you have home contents insurance, which provides cover for money locked in a secure safe.
- 4. Don’t flash your cash: If you’re using cash to buy groceries, don’t take the whole month’s stash with you to the shops. Look at your list before you head to the shop and work out how much you need for that shopping trip and only take that.
This will also help you avoid throwing non-essentials into your trolley, especially in the impulse aisle as you wait to pay.
All those little extras really do add up. The same goes for petrol because you know the average amount it costs to fill your tank.
- 5. Focus on areas where you tend to overspend: It’s easy to go over budget when it comes to things such as entertainment and clothes shopping. Decide what you can comfortably afford for these.
So, if you do splurge a little at the start of the month, be realistic and build that into your allocation. Remember that you will need to cut down for the remainder of the month.
This will also help you plan better for the months ahead so that you can still enjoy yourself throughout the month – within budget.
- 6. Remember that you will lose out on some interest: If you keep all your money in an online bank account, you gain some interest. The portion you choose to withdraw as cash, which sits in a safe, obviously earns none.
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But, if it helps you avoid overspending, then what you lose in interest, you gain in avoiding unnecessary debt.
- 7. Don’t draw it all at once: If you’re considering cash stuffing and decide you want to use R10 000, for example, rather withdraw it over a few days so that you are not carrying around such a large amount of money.
Also take special care at ATMs and banks, where criminals are always on the prowl. Once you have withdrawn the total amount you need, separate it according to your chosen categories and keep the envelopes in a secure safe.
- 8. Don’t forget the savings/emergency fund envelope: Saving for a rainy day starts with building that into your budget by committing to a set amount of money each month.
A good rule of thumb is to build up a reserve fund that can sustain you for at least three months, should you lose your income.