Earlier in 2022, the #cashstuffing hashtag went viral on TikTok. The new trend, where one would divide income into physical envelopes marked for different expense categories and fill them with money, is a twist on an age-old financial concept known as envelope stuffing. Essentially, money stuffing and envelope stuffing allow you to budget and plan your finances without technology.
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Over the past few years and amid the COVID-19 pandemic, many have questioned the role of cash in a world increasingly reliant on digital currency. Is it possible to live on money alone? Should anyone try to make cash only work for them?
How to go cash only
If you only wanted to live on cash, you could. To go from not using credit or debit cards, one would need to employ certain strategies. Michael Collins, CFA and CEO of WinCap Financial, shares the strategies you would need to ensure cash-only success:
Using a budget. Having a budget is essential when trying to live on cash alone. Collins said, “You need to be aware of your income and your expenses to make sure you don’t spend more than you bring in.”
Expense tracking. Collins recommends tracking expenses using a budgeting app or Excel spreadsheet. This helps you see where your money is going and where you can cut back.
Use of cash envelopes. Hey, it’s the cash stuffing trend! Designate a certain amount of money for different expense categories. You can have one envelope for groceries, one for entertainment, and one for bills. This allows you to stay on track with your spending and not overspend in any given area.
As you prepare to pay cash, Collins said the most important thing to remember is to keep your spending habits in mind. Using a budget and cash envelopes makes regular overspending easier.
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Financial benefits of being cash only
Once you’ve done the necessary financial planning to make sure you can only use cash, you can start enjoying some of the financial benefits of this lifestyle.
Michael Throckmorton, business success manager at Merchant Cash Advance, said that in the long run, paying cash only means no more credit card debt or impulse purchases made at home. using a debit card. Those with credit card debt will find themselves creating better spending habits because they stick to the cash.
“A cash-only lifestyle will put a limit on household spending and reduce unnecessary expenses that people often incur when using cards,” Throckmorton said.
In addition to cutting unnecessary expenses, you can use money to better budget each month. The biggest benefit of using a cash-only budget, Throckmorton said, is that you’re usually more motivated to stick to your budget when you start to run out of money.
“Overall, a cash-only budgeting method is a great strategy for maintaining your finances and keeping accurate track of what you have left,” Throckmorton said, “by preventing impulse purchases and contactless payments. which become more difficult to manage”.
Disadvantages of a cash-only lifestyle
Living without cash is not for everyone. Some lifestyles just can’t fit in, depending on your needs. , While it is possible with cash, paying utilities, electricity and gas bills is also much more difficult without payment apps, credit or debit cards or a synced bank account.
The other downside to living a cash-only life is that it can hurt your financial growth. The long term of being cash only means incurring no credit card debt. However, if you do not use credit cards at all, there is no possibility of increasing your credit.
“Credit cards help build a credit history, which helps you qualify to borrow money for major purchases,” said Danielle Miura, CFP and founder of Spark Financials.
In addition, consumers who only buy cash do not enjoy the other benefits associated with credit cards.
“A cash-only consumer may miss out on rewards programs and fraud protection,” Miura said. “Debit cards can provide these conveniences, but they often carry more risk of being tied to your bank account.”
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This article originally appeared on GOBankingRates.com: How to Live on Cash Only: Should You?