In the age of digital dollars, it makes sense to budget with cash – Colorado Hometown Weekly

“Cash stuffing,” or using envelopes filled with cash as a household helper, is making a comeback on social media as a way to save money for people who are used to paying with credit cards. (Dreamstime/TNS)

Emma Nelson | Star Tribune (TNS)

Although Emily Franks and her husband made enough money to get by, they lived paycheck to paycheck and struggled with debt.

When they learned that their church was offering a financial literacy class, they decided to take action. Over the course of several weeks, they learned how to create and stick to a budget by using envelopes filled with cash as a budgeting system to plan and control spending.

Seven years later, Franks has built a career around “cash stuffing” and is the founder of Aesthetic Dollar, an online store in the Twin Cities that sells minimalist budgeting tools like envelopes, wallets and planners. Franks also regularly posts YouTube videos – originally an accountability tool for her own budgeting efforts – with business updates, budgeting tips and calming aerial shots of her organizing piles of cash.

The internet is full of similar videos since cash stuffing – a familiar concept revamped for the social media age – has gained popularity among a new generation, even as digital currency has already become the norm.

According to Federal Reserve survey data, cash accounted for 16% of respondents’ payments during a one-month period in 2023, compared to 31% in 2016. Still, cash use has remained stable since 2021 and remains popular among lower-income consumers and the elderly, according to the Fed.

“Anyone can use cash. It’s available to everyone,” Franks said. “It doesn’t have to be complicated. Anyone can make it as simple as they want.”

Before you withdraw a stack of twenties from your bank account or order fancy envelopes online, you should first determine your budget by taking the often humiliating step of keeping track of your current spending.

Autumn Schinka, a Twin Cities-based financial advisor with Thrivent, said people often underestimate spending on nonessentials – categories like groceries or eating out that vary from month to month. That’s when things can get out of control.

“Sometimes when people start spending cash instead of swiping, they think, ‘Oh my God, I had no idea I was spending $600 on entertainment and dining out,'” Schinka said. “But now when they put aside $300 a month … they put the cash in the envelope, and when the money’s gone, it’s gone for the month.”

Kumiko Love, a recognized financial advisor and bestselling author of My Money, My Way, recommends keeping three months of bank statements so you can see where money is coming in and going out. If you notice big differences from month to month when you categorize your spending, plan your budget using the highest number so you’re prepared for the worst-case scenario.

Once you’ve set spending limits, withdraw cash and fill your envelopes every time you get your paycheck, she said. You don’t need fancy materials: Simple white envelopes written on with a felt-tip pen will do just fine.

Budgets are meant to evolve over time, Love said, from monthly bill fluctuations to long-term value shifts.

“When people copy and paste the same budget from month to month, they’re not doing it right,” she said. “Because fundamentally, your budget is a reflection of your real life. And how many of us have the same day twice? None of us.”

Although Franks said she has more than 40 budget categories as specific as school expenses, gardening and individual vacations, those trying to stock up on cash for the first time should start with just a few categories and go from there.

And don’t worry about lugging around all your envelopes. Franks said she usually carries no more than $100. If she needs to buy something with a debit card, she writes down the amount and then during the 30 minutes a week, she replenishes her account by depositing the money she’s already set aside. For those who share budget planning and shopping responsibilities with a partner, Love recommends keeping receipts to tally up expenses later.

Research has shown that swiping a debit or credit card elicits less of an emotional response from consumers, making it easier to repeat than parting with tangible, limited cash. Smaller merchants may offer discounts for paying with cash, Schinka said, which is something Franks recently experienced when she had her air conditioner repaired.

Millions of American households rely on cash because they are “unbanked,” meaning no one in the household has a checking or savings account. About one-fifth of those households reported not having enough money to meet minimum balance requirements in 2021, according to the Federal Deposit Insurance Corporation (FDIC). Others said they don’t trust banks or prefer more privacy than a bank account offers.

“When we as a society run out of cash, it forces people to use lines of credit, so either credit cards or PayPal loans or maybe even more usurious loans,” said Kara Pérez, founder of financial education company Bravely Go. “And I don’t think that’s good for people’s individual finances, and I don’t think that’s good for us as a society.”

However, cash also has disadvantages. While it may seem more secure than a bank account or credit card, if it is stolen, consumers have little chance. And in times of high interest rates, saving cash can mean losing valuable interest, says Schinka.

Ashley Feinstein Gerstley, founder of the financial platform Fiscal Femme, offers a 30-day money cleanse program in which all non-bill expenses are paid in cash. But for some participants, cash does more harm than good.

“I’ve found that there’s a group of people, a small group, where once the money is out of their account, it almost feels like Monopoly money because it’s already gone,” she said. “So definitely not a tool if that describes you.”

For those who don’t want to use cash or are afraid to keep such a close eye on their spending, Feinstein Gerstley recommends using a separate debit or credit card that is only used for discretionary spending and setting aside a certain amount each month for it. As with cash, once it’s gone, it’s gone.

Budgeting, whether it’s cash on hand or something else, is a habit that can and probably will fall by the wayside from time to time. The key is to plan as far ahead as possible – Schinka recommends building up an emergency fund that covers three to six months of expenses – and trying not to throw in the towel when something goes wrong.

“Our financial failures are actually perfectly curated lessons for us,” Feinstein Gerstley said. “So if we can take the emotion out of it — and I think a lot of compassion and forgiveness for ourselves helps with that — we can actually look at what happened … and we can work to prevent it from happening again, or try something different to see if it works.”

Love works with her clients to identify why they need to rethink how they manage money. Instead of focusing on one reason, like “I want to pay off my debt,” she encourages them to go broader, like, “I want to pay off my debt so I can have more freedom and spend more time with my kids.”

It also makes sense to simply make the process of budgeting something enjoyable rather than a dreaded chore, says Pérez.

“A lot of people look at (budgeting) as a punishment, like, ‘Oh God, I have to sit down and budget today,’ rather than, ‘I’m going to put on my favorite musician, get my Thai food, this is my me moment, I’m going to run through my numbers and feel good about my life and my spending,'” she said. “So I think there has to be a mindset shift as well: budgeting is fun, budgeting is self-care, budgeting is good for me. As opposed to: budgeting is a punishment no matter how you do it.”

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