A budget is the backbone of a person’s financial health, according to Janine Horn, financial adviser, Momentum.
While the thought of starting may sound tedious, new ways of budgeting are taking social media by storm making the process of having a budget more exciting.
A new way to budget called cash stuffing is quickly becoming a viral trend on TikTok with many users of the platform starting to use this method to take control of their finances.
Cash stuffing involves allocating specific amounts of cash that you can spend each month on different expense categories such as groceries, entertainment and petrol.
You then stuff the allotted cash into labelled envelopes earmarked for these expenses. It’s essentially a fixed budget in an envelope.
While the cash stuffing method of budgeting can help people gain control of their finances, is cash really king?
According to Tyrone Lowther, head of Budget Insurance, the answer is yes and no.
“While this hands-on approach to saving money does have its advantages, like enabling you to physically see the cash you spend and curbing reckless spending, it should be done with caution, especially in South Africa where keeping large sums of cash is generally not a good idea,” Lowther said.
Before you dismiss the idea of cash stuffing, remember that taking control of your finances by budgeting is about balance.
This means that cash stuffing in combination with other actions such as setting a realistic goal for your budget, making the most of rewards programmes and starting or boosting your emergency fund can help you get on the right money track.
Here are cash stuffing tips designed for South Africans:
1. Combine with other budgeting techniques
Since it’s not advisable to keep large sums of cash with you, consider using cash stuffing for some expenses while using alternative ways of budgeting to take care of others.
2. Don’t boast about it on social media
While cash stuffing is a social media trend, don’t let opportunistic criminals know that you are keeping large sums of cash with you by posting about it online.
3. Keep your envelopes safe
Invest in a quality safe, installed by professionals. Make sure you have home contents insurance, which provides cover for money locked in a secure safe.
4. Don’t flash your cash
If you are going to the store to buy groceries, don’t take all of the cash that you stuffed in your groceries envelope. Instead, do a bit of research by looking at the specials and discounts advertised by shops and then write your grocery list.
Writing up a grocery list will let you know much money you need to carry and ensure that you avoid the temptation of impulse buys.
5. Focus on areas where you tend to overspend
You can easily go over budget when it comes to things like entertainment and clothes shopping so it’s important that you decide what you can comfortably afford for these.
If you do splurge a little at the start of the month, be realistic and build that into your allocation. Remember that you’ll need to cut down for the remainder of the month.
6. Remember that you’ll 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 will not earn interest.
Lowther said: “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, don’t take out a large amount of money. Rather withdraw the money over a few days so you are not carrying around so much cash.
8. Have a savings/emergency fund envelope:
Committing to saving a set amount each month will allow you to build in savings or an emergency fund into your budget.
According to Katlego Gaborone, a financial planner at Momentum, people need to have at least three months’ salary saved up in an emergency fund.
