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With soaring costs and Christmas upon us, monitoring our spending habits is more important than ever to ensure we don’t damage our finances.
A viral social media savings trend has entered the financial scene for savvy savers called ‘Cash Stuffing’. Quite simply, the method involves putting cash into allocated envelopes of different categories.
It’s based on an accounting concept known as ‘zero-based allocation budgeting’. Many who use cash stuffing feel more in control of their spending, which serves as a reminder that the money you have is real funds. The use of cards and contactless payments can disrupt that reality at times.
It’s entirely up to you how you implement this budgeting method into your financial system. It can be for bills or general monthly spending. However, we do recommend continuing to pay your bills via direct debit so you never miss a payment.
The key to this budgeting method is if the envelope is out of cash you have to decide - do you move more money from another envelope or don’t spend any further funds in that category for the rest of the month?
To get started, look at your monthly payslip and put aside the funds needed for your priority bills. With what’s left over (disposable income) you can begin to allocate different amounts to different categories.
If you would prefer to start small and notice in your account statement a problem area that you overspend on, begin with just one envelope and an allocated amount for this. For example, ‘eating out’.
Once you’ve grasped the concept of this budgeting method and have found a good rhythm you can start to add more envelopes to your budgeting system.
Some people feel anxious when carrying cash, if this sounds like you there are plenty of apps that can replicate this budgeting system digitally. These digital banks can be separate from your current bank account and it means you won’t overspend on your balance, which could jeopardize your priority bills.
Whilst we weather the inflation storm, cash stuffing can be a great budgeting alternative and a method you can now try over the Christmas period. We’d only recommend cash stuffing for short-term savings and spending, long-term savings is better held in an interest-paying account.
The great feature of having your savings funds in a savings account over some time is that your money starts to work for you and gain value from incurred interest. Whether it’s a fixed or easy-access account, your money will make money!
Head officeParagon51 Homer RoadSolihullWest MidlandsB91 3QJ
Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551