Cash Envelopes for a Budget Habit in a Growing Cashless World

In today’s digital world, using digital currency is ever popular. People enter their credit card numbers online, swipe or tap at the store, and even save their card information to their phones for easier checkout. 

But having tangible money in hand can help you build great budgeting habits that will help you achieve your financial goals.

This is where the cash envelope system comes in. 

The growing cashless society

Cash Envelopes for a Budget Habit in a Growing Cashless WorldCash usage has been descending in the past years, the Federal Reserve's (Fed) findings from the 2022 Diary of Consumer Payment Choice Survey show less affinity to coins & bills in payments.

Only 18% (down 13% from 2016's 31%) of the surveyed said their transactions were made in cash.

The survey showed that credit cards accounted for 31% (up 13% from 2016's 18%) and debit cards for 29%.

Although there've been some efforts promoting mobile payments, it's been up and down from 1% in 2018 to 3% in 2020 and back to 1% in 2022. On the other hand, Automated Clearing House (ACH) payments have been steadily growing from 10% to 13%, showing Americans are choosing the convenience of automated payments over in-person payments.

Cash Envelopes for a Budget Habit in a Growing Cashless WorldWhile these readings show how Americans pay for their purchases, a Pew Research Center survey displays how Americans are opting for a cashless lifestyle.

41% of US adults said they use cash to make a purchase in a typical week.

That's a 20% growth from their 2015's survey that showed 24% of them didn't use cash, approaching to double the stat in only 7 years.

Are We Still Printing Money?

The United States has never stopped printing money, even though most people practice a cashless lifestyle and use digital payment methods. 

Most stores accept cash payments, so introducing cash envelopes to your budgeting practices will not leave you in the dark. 

Today, most of us can say that we do not carry cash and that digital wallets are the future of money.

Everything is made easy with the swipe or tap of a plastic card at every store, restaurant, or event.

But people benefit from on-hand cash, as it can help influence positive financial discipline and prevent frivolous spending.

What is the Cash Envelope System?

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United States USA American money cash currency dollar bills in a white envelopeCash envelopes are not a new concept. Referred to as “Cash Stuffing,” it is an idea where someone takes physical money out of their bank account and places it in predetermined categories. 

The intention is to make it easier to track each month and meet budgeting goals through cash usage.

This budgeting style has gained traction across social media platforms, like TikTok, where creators are “stuffing cash” into labeled envelopes with budgeted amounts for the month. 

How Can It Help Me Keep a Budget?

According to an Experian research, by the end of 2022 the average total consumer household debt was $101,915 (10% up from 2020's $92,727), but breaking out of that cycle is not impossible.

You can see exactly where your money is going by identifying a desired spending amount per category.

Physically seeing a decrease in a category can promote more financial awareness of where you tend to spend the most and improve financial discipline over time. 

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