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Can an old-fashioned budgeting hack be a good post-Bankruptcy strategy?

Posted by Brian Hallaq | Jun 27, 2023 | 0 Comments

Recently there have been a lot of articles related to “cash stuffing” which was a method of budgeting popularized in the 1990's but which has been making a big comeback with Gen Z through social media users.

Essentially, cash stuffing is a way of cash-only budgeting that can be very effective.  What you do is take some envelopes (or any container…one of my clients used shoe boxes), and you label the container for the particular type of monthly expense that you have.

So, in theory you would have an envelope marked for “rent” and another marked for “gas” and another marked for “food”, etc. etc.  Then you would stuff that envelope with the correct amount of cash you would need for that particular category of expenses for the month.  Once you use up the cash in the envelope, you don't spend any more on that particular expense.  The idea is that you would have money left over at the end of the month that money would go into savings.  It is a much better method of budgeting than trying to go “cash only”, but by keeping your entire pool of monthly expenses in a single bank account.  The reason for this is that psychologically, when all your money is in one pool it is hard to think of it in terms of its usage but when it is broken down into categories, you keep a mental picture of your expenses and stay within your budget.

The internet is referring to this method of saving as a “financial hack”, but in truth it is just old-fashioned budgeting of the type that you would have learned in your middle school home economics class in the 1980's.  Regardless of how it has come back; it is a good thing.  It creates discipline, financial responsibility, and eventually it will lead to wealth creation.

Cash stuffing is a much better method of saving and growing wealth than the current trend of having $5 in a Robin Hood account, or $50 worth of Cryptocurrency.  You are much better off growing your wealth through your own savings than hoping that a small initial contribution to the latest investment trend will balloon into wealth.  It appears Gen Z got the message when it comes to going cash only and avoiding high interest credit.  According to Credit Karma, 69% of Gen Z are going cash only compared to 47% of Gen X and 37% of Baby Boomers.

Cash stuffing is also a great post-Bankruptcy strategy for building yourself up financially.  The #1 question that I receive from Bankruptcy clients is “how do I improve my credit?”.  This is because most people are fixated on their FICO score as a measure of their credit worthiness, but the truth is that most people want a good credit score for the purpose of purchasing a home or a car, and the biggest thing that you can do to make those processes work is to 1) have a steady job, and 2) have a significant down payment.  The only way to provide a decent down payment on a loan is to build up your savings, and cash stuffing is a great way to do that.

Once you get comfortable with cash stuffing, you need to add a few more skills to your financial planning.  A good strategy is: keeping receipts, and going over them each month.  Here the “shoe box” method works best.  Starting at the beginning of the month, keep your receipts for everything, especially food, and when you come home throw them into the shoe box.  At the end of the month, go through the receipts and total up the amounts you spent on the various categories of expenses.  Home maintenance, personal care products, and food are the categories of expenses that people consistently misjudge.  Tracking your expenses each month will make your cash stuffing more precise and will also give you ideas for places to adjust your expenses.  Suddenly, you might reconsider that additional streaming service, or that cup of coffee from your favorite barista stand that you could have made at home.

There is no way to avoid credit in our modern society, but cash has some serious advantages when it comes to being financially responsible and avoiding credit unless you absolutely need it is a sure pathway to success.

About the Author

Brian Hallaq

My name is Brian and I have been a practicing attorney in Bankruptcy for over 20 years helping thousands of clients.  I have worked for the Chief Judge of the United States Bankruptcy Court for the Western District of Washington, as well as several small boutique Bankruptcy law firms handling Bankruptcy cases in Washington State and the State of California.  I have litigated for and against major banks, and I have recovered millions of dollars on behalf of clients in my career.


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