Nov 27, 2023

How Do I Start Cash Stuffing?

What is ‘cash stuffing’?

The envelope system — also known on TikTok as "cash stuffing" — is a budgeting method that allows you to physically portion out your monthly income into different spending categories.

Cash stuffing is actually just a new name for the time-tested, simple but effective budgeting method known as the “envelope system” or “envelope budgeting.” It involves setting aside cash in marked envelopes for different spending categories and only spending what you’ve allocated each month.

The concept is simple: Take a few envelopes, write a specific expense category on each one — like groceries, rent or student loans — and then put the money you plan to spend on those things into the envelopes.

Traditionally, people have used the envelope system on a monthly basis, using actual cash and envelopes.

How the cash stuffing method works

Cash stuffing doesn’t have to be complicated, but it does require some organization and planning on your part. The three steps below outline how you can begin your budgeting journey, if this is the right method for you.

1. Start with a budget

A solid budget can make the cash stuffing method smoother by ensuring you have enough money to cover your expenses. Consider using the 50/30/20 budget, where you put 50% of your after-tax income toward needs like rent and groceries, roughly 30% toward wants like travel and eating out, and at least 20% toward savings and debt repayment.

Say you take home $3,500 a month. This is what your budget might look like:

$1,750 in your needs envelopes.
$1,050 in your wants envelopes.
$700 in your envelopes for savings and debt repayment.

Keep in mind that this is just one budgeting strategy and you can divvy up your money as you see fit.

2. Create your envelope categories

Think about the types of expenses you have and sort them into categories. You get to decide how broad or specific to be here. You can have a general “going out” envelope, for example, or you can have a “movies” envelope, a “restaurants” envelope and a “drinks” envelope.

Next, label an envelope for each category and fill it with the amount of cash you’ve allotted for that expense. That's the "cash stuffing" part of the process.

3. Limit spending to the envelopes

When you pay for something, use money only from the corresponding envelope. For example, if you set aside $50 in an envelope marked “coffee,” and you buy a $5 latte at Starbucks, you’ll take the money from the envelope. That leaves you with $45 left to spend on coffee for the month.

You can refill your envelopes once a month or after you get your paycheck.

The pros

The cash stuffing envelope system also helps avoid the overdraft fees and debt that can come with frequent debit and credit card swiping. Physically dividing up your money also makes you aware of exactly how much you have available to spend on a given item, which helps curb overspending on impulse purchases.

“What either makes or breaks a budget is the variable expenses. It’s the going out with friends here and there. ... It’s all these little things that add up,” says Carlos Moreno, a financial specialist and coordinator of the Mobility Mentoring Center at Economic Mobility Pathways, a Boston nonprofit that serves low-income families. “That’s where the envelope system is so effective. It shows you right then and there how much money is going into specific categories.”

Cash-only users are more likely to feel an emotional connection to their money, too. Because cash is visible, touchable and instantly parts with you, it’s easier to be aware of how much you’re spending — and you’re likely to spend less than you would with a credit card, according to several studies.

The cons

Making regular trips to the bank or ATM to withdraw money can be time-consuming and leave you vulnerable. Carrying large sums of cash puts you at risk of loss or theft. You’ll also miss out on the protection and rewards that credit cards can offer.

Who Is the Cash Stuffing Method Best For?

Cash stuffing is best for folks who have a hard time controlling their spending, have a lot of debt or frequently find themselves buying things on impulse. If you find yourself overdrawing your bank account or relying on cash advance apps to get to the next paycheck, this system could help.

Because cash stuffing involves withdrawing large sums of cash and storing it in a physical location in your home or purse, it’s not ideal if you would worry about having your funds stolen.

One of the best parts of cash stuffing is how customizable it is, meaning it can work for many different types of spenders. There’s no one right way to choose categories or set spending limits, and you can tweak the envelope system to work for your money management style.

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