Cash Stuffing: How Does This Budgeting Method Work?

If you’re looking for a way to stop compulsive spending, the budgeting TikTok trend known as “cash stuffing” could be the fix.

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.

Here’s a closer look at how cash stuffing works and whether this budgeting method might help you tame your overspending and get organized.

What Is Cash Stuffing?

Cash stuffing involves taking your spending money, converting it to cash and stuffing it into envelopes marked with spending categories like rent, bills, groceries and gas.

You determine how much money you want to spend in each category on a weekly or monthly basis. Then, you put that much cash in each envelope and commit to only spending what’s in your envelopes.

While you can use a spreadsheet or a budgeting app to do this, many people find using physical cash and envelopes to visualize their spending to be more effective. Money in a bank account can seem more abstract, and you might not be able to keep track of how much you have left to spend at all times. If you go to grab cash out of your groceries envelope and see you have $40 left, you know exactly how much you can spend at the supermarket without going over budget.

How To Start Cash Stuffing

If you decide cash stuffing might help you stick to a budget, follow these steps to get started.

1. List Your Spending Categories

Write down everything you spend money on in a given month or go through your bank statements. Group your expenses into a handful of categories, leaving one for miscellaneous spending if needed. The categories you pick are entirely up to you, but some common ones include:

• Rent and bills
• Groceries
• Gas
• Dining/takeout
• Coffee
• Alcohol
• Entertainment
• Travel
• Clothing
• Car maintenance
• Home decor
• Gifts

2. Set Spending Limits for Each Category

For each category, decide how much you want to spend each month. Open up your bank and credit card statements and use a spreadsheet or calculator to add up how much you spent in each category over the past few months. Use a budgeting calculator and reference the 50/30/20 rule as a guideline for allocating your funds.

If you want to spend less and save more, pick categories where you can realistically cut back and set your spending limit lower than it’s been for the past few months. Setting weekly limits for more frequently used categories like groceries may also help you avoid spending your entire budget in the first half of the month.

3. Create Your Cash Stuffing Envelopes

This is where you can get creative and have fun. While you can put your money in plain white envelopes in a sturdy box, some people prefer to spice things up by decorating or color-coding labels.

A lot of TikTokers use colorful wallets known as “budget binders” that can hold all your cash envelopes and fit in a purse or backpack. However, some people don’t feel safe carrying much cash or prefer to keep their envelopes at home to avoid impulse buying.

4. Withdraw Cash and Stuff Your Envelopes

Once you have your envelopes ready and know how much money you’d like to allocate to each, add up all your spending limits and withdraw that amount in cash from your bank or an ATM. Count it and sort it into piles according to your spending category limits, then stuff your envelopes.

Be sure to keep your envelopes in a safe place. If you live with roommates, you might want to get a lockbox or a safe.

5. Spend With Your Envelopes

Here’s where discipline comes into play. To make cash stuffing work, only spend what’s in each envelope, and try not to run out of money too quickly. Don’t spend money from other sources, like a debit or credit card.

Also, try to avoid transferring surplus cash from one category into another. If you find yourself frequently going over an envelope’s budget, you may need to reevaluate either your budget or spending habits.

6. Save Leftover Cash

If you get really good at curbing your spending, you may even have some leftover cash each month. Instead of spending that cash the following month, consider using it to pay off debt or stashing it in a high-yield savings account. That way, you can earn some interest and put money toward expenses your envelopes don’t account for, like a summer vacation.

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. In that case, it’s better to keep your money in the bank and use a spreadsheet or an app like Goodbudget or YNAB to manage your envelopes and spending digitally.

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.