What Is Cash Stuffing?

Cash stuffing works by dividing your cash into categories like groceries, entertainment, utilities, savings, and so forth. Each category gets its own envelope, and only the allocated amount of cash can be spent from that envelope during the budget period (usually a month).

To get started with cash stuffing:

1. Identify categories: List your primary spending categories like rent, groceries, utilities, entertainment, transportation, and savings.
2. Set budgets: Determine a realistic budget for each category based on your monthly income and expenses. You could start with the 50/30/20 budget strategy or use a budget calculator.
3. Withdraw the cash: Withdraw the total budgeted amount in cash at the beginning of the month.
4. Stuff the cash: Label the envelopes with their categories and distribute the cash into the respective envelopes.
5. Track spending: Use only the cash in each envelope for its designated category and track your spending to ensure you stay within your limits.
6. Adjust as needed: Review your spending at the end of each month and adjust your budgets as necessary for the following month.

This method creatively forces people to stick to their budget, as once the cash in an envelope is gone, no more spending is allowed in that category until the next budget period.

Cash stuffing is great for those who tend to overspend with credit or debit cards, as it limits you to the cash you have on hand. With the average American household carrying around $7,226 in credit card debt, this method can help avoid that kind of debt, overdraft fees, and declined transactions.¹

Handling your money physically makes you think twice about spending, making your true spending priorities a little more transparent. It also stops online shopping, which can help curb impulsive buys.

On the flip side, you might miss out on improving your credit score, earning interest, or getting rewards. There’s also the risk of losing or having your cash stolen, and it’s not as convenient for online payments.

You can try cash stuffing to see if it helps you refocus and rewire how you think about your income and your spending. It could shed light on where you need to spend more or less, helping you see where savings are possible over time.

Here are a few things to keep in mind as you try out this new approach:

• Stash your envelopes discreetly: If you live with roommates or have frequent visitors, keep your envelopes in a secure and discreet location, like a lockbox or safe.
• Keep a backup fund: While cash stuffing is about sticking to a budget, it’s never a bad idea to keep a small emergency fund in a separate, easily accessible location for unexpected expenses that don’t fit into your regular categories.
• Review and adjust regularly: At the end of each month, review your spending habits. Adjust your budget categories and amounts as needed to reflect changes in your financial situation or goals.
• Use smaller bills: When filling your envelopes, use smaller denominations like $5s, $10s, and $20s. This makes it easier to make exact payments and manage your spending more precisely.
• Track your spending: Keep a small notebook or a spreadsheet to record each transaction from your envelopes. This will help you see where your money is going and identify any areas where you might need to cut back.
• Throw in some budgeting apps: While cash stuffing is a physical method, you can still use digital tools to help track your overall financial picture and enhance your budgeting.
• Stay disciplined: The key to cash stuffing is discipline. Resist the temptation to borrow from other envelopes unless absolutely necessary. Stick to the allocated amounts to truly benefit.
• Plan for irregular expenses: Some expenses, like car maintenance or medical bills, don’t happen every month. Create a separate envelope for these irregular expenses and contribute a small amount to it regularly.

Cash stuffing takes us back to the basics of budgeting. It’s a practical, hands-on approach that can help people gain control over their finances. By allocating limited cash to specific, categorized envelopes, you can avoid worsening credit card debt, grasp money management, and prioritize savings.