Lately on TikTok, I’ve been seeing a lot of videos of people placing cash into cute little binders with labeled zipper envelopes. The narration usually says something like “I just got paid, so it’s time to do some envelope stuffing. They flip through the envelopes, labeled things like “Groceries,” “Gas,” “Entertainment,” “Dining Out,” etc., and they place various amounts of money into those envelopes. What exactly is going on here?
Cash Stuffing Method is Low Tech Budgeting
At its core, the cash stuffing method is just like any budgeting method – allocating money to various categories and then spending only what is in those categories. What the cash stuffing method does, however, is really force you to limit your expenses. If you’re only spending cash, it’s much harder to overspend. It’s also known as the envelope method, and has been around for years. TikTok has just made it trendy again. And obviously, I’m very pro-budgeting, so I think this is great!
Does It Work?
If you only spend cash and only bring with you the cash you’re allowed to spend (so no bringing the gas money to the grocery store, for example), then yes. You’re forced to stay within budget because you only have a certain amount of money to spend. Of course, it’s easy enough to borrow from one envelope to fund another, but that’s a risk in every single budgeting method.
Another great thing about this program is that you can very easily see how much money you have and get some excitement by managing to keep money in those budget categories. I’ve seen a number of people online who budget in this way every month, and then at the end of the month, they sweep out a few of the categories and put that money into an envelope for a special fund, anything from a vacation to a down payment. That’s certainly a great way to try to cut back on things like dining out – if you know that you can physically move that money to an envelope that will pay for your vacation, it can be added motivation.
What Are the Risks?
To me, the biggest risk is that you’re keeping a whole lot of cash in one place. I’ve seen a number of people on TikTok who have their “home envelopes” and their “wallet envelopes,” so they’re carrying a binder with all their spending money with them at all times. If you lose that, you’ve just lost all of your money. Conversely, if you are spending using debit cards and lose your wallet, you can quickly call your bank and have your card frozen so your money is still there (even if it’s a bit harder to access for a few days). Also, if other people know that you’re doing this method, they also know that you have a lot of cash hanging out in your house. That could be tempting to some.
Another risk I see is that this method is becoming trendy and a lot of people are buying (admittedly very cute) binders and labeled envelopes to keep their cash. Taking a look on Etsy, it would be easy to drop $30-$50 or more on these cute binders. Now, if buying one of those binders really helps you with your budgeting, who am I to say to not do it? I pay for YNAB to do my budgeting. But I can also see it being one of those “Buy all the supplies and never use it” things that so many of us fall into.
Finally, some bills are hard to pay in cash or nearly impossible. I know that I can walk into the power company and pay my bill in cash, but I’m not sure that I can do that with my cell phone. Also finding the time to get to the power company during their business hours to pay my bills might be tough. Of course, you can also do a hybrid – bills you have to pay electronically can be funded from a bank account and things where you can pay cash can be funded from the envelopes.
Basically, if you’re struggling to budget using digital methods and finding yourself overspending too much, consider giving it a shot. You don’t need fancy envelopes. You can use regular envelopes or even Ziploc bags. If you find it working for you and want to make yourself a cute little binder, go for it. Figure out what works best for you!
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.