What is cash stuffing, and can it help me budget better?

Budgeting is a key part of overall financial wellness, and you have many budgeting options to choose from. One budgeting option that’s made a resurgence — albeit under a new name — is the envelope budgeting system. Now called cash stuffing, this system gives you a quick and tangible look at your budget, using physical cash instead of budgeting software.

So what exactly is cash stuffing, how does it work, and can it help you achieve your financial goals? We cover that and more below.

What is cash stuffing?

Before we can dive into what cash stuffing can do for your budget, you need to grasp how it works. So, cash stuffing is nothing new in the personal finance world, though it is trendy today. Cash stuffing became a thing many years ago under a different name: envelope budgeting.

Cash stuffing or envelope budgeting are subsets of the larger zero-based budgeting (ZBB) method, which means you budget to use 100% of your income through spending and saving. 

Cash stuffing is different from other ZBB methods. With some methods, you use a bank account for your cash, swipe a debit card to pay for things, and track your expenses digitally with budgeting apps or other software. But with cash stuffing, you physically stuff money into an envelope for each budget category. You only stuff the envelope with the amount of cash you intend to spend in that category.

You can also take it further by decorating the envelope or writing the category in elegant penmanship. You don’t necessarily have to use an envelope either. You can also use a folder, pouch, money clip, a budget binder, or any other method of separating the cash for each budget category.

The 5 steps of the cash stuffing budget

The envelope system of budgeting is designed to help you physically see your cash and watch each budget category dwindle as you pay for things. Using this method may help you realize where to cut expenses or limit excessive spending if a stack of cash gets too small. It can also help you visualize any overspending, as you must take money from one budget to pay the other.

Here’s how to start and execute a cash stuffing budget.

1. Determine your budget categories

Once you’re an adult, you’ll have many categories, like insurance, credit card bills, car payments, rent or mortgage, utilities, transportation, and more. As a teen, you’ll likely have a lot fewer than your parents may have. However, you still want to look at what you spend money on and categorize it — no, they can’t all get tossed into a “miscellaneous” category.

If you drive, you likely have to refill your gas tank periodically and maybe your parents have you pay your portion of the car insurance. You also want to budget for periodic maintenance on the car. Other categories may include food, extracurricular activities, entertainment, and savings (of course).

Create a way to separate the cash for each category, whether it’s envelopes, folders, sleeves in a binder, money clips, or whatever else you may prefer. If you’re feeling artistic, you can decorate the cash separators and maybe even write the categories in slick calligraphy for an added personal touch.

2. Figure out your average monthly income

Now it’s time to look at how much cash you’ll have to spread out across your new cash stuffing system.

If you have a job, receive a regular allowance, or do odd jobs around the neighborhood for extra cash, look over the past few months to get a sense of your average monthly take-home (after-tax) income. 

If you have a bank account already and deposit all your pay in there, you can look back at the last few months to get a sense of your average monthly income. If you don’t, estimating at first and adjusting later is OK.

Write that number down and hang on to it for later.

3. Estimate your average monthly expenses

Now, review your last few months of expenses. If you have a bank account or debit card, you can look at the last few months to understand what you spend monthly in each category. You can estimate and adjust later if you don’t have a bank account or haven’t tracked your spending in the past.

Don’t forget to earmark 20% of your income for savings!

Write the amounts for each category and add them to determine your total monthly expenses.

4. Calculate how much money you have left

Now, subtract your total monthly expenses from your total monthly income. If you have income leftover, you’re off to a good start. You can add the extra money to your savings or talk to your parents about investing it.

If you end up in the negative, don’t panic. You just need to make some adjustments.

If you’re in the negative, review your expenses and see where you can cut back. Are you dropping $10 a day on eating out or $50 a week on entertainment? Those are great places to start trimming. Instead of eating out, dig through the fridge for leftovers or something simple you can make yourself. If you’re spending too much on entertainment, think of some free activities you and your friends can do.

Continue trimming until you reach a balanced monthly budget, meaning there is exactly $0 in income remaining after all expenses. This means you’re breaking even on your budget. 

5. Start cash stuffing

To begin, take your cash and stuff it in each budget category’s holder. Put the exact dollar amount into each envelope and use only the cash from the corresponding envelope for each category.

If you need to spend cash in a specific category and have no more cash in that category’s holder, pull the cash from another category and write down why you needed to take that cash on a notepad. This will allow you to fine-tune your budget — especially if you needed to estimate initially. It will also allow you to track your money trends in each category.

As you continue using this cash envelope system, you can make small tweaks to your cash budget to ensure you’re meeting savings goals monthly and not overspending in any one category.

How can the cash stuffing budgeting method help you?

The cash stuffing budgeting system is a little old-school, but it’s seen a resurgence with Gen Z and other younger generations. It even has a lot of traction on TikTok. So, how can cash stuffing work to make budgeting and meeting financial goals easier for you?

Makes your budget more tangible

Swiping a debit card is effortless and can sometimes feel like you’re not actually spending money. Also, you can forget to load transactions into your budgeting app and not realize you overspent until the end of the month.

With the cash stuffing method, you physically hand over the cash. As you watch your allocated cash for each budget dwindle, it might be easier to spot poor spending habits and places where you can cut back.

Lets you watch your savings grow

Building savings is essential at all stages of life, and building solid money-saving habits in your teens will help you stick to them by the time you hit adulthood. The cash stuffing method allows you to literally watch your savings grow.

Helps you avoid debt

With the cash stuffing method, all cards, including credit cards, are out. This means there’s no chance you’ll ever get into debt. If you don’t have the cash left in a budget category to pay for an item or extra cash in another budget you can borrow from, you don’t spend that money.

What potential downsides does cash stuffing present?

While cash stuffing is a great way to get a good grasp on your personal finances, there are drawbacks. Let’s review the cons of the cash stuffing budgeting method.

You might lose your cash.

When it comes to cash, there’s a chance of it being lost or stolen. While the same is true for a debit or credit card, they can be replaced, and you’re often not held responsible for fraudulent charges.

You miss out on interest.

When you stash cash in a savings account, you often get an annual percentage yield (APY) or interest rate. This means the bank will pay you for the cash you leave in the account. 

For example, if you have $1,000 in an account that pays 2% APY, you would earn $10 per year in interest. Many banks break this up into monthly increments, so you’d see $0.83 in interest deposited in your account monthly.

You don’t earn rewards.

Some credit and debit cards also offer rewards just for making purchases using your debit card. For example, the Greenlight app offers 1% Cash Back to Savings* on every purchase with its debit card with the Greenlight Max and Greenlight Infinity plans. Using the cash stuffing budgeting method means you’d miss out on these valuable rewards.

The Greenlight app: The better alternative to cash stuffing

If you find the cons of the cash stuffing method are impossible to ignore, the Greenlight app can offer a perfect alternative. Not only does it include an easy-to-use debit card, but you can also track your transactions right through the app to help with budgeting. Plus, you can build your financial literacy, learn to invest, and earn up to 5% rewards* on your savings with Greenlight Infinity.

Sign up for the Greenlight app today.

*Greenlight + Invest families can earn monthly rewards of 1% per annum, Greenlight Core and Greenlight Select families can earn 2% per annum, Greenlight Max families can earn 3% per annum, and Greenlight Infinity families can earn 5% per annum on an average daily savings balance of up to $5,000 per family. Only Greenlight Max and Infinity families can earn 1% cash back on spending monthly. To qualify, the Primary Account must be in Good Standing and have a verified ACH funding account. See Greenlight Terms of Service for details. Subject to change at any time.