With prices for goods and services on the rise, it's become increasingly difficult for individuals and families to make ends meet, let alone try and save money each month. This increase in the cost of living — coupled with stagnant wages and inflation — has left many people struggling to budget efficiently. If you ever find yourself in a pinch, it may be worth considering the cash stuffing method. Here's what you need to know about it.
What Is Cash Stuffing, and How Did It Become Popular?
The envelope system, or cash stuffing technique, is a budgeting system that involves physically dividing cash into different categories and placing it in labeled envelopes. After making the rounds on social media, the method became increasingly popular (among Gen Z in particular) thanks to its simplicity and effectiveness in keeping finances organized.
Though similar budgeting techniques have been around for a while, the cash stuffing method took off after TikTok user Jasmine Taylor shared how she was able to get herself out of nearly $80,000 of debt by using the nifty trick.
Before stumbling upon the strategy on YouTube, Taylor, 31, was drowning in debt and struggling to find an effective solution to manage her finances, despite trying various other budgeting techniques. “I went from swiping a credit card and not really understanding where my money was going” to "having to tangibly handle the cash," resulting in more financial accountability, she told Good Morning America.
After just one year of implementing the technique, Taylor successfully paid off $23,000 in student loan debt, and cleared her medical expenses and credit card balances. As her TikTok following grew (currently at 671,000), she transformed the cash stuffing method into a business called Baddies and Budgets, which offers budgeting supplies, accessories, and financial advice.
In 2022, the business raked in approximately $850,000, and is expected to hit the $1 million mark this year, according to Taylor.
How Does the Cash Stuffing Method Work?
To incorporate the method into your finances, start by creating a budget and dividing your income into various categories such as "rent," "groceries," "transportation," and "entertainment." Next, withdraw cash from your bank account and allocate it into the respective envelopes. As the month goes by and you spend money, you'll remove the corresponding amount from the labeled envelope; when an envelope is empty, you'll know you've reached your budget limit for that category.
While you can divide your money however you choose, a good place to start is by using the 50/30/20 rule. This involves allocating 50% of your after-tax income to necessities like rent and groceries, around 30% for recreational or leisure spending like dining out and travel, and at least 20% towards savings and debt repayment.
For example, if you bring home $3,500 monthly after taxes, your budget could look something like this:
- $1,750 in the "needs" envelopes.
- $1,050 in the "wants" envelopes.
- $700 in the "savings" or "debts" envelopes.
When making a purchase, only use money from the corresponding envelope. For instance, if you have $50 in the "coffee" envelope and purchase a $5 latte at Starbucks, you'll withdraw the money from the envelope, leaving you with $45 to spend on coffee for the remainder of the month.
You can then refill your envelopes once per month or after receiving another paycheck.
The Bottom Line
The cash stuffing method can be a useful tool to help you stay on top of your finances and avoid overspending. When you have physical cash to spend, you'll be more mindful of unnecessary purchases. “It’s more about building the financial muscle, learning the consistency to consistently make debt payments, pay on time, pay extra,” says Taylor, adding, "I could hand you a $100 bill now and a debit card with $100. I guarantee you it would be a lot easier to swipe that card than it would be to break the $100. We just have some type of connection with physical cash."
The method also provides a visual representation of your spending to help you make informed decisions about where to allocate your funds. All in all, we recommend the cash stuffing method to anyone who's looking for a hands-on approach to help manage and optimize their finances.
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