The Pros and Cons of Using Cash Stuffing for Your Budget

Learn about the cash stuffing trend, a modern twist on the envelope budgeting system, and its benefits and drawbacks.

Are you struggling to keep your budget and spending on track? The cash stuffing trend, a modern take on the age-old envelope system of budgeting, could be the solution you need.

Cash stuffing involves taking cash and stuffing envelopes, folders, or any container for different categories of spending in your monthly budget. According to Greg McBride, chief financial analyst at Bankrate, this budgeting method can help you avoid credit card debt by limiting spending to the cash you’ve allotted for each expense category.

The primary benefit of using cash is that it helps you avoid racking up high-cost credit card debt. Additionally, some people find it easier to account for their expenses with cash that is specifically set aside for different types of spending than trying to follow the paper trail of debit or credit card spending at month-end.

To set up a cash stuffing system, label each envelope with a specific spending category such as groceries, gasoline, and dining out, and put an amount of cash equal to what you’ve allocated for each category for the month. As the cash dwindles, you’re more likely to manage your remaining cash for the month, and once you’ve run out, that’s it.

However, carrying cash around comes with risks such as theft or loss, and having access to cash can be tempting to spend if it’s readily available. Moreover, you have to make trips to the bank to cash your paycheck or withdraw the cash needed from your account.

To force savings with this system, consider labeling one of the envelopes “savings” and putting cash for savings into it. You may want to move the money to an online high-yield savings account to earn a higher yield.

Ultimately, the best budgeting method for you is the one you can stick with most easily, whether it’s using cash and envelopes or tracking money with an app or other digital system. By understanding the pros and cons of cash stuffing, you can determine whether it’s the right budgeting method for you.