Budgeting can be difficult and time-consuming. "Cash stuffing," also known as the envelope method, has emerged in recent years as a straightforward money management tool that enables users to put hard limits on their spending.
It's found increasing popularity on TikTok, where clips with the hashtags "#cashstuffing", "#cashenvelopesystem" and "#cashenvelopes" have garnered more than 3 billion views combined.
A big part of cash stuffing's appeal is its simplicity: Every month, adherents simply divvy up their funds among envelopes devoted to different spending categories. But is this low-tech technique a good budgeting strategy?
Below, CNBC Select explores the pros and cons of cash stuffing, as well as alternatives that offer more bang for your buck.
What we'll cover
- What is cash stuffing?
- Benefits of cash stuffing
- Risks of cash stuffing
- Alternatives to cash stuffing
- Bottom line
What is cash stuffing?
Cash stuffing involves putting money in envelopes earmarked for various spending categories — like rent, groceries, entertainment and gas. Once you use up all the money in a given envelope, you aren't allowed to spend any more in that category until the following month.
The idea of budgeting by physically allocating cash into spending categories is nothing new: Personal finance personality Dave Ramsey has been touting his envelope system for nearly 20 years. But cash stuffing has taken off with Gen Zers and millennials, some of whom are facing credit card debt and inflation for the first time.
Benefits of cash stuffing
While other budgeting methods merely track your spending, cash stuffing physically prevents you from going over budget. Once an envelope is empty, you can't spend any further. That makes it useful if you're an impulse shopper or find yourself coming up short every month.
With cash stuffing, you can better visualize your spending habits and make adjustments. You can also avoid credit card interest and overdraft fees, which can add up quickly.
Risks of cash stuffing
There's no two ways about it: Having large amounts of cash at home is risky. If you were robbed or there was a fire, that money would be gone forever. (Even a disobedient dog could cost you thousands.)
Say goodbye to online shopping, too. Not just for clothes and other merchandise, but movie tickets and meals. And all those trips to the ATM and cash register are time-consuming.
Paying in cash also means you won't enjoy the purchase protection and rewards programs most credit cards come with. The American Express® Gold Card, for example, offers 4X Membership Rewards® points at restaurants and grocery stores and 3X on flights booked directly with airlines or through Amextravel.com.
Members who link their card to the Uber app can also get a credit of up to $120 annually to use on Uber rides and Uber Eats orders in the U.S.
American Express® Gold Card
On the American Express secure site
Rewards
4X Membership Rewards® points at Restaurants (plus takeout and delivery in the U.S.) and at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X), 3X points on flights booked directly with airlines or on amextravel.com, 1X points on all other purchases
Welcome bonus
Earn 60,000 Membership Rewards® points after you spend $6,000 on eligible purchases with your new Card within the first 6 months of Card Membership.
Annual fee
$250
Intro APR
Not applicable
Regular APR
See Pay Over Time APR
Balance transfer fee
N/A
Foreign transaction fee
None
Credit needed
Excellent/Good
See rates and fees, terms apply.
Read our American Express® Gold Card review.
Most importantly, using the envelope method means that money won't be accruing any interest. The Milli Savings Account is a high-yield savings account with a 5.5% annual percentage yield. There's no minimum opening deposit and no maintenance or overdraft fees.
There's even a budgeting feature that lets account holders distribute money into up to five different "jars" and calculate how much they need to meet that financial goal.
Milli Savings Account SMALL
Annual Percentage Yield (APY)
5.50%
Minimum balance
No minimum balance requirement
Monthly fee
None
Maximum transactions
None
Excessive transactions fee
None
Overdraft fees
N/A
Offer checking account?
Yes
Offer ATM card?
Yes
Terms apply.
Relying on paper money may also encourage irresponsible spending. A 2023 analysis of more than 118,000 transactions found shoppers tended to use cash for purchases they felt guilty about or didn't want to think about later, since credit cards leave more of a trail.
Alternatives to cash stuffing
If you want to work on your budgeting but don't want to give up the ease and perks of credit cards, you have some options. CNBC Select's choice for the best cash-back credit card, the Chase Freedom Unlimited® card comes with the Chase Spending Planner, which breaks down your spending into categories and lets you track daily and monthly spending.
The card also offers 6.5% cash back on travel purchased through Chase Travel, 4.5% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and 3% on all other purchases (on up to $20,000 spent in the first year).
Chase Freedom Unlimited®
On Chase's secure site
Rewards
Enjoy 4.5% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery services, 6.5% cash back on travel purchased through Chase Travel, our premier rewards program that lets you redeem rewards for cash back, travel, gift cards and more; and 3% cash back on all other purchases (on up to $20,000 spent in the first year). After your first year or $20,000 spent, enjoy 5% cash back on travel purchased through Chase Travel, 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and unlimited 1.5% cash back on all other purchases.
Welcome bonus
INTRO OFFER: Earn an additional 1.5% cash back on everything you buy (on up to $20,000 spent in the first year) - worth up to $300 cash back!
Annual fee
$0
Intro APR
0% for the first 15 months from account opening on purchases and balance transfers
Regular APR
20.49% - 29.24% variable
Balance transfer fee
Intro fee of either$5or3%of the amount of each transfer, whichever is greater, on transfers made within 60 days of account opening. After that, either$5or5%of the amount of each transfer, whichever is greater.
Foreign transaction fee
3%
Credit needed
Excellent/Good
Member FDIC. Terms apply.
Read our Chase Freedom Unlimited® review.
If you just want a money management tool, the You Need a Budget (YNAB) app is a virtual version of the envelope method. Users allot funds to a spending category, or "job," until all of their available money is assigned. There's a 34-day free trial period and you can link accounts and set spending goals.
You Need a Budget (YNAB)
Cost
34-day free trial then $99 per year or $14.99 per month (college students who provide proof of enrollment get 12 months free)
Standout features
Instead of using traditional budgeting buckets, users allocate every dollar they earn to something (known as the "zero-based budgetingsystem" where no dollar is unaccounted for). Every dollar is assigned a "job," whether it's to go toward bills, savings, investments, etc.
Categorizes your expenses
No
Links to accounts
Yes, bank and credit cards
Availability
Offered in both the App Store (for iOS) and on Google Play (for Android)
Security features
Encrypted data, accredited data centers, third-party audits and more
Terms apply.
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Bottom line
Cash stuffing might appeal to consumers who prefer simplicity or have problems with impulse control. But the risk of having all that cash around — not to mention missing out on interest and card rewards — should make you think twice before labeling all those envelopes.
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For rates and fees of the American Express® Gold Card, click here.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
