When Giovanna \u201cGigi\u201d Gonzalez wanted to cut back on her food spending, the finance expert and money coach applied what is known as the \u201ccash-stuffing\u201d method of budgeting. She put the cash she allotted to food for the week into an envelope and limited her spending to that amount.<\/p>\n
\u201cI could see when I had just 20 bucks left for the week, so it was really helpful,\u201d she says.<\/p>\n
Popularized through TikTok videos, cash stuffing has brought back the old-fashioned\u00a0envelope system\u00a0of budgeting: You divide up your cash into different envelopes, each dedicated to a category of spending or saving. \u201cIt\u2019s a tried and true method,\u201d says Gonzalez, who also founded The First Gen Mentor, a money course where she promotes financial literacy.<\/p>\n
If you\u2019re considering joining the cash-stuffing movement yourself, here are some guideposts:<\/p>\n
Cash stuffing requires an upfront time commitment because you need to plan your spending, withdraw your cash and then \u201cstuff\u201d it into labeled envelopes. That process could easily take an hour or two to get prepared for the week ahead.<\/p>\n
\u201cIt\u2019s an additional time commitment,\u201d Gonzalez acknowledges, but the upside is that \u201cyou immediately feel more in control of your money.\u201d<\/p>\n
Check out: <\/strong>These are the biggest lottery prizes in U.S. history.<\/p>\n With so much cash on hand, it\u2019s important to secure it, says Bruce McClary, senior vice president of membership and communications at the National Foundation for Credit Counseling. \u201cThere are all kinds of risks involved if you\u2019re stuffing cash in places where you might forget it or heaven forbid something happens and the cash burns,\u201d he says.<\/p>\n Tim Melia, a certified financial planner and founder at Embolden Financial Planning in Seattle, suggests keeping the cash envelopes in a fireproof safe that locks. He adds that while news about bank collapses likely contributed to the appeal of cash, an\u00a0FDIC-insured\u00a0bank account is still the safest place to store money. (The Federal Deposit Insurance Corp. insures up to $250,000 per depositor, per bank and per ownership category.)<\/p>\n Don\u2019t miss: <\/strong>Thieves can empty your bank accounts if you\u2019re still using this outdated payment method<\/p>\n Gonzalez likes the idea of cash stuffing for everyday expenses but then moving larger amounts for savings or something like a house down payment into a bank account. \u201cI don\u2019t want that money sitting in an envelope,\u201d she says. Also, cash doesn\u2019t earn interest, but if you move the money into a\u00a0high-yield bank account, it can grow.<\/p>\n Melia says cash stuffing is a great way to get started with budgeting and see where your money is going for a month or so. \u201cThen, transition to a spreadsheet and bank account,\u201d he recommends, noting that the discipline of the cash-stuffing method can stick with you.<\/p>\n McClary points out that many banks allow you to create digital envelopes for different categories in the form of separate bank accounts. For example, you might have labeled accounts for travel savings, down payment funds and everyday expenses, as well as a \u201cfun money\u201d account.<\/p>\n \u201cThe money is still deposited with a financial institution and insured through the FDIC, but you are able to accomplish this kind of envelope approach and segment it into different spending categories,\u201d McClary says.<\/p>\n Severine Bryan, a personal finance educator and accredited financial counselor candidate, uses an approach she calls \u201cfaux cash stuffing\u201d because she doesn\u2019t carry the bills around. Instead, she assigns set dollar amounts to different categories like food and transportation, makes sure not to exceed those dollar amounts, and uses her credit card to earn cash back while she spends.<\/p>\n \u201cI\u2019m not using cash, but it\u2019s the same idea,\u201d she says.<\/p>\n Also on MarketWatch<\/strong>: My sibling \u2018borrows\u2019 hundreds of thousands of dollars from our parents. Should I take my inheritance now before it\u2019s too late?<\/p>\n For some fans of the cash-stuffing method, the appeal comes down to the fact that you\u2019re touching real cash. \u201cIt feels more real and you\u2019re more aware of your spending, whereas if you\u2019re swiping a credit or debit card, or buying something on Amazon McClary notes that others are drawn to the simplicity of the method. \u201cIt\u2019s not overly complicated and you are less likely to end up in debt because it keeps you spending within your means.\u201d<\/p>\n Bryan says that cash stuffing likely works best for people who are more visual. \u201cIf you don\u2019t want the friction of writing numbers down, this method becomes more fun with colorful envelopes. It doesn\u2019t even feel like budgeting,\u201d she says.<\/p>\nKeep your cash safe<\/strong><\/h2>\n
Consider a hybrid approach<\/strong><\/h2>\n
Decide whether it\u2019s a good fit<\/strong><\/h2>\n
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\n it doesn\u2019t feel real. It\u2019s just the click of a button,\u201d Gonzalez says.<\/p>\n