Discover Cash-based Budgeting

Aug 9, 2023


Cash stuffing—the hot new trend with decades-old credentials—is a hugely popular budgeting method that aims to do more with less: stripping finances back to basics to manage spending and save towards future goals. As people worldwide face increasing economic struggles, this is one life hack that works.

The Cut’s financial advice columnist Charlotte Cowles recently examined the phenomenon, trying it for herself and finding it made her feel more accountable for her money, concluding she would ‘stick with it for a while longer.’

‘Cash stuffing’—popularised most recently on TikTok, but more traditionally called ‘the envelope method’—is a budgeting system that uses cash to manage expenses. It takes advantage of the physical nature of banknotes and coins, along with human psychology, to find the optimal balance of incomings and outgoings.

The stuffing side of the technique refers to placing cash into envelopes, each of which is allotted to a particular expense, starting with essentials—such as rent, groceries and transportation—and progressing through to luxury items or savings. These latter envelopes are filled last, only when the former have been adequately covered.

The clever psychology comes into the spending side. There is a scientifically-observed ‘pain of paying’ with physical money that makes people think twice before handing over their hard-earned cash, and can deter frivolous spending. Cowles says: ‘I tried a version of the cash-only method years ago. It kept me accountable for my spending and helped me save a bunch of money.’

Carmen Perez—founder of financial coaching service Make Real Cents—is also a cash fan, and speaks in favour of using it tactically alongside cashless options. Every two weeks, when she was paid, she withdrew cash for budgeted spending and left the rest in her bank account.

I had envelopes for groceries, gas, going out, date-night money, therapy, Ubers, and upcoming trips. If I spent money using a card, maybe for an Uber or to split a group dinner on Venmo, then I would just move the cash out of the corresponding envelope and deposit it back into my account the next time I went to the bank.
"Carmen Perez, Founder of Make Real Cents

While on the surface this may sound complex, Perez explains it actually made the mental arithmetic of budgeting easier, since she had a quick, visual reference for all her spending, which helped her plan and save.

If you have a certain amount allocated, in physical envelopes, it’s easier to know exactly how much you have left. [Sometimes I would overspend in one envelope and dip into another] but that was fine. The envelopes were just there to provide organisation.
"Carmen Perez, Founder of Make Real Cents

Charlotte Cowles’ approach to cash stuffing diverges from a categorised budget, and instead just gives her a maximum daily spend. Once the cash is gone, she can’t buy anything else. She likens it to giving herself an allowance.

I found it strangely satisfying and easier than I anticipated. Taking stock of my daily cash allotment makes me feel more accountable. I’m responsible for giving those dollars a job to do, and I want to be thoughtful about it.
"Charlotte Cowles, Financial Columnist, The Cut

While variations can be incorporated to personalise the technique, and cashless options can be involved where they make sense, the core remains the same: using cash helps take control of budgets and encourages healthier spending habits.

Last Updated: Aug 9, 2023