Cash Stuffing: The Envelope Budgeting Method

Budgeting can seem like a daunting task. With so many methods and theories on how to best budget your money, finding the option that works for you can be challenging. Sometimes, the simplest means is the ideal solution. Enter the Envelope Budgeting Method.

Envelope budgeting is a timeless strategy gaining in popularity due to its relative ease and visual cues. Its simple approach allows you to track where your money is going and help keep you accountable with your spending plans.

What is the Envelope Method?

The envelope method is a budgeting system that’s been around forever due to its minimal effort and straightforward approach to managing expenses. With this method, you split your money into categories and decide how much you want to spend for each.

The envelope method differs from other budgeting systems in that you allocate these funds in an envelope for each category. Once you’ve emptied an envelope, you’re done spending for that category for the rest of the month.

Although the envelope system has been around for quite some time, it’s recently seen a resurgence in popularity under a new name. The “cash stuffing” trend has been circulating on social media and finance websites, exposing a new wave of budgeters to this effective method.

How It Works

While a relatively simple budgeting method, cash stuffing proves successful time and time again. Follow these steps to craft your spending strategy:

  • Create Your Budget Blueprint:

Start by listing out all your monthly expenses. Write out your monthly cost for fixed expenses that stay the same month to month, like rent, insurance, car payments, etc. For variable costs that may differ each month, like groceries, shopping, etc., review your spending over the last 6-12 months and determine the average amount you spend in these categories monthly.

  • Label & Stuff Your Envelopes:

Write the name of each expense category on your different envelopes. Take your cash and divvy it up between each envelope based on the amounts you determined in the previous step. For example, if your insurance payment is $150 per month, place that amount in the envelope labeled “Insurance.” If you average around $400 monthly on groceries, put that amount in your “Groceries” envelope.

  • Spend Your Envelope Cash:

Once you’ve emptied all the cash from a particular envelope, you can’t spend any more for that category until you start over next month. However, you can move some cash out of a different envelope – but understand that means less money to spend in the category you’re borrowing from. For example, if you have an unexpected cost pop up in your “Pet Care” category and borrow from “Dining Out,” be prepared to eat at home more that month.

Why It Works

The envelope method works well for those who prefer to have a visual of how they’re spending their money. It can help you gain a deeper understanding of your cash flow and bolster accountability for your spending.

The envelope method also works great for variable expenses that can change each month, depending on your plans and schedule. Many people who follow this method focus solely on their variable spending, leaving their fixed expenses set up to transfer funds online automatically. This way, you get the best of both worlds! You know your bills are covered, and you only need to handle what’s left.

How to Modernize the Envelope Method

If keeping cash isn’t ideal for you but you still want to organize your finances, the envelope system is easily adaptable to modern methods. Here are a few examples:

  • Empty Envelopes:

Tracking your monthly expenses is the best way to stay within your budget. However, if you don’t want to keep a bunch of cash around the house, you can still use envelopes to budget.

Using the steps listed earlier, write a category name and dollar amount on the outside of a blank envelope. Then, each time you spend money related to that category from your account or with your debit card, subtract that amount from the total on the envelope. It’s a simple strategy to monitor your spending and organize your category totals.

  • Go Digital (Banking):

Many financial institutions allow you to create sub-accounts through online banking. If you need help to complete this online, ask your institution for assistance. For example, you can set up a sub-account for specific categories like rent, groceries, insurance, etc.

If you’re limited on the number of sub-accounts you can create, consider simplifying the process with fixed expenses (e.g., rent, car payment, insurance) and variable expenses (e.g., groceries, gas, clothing). Then, you’ll manage the funds the way you would with the traditional envelope method. Once you’re out, you’re out – unless you transfer funds from another category.

  • Use Pre-Paid Cards:

Another alternative to the traditional envelope method is to use pre-paid cards. You can purchase several pre-paid debit cards or gift cards from your local retailers and label each with a different budget category. You can easily load and reload funds onto these cards and keep them in your wallet as a convenient alternative to envelopes stuffed with cash.

  • Go Half & Half:

In today’s digital age, most bills are easier (and cheaper!) to pay online. Especially if you take advantage of Online Bill Pay and other automated payment services. You can go half-digital for these necessary payments and half-cash for the remainder of your expenses.

Most people find using cash for discretionary spending, such as dining out, shopping, and entertainment, easier and more beneficial. When you see your money disappearing with each purchase, you begin to think twice about frivolous spending.  

We’re Here to Help!

Yes, budgeting can be tedious; however, it’s the best way to keep your money organized and achieve your financial goals. The Envelope Budgeting Method delivers a simple, straightforward, and effective means to manage your money successfully.

Whether you choose to use the traditional envelope method, modernize cash stuffing, or incorporate the half-and-half process, you’re sure to gain insight into your spending and improve your financial situation.  

If you want to learn about creating sub-accounts or have questions about budgeting more effectively, we’re ready to help. Please stop by any of our convenient branch locations or call 801-451-5064 to speak with a team member today.

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