Should You Try the Money Envelope Budgeting System?

Creating and maintaining a budget is one of the best ways to stay on track with your finances. Budgeting allows you to save up for large purchases such as a down payment on a car or home, build an emergency savings fund or even pay off high-interest debt. 

But with inflation on the rise, it may be time to take a second look at your budget and make some adjustments. Cash Stuffing has gone viral on popular social media sites as people look for new ways to adjust their spending to accommodate increasing prices at the gas pump and store shelves. 

If your previous budget is no longer realistic or could use some adjusting, you may want to consider this retro method. We’ve put together some things to consider to help you decide if this tool is right for you and your money.

Cash stuffing has actually been around for years and is a rebranding of the money envelope system.

Cash stuffing, or money envelope budgeting, is when you withdraw cash on payday and divide it into dedicated envelopes, for different expenses and savings categories, like gas, groceries, utility bills, dining out, vacation, holiday shopping, etc. The money you store away in each envelope is the maximum you can spend. Some people use a small accordion file folder rather than envelopes, so their cash is all in one place and stored in something sturdier than a paper envelope,  but the choice is up to.

If there is any money leftover in an envelope by the time your next pay period comes around, you can leave the extra funds in that envelope for an extra boost or roll the money into another envelope that may be low.

Now that you have a better understanding of what this budgeting tool is, it’s important to highlight some of the pros and cons of Cash Stuffing.

Pros

  • Your budget becomes more tangible
  • You’re not charged overdraft fees if you overspend
  • You’ll avoid credit card debt
  • You’re less likely to make impulse purchases
  • You’ll build better spending habits

Cons

  • Your cash can be lost or stolen
  • You won’t build credit when paying with cash
  • Your purchases won’t earn rewards or cash back perks
  • You may have a harder time reviewing your transaction history
  • Your money won’t earn interest

Following the envelope budgeting method takes discipline, but it can be well worth it for certain people. It’s important to do what’s best for you, so if you prefer a digital approach there are plenty of helpful tools to help divvy up your money.  

Having multiple savings accounts is an updated version of the Cash Stuffing and Envelope System method that makes it easier to manage your money.

AFFCU members can open multiple Secondary Savings Accounts, each new savings account will be its own “envelope.” You’ll be able to name each Secondary Savings Account after the monthly expenses or goals you’re saving for like you would when stuffing an envelope.

Using Multiple Secondary Savings Accounts is as simple to understand and far more secure than paper envelopes filled with cash. You can easily set up automatic transfers to each savings account, earn dividends and move money between each account as needed. Best of all, all of the accounts can be managed within Online and Mobile Banking.

Need some more help getting started with budgeting and getting control of your finances? AFFCU has partnered with industry-leading BALANCE to provide you with free access to expertly-crafted financial education and resources to help with your fiscal matters. Learn more about BALANCE.