While TikTok first gained popularity for its viral dance trends, these days, the social media platform is being used for much more, including creative personal finance tips like cash stuffing. Cash stuffing is a budgeting strategy that helps individuals save money and reduce debt by storing physical cash in envelopes, binders, jars, or any other type of container.
Cash stuffing videos began popping up on TikTok in 2021 and quickly snowballed into a viral trend among Gen Zers by 2022. Jay Monique is one TikTok user who put her own creative spin on the trend when she popularized storing cash in empty liquor bottles, which gained her 1.2 million followers.
The financial tips these videos provide resonate with Gen Z as they take their first steps into adulthood at a time of economic uncertainty. With consumer prices up 8.2% year-over-year and seasonally adjusted worker wages down by 3%, this generation is looking for help creating a more secure financial future.
While cash stuffing took off recently on TikTok, the trend isn’t just for Gen Z. It’s a budgeting strategy that has been around for years and used by members of every generation. Learn more below about how you can also reduce debt and grow your savings with this popular budgeting tool.
What Is Cash Stuffing?
Cash stuffing is a budgeting method that involves storing cash in physical containers like envelopes, binders, or jars and dividing that cash into spending categories. “The big draw for cash budgeting is to pull all of your money as soon as it hits the bank so you can give that money a job as soon as you get it,” says YouTuber Jordan Budgets.
In 2011, Allison Baggerly and her husband used the cash stuffing method to pay off $111,000 in debt. They budgeted physical cash for anything they tended to overspend on, like groceries, restaurants, and gifts. Making only a teacher’s salary, the Baggerlys were able to pay off their debt in just 4.5 years.
Baggerly writes about why she felt it was important to improve her family’s financial standing with the cash stuffing method. “We knew that we didn’t want to raise our children in a home that was burdened with debt and money problems. So, we decided that it was time to focus on becoming debt free and pay off all our student loans and car loans,” she explains.
What Makes Cash Stuffing Effective
There are countless success stories like the one above of people who have used cash stuffing to improve their finances. So, why does it work so well?
Increases Awareness of Spending
Dave Ramsey says, “When you are actually handling cash, it activates the pain centers of the brain. You realize you’re spending money. There’s emotional friction involved, and it causes you to spend less.”
Many people are prone to overspending without realizing they’re losing money. The process of cash stuffing envelopes and other containers draws awareness to every purchase you make and allows you to plan for those purchases in advance.
Reduces Credit Card Spending
TikTok user Miss Max Lara creates videos about cash stuffing. She says, “If you assign your cash to a particular category or purpose, then you are less likely to use that cash for unnecessary things or things that it is not assigned to.”
Credit cards are one of the main culprits of overspending. The average amount of debt is on the rise. In Q1 2022, the average cardholder had $5,769 in credit card debt, up from $5,611 in Q1 2021.
MIT economics professor Drazen Prelec studies why credit cards can be dangerous to your finances. Through his research, Prelec found credit cards increase a consumer’s willingness to pay.
More recently, Prelec studied how credit card spending affects the brain’s reward center. In this 2021 study, Prelec says, “The reward networks in the brain that are activated by all kinds of rewards are activated by a credit card purchase. The act of putting that plastic credit card in your hand is associated with enjoyable purchases.”
Using the cash stuffing method for budgeting eliminates the need for credit cards, making it easier to avoid unnecessary purchases.
5 Steps to Start Cash Stuffing
- Convert income into cash (after electronic bills): Before making a budget, you must know how much money you’re working with. After receiving your paycheck or other sources of income, subtract any money you spend on electronic bills. Convert the rest of your income into cash.
- Calculate and categorize expenses: Calculate how much you spend on categories like food, transportation, healthcare, entertainment, savings contributions, and any other regular costs. Make sure you have a category for each purchase.
- Create and fill each envelope: Label an envelope for each spending category. Fill each envelope with the amount of cash you expect you’ll need before your next pay period. Make sure every dollar of your income goes into an envelope. If you have money left over, add more money to your savings envelope. If you’d like, organize your envelopes in a cash stuffing binder.
- Use the envelopes for each purchase: Now that you’ve created your envelopes, leave your credit and debit cards at home and use only the cash inside the envelopes for purchases. If you run out of money in a certain envelope, you’re done spending money on that category. Don’t borrow money from other envelopes.
- Evaluate and adjust budget: At the end of the month or the pay period, evaluate whether you had enough money in each envelope or if there were envelopes with too much money. Adjust the budget as needed and start the process over again.
Important: The most sustainable budgets are realistic budgets. If you set goals that are too restrictive, it will be easy to give up on your budget. Make sure you put enough cash in each envelope to fully cover all necessary expenses. If you don’t have enough to cover each spending category, look for ways to make extra money.
Alternative Cash Stuffing Methods
Electronic Cash Stuffing
While the cash stuffing method is traditionally done with physical cash, some want to avoid holding onto large amounts of cash. Physical cash can be inconvenient to carry around, and it is possible for it to be lost or stolen. Budgeting apps allow you to create virtual envelopes and assign dollar amounts to each one. But you won’t have to deal with the inconvenience of carrying physical cash.
If you choose to start cash stuffing with a budgeting app, it’s important to note you may miss out on the psychological budgeting benefits of cash stuffing with physical money. You won’t experience emotional friction when you hand over cash during a purchase. Because of this, electronic cash stuffing is best for people who feel confident they can stick to a budget with just a moderate amount of support.
To start electronic cash stuffing, try these apps:
1–100 Saving Challenge
The 1–100 Saving Challenge works differently from traditional cash stuffing. Rather than an overall budgeting tool, the 1–100 envelope system is a tool for building a savings fund. At the end of the challenge, you’ll have $5,050 to put toward savings. To participate in this saving strategy, follow these steps:
- Gather 100 envelopes.
- Label each envelope with numbers 1–100.
- Set a target date for when you will have completed the 1–100 challenge.
- Fill each envelope with the amount of cash that corresponds with the label. For example, the envelope labeled “50” will have fifty dollars in it. By your target completion date, every envelope should be filled.
TikTok user, Teryn Makayla explains how she used this cash stuffing strategy to meet her goal of saving $5,000 more quickly than she expected. She says, “Something I set out to accomplish in a year, I did in less than four months.”
Cash Stuffing Is for Immediate Spending Needs, Not Long-Term Savings
While cash stuffing has its advantages, it’s not for everyone. It’s best to use cash stuffing for immediate spending needs rather than for storing large amounts of savings. Here’s why cash stuffing should be used sparingly:
- Inflation: During high inflationary periods, every day you hold onto cash, it loses purchasing power. In 2022, inflation has hit highs that haven’t been seen in the United States in 40 years.
- Unable to build credit: Cash stuffing helps you avoid credit cards and while credit cards can be dangerous, they also help you build credit. A good credit score is essential for anyone looking to buy a house or finance other important purchases in the future. If you do not have any lines of credit open, you may want to consider using a small credit card for one of your spending categories.
- No investment ability: While your money sits in an envelope, it can’t grow. Investing your money is a better strategy for building wealth.
Cash stuffing is best for immediate spending needs. For long-term wealth building and savings, consider putting your money into reliable investments.
Check out these articles for investment tips:
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