With over 368 million views and numbers, a new way to budget money is taking TikTok by storm.
Except it’s not new at all.
The viral TikTok budgeting method known as “cash stuffing” is a revival of an old-fashioned budgeting system that has been around for decades: the envelope system. The recently renamed cash padding method helps people budget and save by “filling” money into envelopes. If this sounds a little strange, don’t worry, we’ll explain exactly how it works.
An increasing number of TikTok users swear by this method, saying it has helped them take control of their finances, pay off their debts, and build savings.
Let’s take a look at the benefits of cash stuffing, how to get started, and whether it’s the right budgeting method for you.
What is money filling?
Cash stuffing is similar to the envelope method, a budgeting technique championed by personal finance guru Dave Ramsey.
Like the envelope system, cash stuffing is the process of stuffing cash into various envelopes labeled for specific budget categories such as rent, gas, groceries, utilities, savings, and more.
You determine the amount of money that goes into each envelope based on your spending and savings goals. For example, you can allocate $150 to gas and $50 to your emergency fund envelope. If you need money for a specific category, you can only use the money in the envelope provided and nothing more, until the next budgeting cycle.
The cash stuffing method relies entirely on cash, eliminating the need for credit and debit cards. This helps users track their spending more easily and eliminates the temptation of impulse purchases.
How topping up money works
The videos under the popular TikTok hashtag “cash stuffing” are admittedly satisfying to watch. Users, mostly women, meticulously count their money and put it in colorful envelopes neatly labeled with their respective budget categories.
It’s no surprise that this budgeting method exploded in popularity: the videos are usually aesthetically pleasing and have an almost addictive quality.
While videos about stuffing money are satisfying to watch, there’s a lot more to it than putting money in fancy envelopes. Cash stuffing requires self-discipline and commitment to work. Here’s how to do it:
1. Determine your budget
The “ritual” of filling cash starts on payday. When you receive your salary, you deduct any fixed costs. Fixed costs are costs that do not change from month to month, such as rent or mortgage payments, car payments, insurance and utilities.
Once you have deducted your expenses, take whatever is left in cash. This amount is distributed over several budget envelopes, as we will see below.
👉 Some people choose to take their full paychecks and use envelopes even for their regular expenses. While it may work for some, it can be cumbersome, especially since many of these bill payments are electronic or automated, eliminating the need to put them in envelopes.
2. Determine your spending categories
Each cash envelope represents a different budget category. The categories you choose will depend on your needs, lifestyle and savings goals. Here are some of the most popular categories among cash lovers on TikTok to get you started:
Supplies – these envelopes should be prioritized when allocating your budget as they are major expenses that you will need to pay:
Savings Goals – you can choose to keep it simple with an envelope labeled “Savings” or multiple savings envelopes. Here are some ideas:
Discretionary Expenses – These are non-essential expenses, but that doesn’t mean they shouldn’t be considered once you allocate money to essential categories.
Dining OutEntertainment Beauty & Hair CareGifts Shopping
☝️ While everyone has essential cash-filling categories like gasoline and groceries, other envelopes will look different from person to person. Think about the categories that are most important to you when you start making your envelopes.
3. Fill your envelopes
Divide your money into piles based on denominations – one dollar bills, fives, tens, twenty, and so on. This makes it easier to distribute the amounts in their respective envelope.
Now comes the part you’ve seen in every TikTok money filling video: you get to put the money in separate money filling envelopes, each marked with a different budget category.
The amount of cash you “fill” into each will depend on your budget and spending goals for each category. For example, to estimate how much cash to put in your envelope labeled “gas,” look at the average amount you’ve spent on gasoline over the past few months. Some envelopes get less money than others if your goal is to curb your spending in that category.
When in doubt, follow the 50/30/20 rule. This budgeting guideline allocates 50% of your money to needs like groceries or childcare, 30% to wants like dining out and 20% to financial goals like saving or paying off debt.
People who use the cash stuffing method keep track of their budget using a notebook. Writing down your expenses and savings can help you organize your expenses and track your progress.
4. Only spend what’s in each envelope
Remember how I said you needed discipline and dedication to make this work? Here’s why: You may only use the money in each envelope for that specific category and nothing else. For example, if you pay for groceries, you can only pay for them from the “groceries” envelope you designated.
If you run out of money in one envelope, you can’t “borrow” from another. You will have to cut spending and make some sacrifices until the next budgeting cycle.
5. Refill your envelopes
People typically fill their envelopes and check their budget every payday, be it biweekly or monthly.
If you have money left over in an envelope at the end of a budgeting period, rejoice! You can reward yourself with something tasty or spend the leftover money on a goal, such as saving or paying back your debts.
The benefits of filling money
The cash stuffing method helps you take control of your finances, especially if you struggle with compulsive spending and impulse buying.
If you pay for everything in cash, you are more aware of the money you are spending. Cash is tangible and saying goodbye makes you think twice about what you’re spending it on. A credit card, on the other hand, is far too easy to swipe. Research by Duncan Simester and Drazen Prelec of MIT found that the willingness of shoppers to spend money increases by 100% when using credit cards instead of cash.
Cash stuffing also helps you stick to a budget and prioritize allocating money to necessities like rent, bills, and groceries. Because each envelope has a purpose, it helps you to consciously spend on things that align with your goals. If you are mindful of every dollar you spend, you are less likely to waste money on unnecessary things.
The monthly or bi-weekly ritual of restocking your envelopes gives you a chance to rethink your budget, savings goals, and review your finances. This will help you develop healthy financial habits and relive financial stress because you don’t have to waste energy on mental accounting every month. You know exactly which bills you have paid and where your money is going.
Is cash filling something for me?
Cash stuffing is especially useful for people who struggle to control their spending and credit card usage. Avoiding credit card use and only spending the money you have in your envelopes will help you avoid building up credit card debt.
But this method may not be for everyone. Relying on cash to pay for everything in an increasingly cashless society isn’t exactly practical. If you’re at the grocery store and realize you’ve forgotten your envelope, you’ll have to go back home and get it, following the cash-filling rules.
Another challenge when filling cash is the safety aspect. Some people don’t feel comfortable carrying envelopes full of money with them every time they leave the house. If something happens to it, you’re out of luck. Keeping your money in a bank account is a much safer option as it is insured by your bank.
Speaking of bank accounts, having a savings envelope is equivalent to hiding your money under a mattress. If you don’t give your money a chance to earn interest and grow, it loses value over time, especially when inflation has risen to 8.5%.
Cash Filling Alternatives
If you prefer to budget online, you can take the cash stuffing concept and give it a digital spin. Budgeting apps and personal finance software like Mint or You Need A Budget can help you create custom budgets and link them directly to your bank accounts.
For example, Mint tracks your expenses and allows you to choose budgeting categories, mimicking money envelopes without having to keep and carry cash with you.
Get started with money filling
The recently rediscovered envelope system, now rebranded as cash stuffing, has helped countless TikTok users take control of their finances and keep up with the rising cost of living.
Thinking about giving cash stuffing a try? Grab a few envelopes and a marker and you’re good to go. If you want to get more creative and have fun with it, look for cash filling templates or fancy cash filling binders on websites like Pinterest or Etsy.
And remember, if it’s not the right choice for you, there are many other budgeting options you can try until you find the one that’s just right.
This post What is it and can it help you?
was original published at “https://finmasters.com/cash-stuffing/”