Can Cash Stuffing Help You Save More in 2025?

If your finances are messy and unorganized, it might be time to start a budget. Dave Ramsey’s envelope budget system is a popular method that helps you physically see where your money goes each month. But before you start, you should understand how the envelope system works. 

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What is the envelope budget system? 

Envelope budgeting, also known as the “cash-stuffing method,” might seem old-fashioned in today’s digital world — but it’s a helpful way to visually manage and keep track of your money. 

Each envelope represents a spending category, like groceries or entertainment. Label each envelope accordingly, stuff it with a designated amount of cash, and only spend what’s inside. This method helps you avoid using credit cards or dipping into your checking account.

How to use the envelope budgeting system 

Cash stuffing is easy and only requires a few materials and steps. 

1. Calculate your monthly income: The first step in any budgeting method is to figure out how much money you have to work with. To do this, you’ll need to calculate your after-tax income. You should include your regular income and anything earned from side hustles, investments, alimony, or child support. 

2. Create spending categories: With an idea of how much you’re bringing in, you can start categorizing your spending. These categories will be the labels on your envelopes. They will vary depending on your individual spending habits, but some popular categories include: 

• Groceries
• Transportation
• Household items
• Pet care
• Dining out and food delivery
• Entertainment
• Personal care
• Gifts 

You don’t need to include fixed expenses like housing, insurance, utilities, and debt payments as part of your envelope budget system unless you want to. These types of payments are often made online with autopay and linked to a debit or credit card to make your bills easier. 

Even Ramsey says, “I don’t use the envelopes for everything. I only use them for things. . . when you’re away from home.” He agrees that keeping large bills separately on autopay is the safest way to go. 

3. Add cash to each envelope: Once you’ve created your envelope budgeting categories, it’s time to divvy up your cash. You can determine each category’s spending limit by looking at last month’s receipts and bills. From here, you can get realistic numbers to use for each envelope. 

Now you can create and label your envelopes and withdraw cash from your bank account. Stuff each envelope with the amount you’ve set for each category based on your totals from last month. An example of an envelope budget will look something like this: 

• Groceries - $400
• Transportation - $120
• Household items - $50
• Pet care - $80
• Dining out/food delivery - $120
• Entertainment - $80 

This cash stuffing method can help you save money if you’re trying to decrease your spending. Suppose you spent $120 on food delivery last month but want to reduce your spending. Maybe you can try reducing your takeout envelope to $80 and see how it goes. 

4. Spend the money in each envelope: The envelope budgeting system works best when you shop in physical stores and spend cash rather than paying with your debit or credit card. Always bring your envelopes with you when you leave the house and only spend the money within each category. Try not to dip into other envelopes. 

With envelope budgeting, you can track how much you’re spending by writing the cash balance on each envelope and subtracting your spending amounts. 

5. Adjust your budget as needed: It may take a few months to perfect your envelope budgeting system. You might find that you underestimated or overestimated the amounts you allocated to each envelope. This is part of the budget learning process and it’s okay to change the amounts. 

➢RELATED: Download our FREE budget tracker

Pros and cons of envelope budgeting 

As with any budgeting method, the envelope budget system has some benefits and drawbacks. 

Pros 

• Simple system: Envelope budgeting is simple, making it easy for everyone to learn. You only need basic math, and there is no technology involved.
• Could keep you motivated: Since the envelope budget method uses physical cash, you’ll have a visual of where your money is going. Physically moving the money around can make you feel more accountable. So, you’ll feel motivated to spend less.
• No overdraft charges: Since envelope budgeting limits spending to the amount of cash left in each envelope, you don’t have to worry about accidentally overspending. That means no overdraft fees like you’d have with a checking account! 

Cons 

• Cash can be less secure: Carrying cash is riskier compared to shopping with a debit card. Cash isn’t replaceable if you lose it, whereas your money is typically insured if you lose your debit card.
• Could be difficult for people who don’t use cash: If you primarily use your debit or credit card to make purchases, switching to only cash can be a challenging adjustment. Cash is easy to forget about if you’re suddenly using it for your purchases. This budget system also won’t be as effective for those who do most of their shopping online. 

Envelope budget vs. other budgeting systems 

Cash stuffing is one of the easiest ways to budget, but there are other budget options out there if it isn’t for you. 

Zero-based budget 

The key concept behind zero-based budgeting is that every dollar must be accounted for. 

Zero-based budgeting involves subtracting your expenses (including savings and debt payments) from your income. At the end of the month, it should equal zero. While it’s flexible, you’ll need to hold yourself accountable and closely monitor your spending. 

50/30/20 budget 

The 50/30/20 rule divides your after-tax income into three categories, including 50% for essential needs, 30% for wants, and 20% for savings. 

This method offers more flexibility than envelope budgeting, but the downside is that overspending is easy. The 50/30/20 budget also may not work well for low-income earners with high housing costs. 

The 60% solution 

Another percentage-based budgeting method is the 60% solution. You’ll designate 60% of your income to “committed expenses,” which include housing, food, personal items, insurance premiums, taxes, bills, and household items. 

The remaining 40% is divided equally between retirement savings, short-term savings, long-term savings, and “fun money.” 

Is the envelope budget system right for me? 

The envelope budgeting is highly effective in preventing overspending and allows you to physically see where your money is going. But if you want it to work, you’ll need to be okay with designating time to stuff envelopes every month. If you feel like you’re ready for this accountability, go for it!