Photo illustration: by The Cut; Photo: Getty Images
Calm down by shuffling fragile banknotes that are counted, stacked, sorted, and placed in labeled envelopes? Do you find it difficult to keep track of where your money is going? Allow me to direct you to The “stuffing money” phenomenon on TikTok. Also known as the “envelope method,” this is a budgeting system where you pay for things only with the physical cash you have set aside for them. The idea is that when your precious paper dollars are tangible and accountable, you’re less likely to misplace them, say, whichever sale tab you’re currently open in.
Popularized by the radio personality (ur Doubtful guru) Dave Ramsey more than a decade agoThe original envelope method followed a strict formula. Every time you got your salary, you would pay your fixed bills (housing, phone, etc.) and cash out the rest. Then I divided that cash between the envelopes for each budget category (groceries, transportation, hobbies, etc.) and she just cashed in what was inside. (In Ramsey’s words, “When it’s gone, it’s gone.”)
Versions of this strategy have helped a lot of people (including me) with their finances. You can even buy Special pre-labeled cash folders and cash holder on amazon. But until recently, I hadn’t thought about the envelope system in years. Paying for everything in cash is not only annoying, but impossible these days, and sometimes even rude. (Just watch everyone’s faces in the line behind you when you start fumbling with bills at the checkout counter.)
Like most busy adults who hate carrying things around, I also do most of my shopping online, where cash is just an abstract concept. But even if I don’t, a lot of the stores in my neighborhood are cashless. In addition, credit cards are not everyone Bad – Most offer benefits like points, better consumer protection, and opportunities to build credit. Or so I tell myself as I use it to pay for my life.
However, the argument for cash-only is compelling. Research has shown Using cash increases the “pain of paying,” also known as the sinking feeling of parting with your finances when you make a purchase (or even think about it). Other studies have found that when people use cash, they do Tend to spend less; them too They feel more connected to the things they buy. When I tried a version of the cash-only method years ago, it kept me accountable for my spending and helped save me a bunch of money.
So, how do you balance the advantages of cash budgeting with our expensive, money-sapping reality of cards and payment apps? When I talked to people who are incorporating fillers into their daily lives, they all admitted that it’s not perfect, but it’s worth a try.
First and foremost, you don’t need to go in full Cash only – think about what’s realistic. Most of your fixed bills (such as rent and internet) can only be paid with a check or card. Don’t fight it.
Instead, focus more on the spontaneous spending that you do on the go that you actually need to budget for. You can also use cash-stuffing for short periods of time—say, a month, a week, or even a few days—to course-correct if you’ve been overspending. It doesn’t always require the combat precision you might assume.
In its strictest form, the envelope method involves dividing your money according to different budget categories, or “buckets,” and then spending it accordingly. But how is this done in practice?
As for Carmen Perez, who stuck to the envelope method for four years to pay off $57,000 in debt, buy a house with his wife, and start her own business (she’s an entrepreneur… Make real cents, a financial coaching service), it took some flexibility in the beginning. “When I started, my spending was on the map,” she says. “Three out of five Americans have no idea how much they spent last month, and I was one of them.” She needed to keep track of her expenses, and using cash was better than anything else she’d tried.
Every two weeks, when Perez got paid, she would withdraw cash for the spending specified in her budget and leave the rest in the bank (her savings and debt payments were automatically withdrawn from her account). Then she would spread the money among her different expense categories. “I had envelopes for groceries, gas, going out, lilly money, therapy, Ubers, and upcoming trips,” she says. “If I spend money with a card, maybe for an Uber or to split a group dinner on Venmo, I will move the money out of the corresponding envelope and deposit it back into my account the next time I go to the bank.”
It may sound complicated, but using cash made it easier for Perez to do the mental math related to budgeting. “I’ve been able to make two weeks at a time. If you have a certain amount set aside, in physical envelopes, it’s easier to know exactly how much you have left,” she says. Sure, sometimes she overspent a little in one area and had to dip into another envelope. “But that’s fine. The envelopes were just there to provide organization,” she adds.
It was also important to budget realistically. “I wasn’t trying to be too restrictive,” she says. “I still had envelopes for the fun stuff, too, because I knew if I didn’t, I’d be setting myself up for failure.”
If this still seems too difficult and stressful, I understand. You can also take a more modified route. I know people who selectively use cash to limit spending in situations where they are more inclined to shop. One of my friends never leaves the house with more than $20 on the weekends (and no cards to backup—though she could technically use Apple Pay on her phone, in a real emergency, but she never had to). When the $20 is gone, that’s it – she has to go home.
Another friend turns to cash when he comes home from a trip or has a period of extravagant spending and wants to rein in himself. “I’ll just go to the bank, take a chunk of cash, and try not to use any cards for a few weeks until the money runs out,” he says. “It’s not a set budget per se, but it creates more friction when I buy things. I always end up spending less than usual as long as the money lasts.” Sure, the cashier sometimes gives him a dirty look when he pulls out a batch of bills at the grocery store, he says. But for the most part, it’s a useful exercise.
I tried to pay cash only. But instead of following a graded budget (with certain amounts set aside for food, drinks, coffee, etc.), I’ll give myself the maximum amount I’m allowed to spend per day. If you spend less, whatever is left is rolled into the next day. It’s almost like giving myself a dole.
Prior to this week, I had not used the daily allowance method for a few years. But once I put it back in for a few days, I found it oddly satisfying and easier than I expected (like Carmen, if I use a card to pay for something, I just remove the cash I’ve spent so it “counts” against my daily total). Valuing my daily cash allowance makes me feel more accountable; I’m responsible for giving those dollars a job to do, and I want to be thoughtful about it.
For now, I plan to stick with it for a while longer. At the very least, it reminds me that I’m not just a sieve through which money passes on its way to buy clothes for my kid or pick up groceries for dinner; I have to decide where to go.
Charlotte Cowles, financial advice columnist for The Cut, answers readers’ personal questions about personal finance. Email your money puzzles to [email protected].
“Web maven. Infuriatingly humble beer geek. Bacon fanatic. Typical creator. Music expert.”