You May Have To Pay A Price For Tiktok's Budgeting Challenges

There's something demoralizing about playing games that require you to save a certain amount every day. 

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The "New Year, New Me" challenges most people set a few weeks ago are likely to have failed. In too many cases, short-term lifestyle and physical plans don't stick, such as Dry January. 

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In the world of finance, people try to compensate for financial mistakes from the previous year by hacking in January and February. 

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It has been a while since I last tried a money challenge. Occasionally, I believed I could squeeze a little more money out of my then-paltry income with some catchy strategy, even though I would love to put it down to professional curiosity. Savings challenges can seem attractive in the short term, but they're not sustainable. Once people abandon these challenges, they feel demoralized. 

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TikTok and other social media platforms have become increasingly popular, so proceed with caution. To build a strong financial behavior, you should build it on a foundation that's simple, easy to automate, and sustainable.

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There was a $5 challenge that was popular several years ago. Whenever you received $5, you had to put it into savings for the next time. The system required you to pay for things with real cash. It wouldn't be difficult for you to have saved a few hundred dollars after a few months. 

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During the start of the year, there is also a 52-week challenge that can be completed digitally and continues to be popular. It can be done in many different ways, but the easiest is to start with a dollar in savings and add a dollar each week for the entire year. Because the increase takes place incrementally, you will end up with an extra $1,387 by year's end.

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There is a popular savings hack that is taking TikTok by storm called the "100 envelopes challenge," which promises to save users $10,000 within 100 days. Rather than setting up a challenge with 100 envelopes numbered 1 through 100, the goal should be to save a certain amount every day. Every day, you can reach in and grab one envelope to see how much you need to save. You can go in order or you can shuffle the envelopes and place them in a box. You may draw an envelope with the number 45 on it, and to fill the envelope, you have to take $45 from your checking account. 

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Others may have no problem setting aside a sum, while others may have to sacrifice bills or necessities in order to do so.

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Making budgeting and saving goals more fun by participating in challenges is a good idea. In reality, most people's cash flow does not permit them to save as much as $10,000. 

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Congressional Budget Office estimates that American households have an average post-tax income of $65,345 in 2021. While it isn't impossible to save $10,000 on that salary in 100 days, you will need to assume that living expenses are low in order to do so. 

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A person's financial situation can be tailored to any of these challenges - but that means that the proclamation of saving $10,000 in 100 days will not be met. Quick videos tend to be too generic and don't allow for much discussion about how to modify a savings challenge to suit your life realistically. It isn't possible for everyone to save $10,000 in 100 days, regardless of how committed and determined they are. 

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Saving or budgeting techniques that rely on cash are the most common problems that I have because they leave money on the table. When high-yield savings accounts provide decent returns right now, encouraging people to leave large sums of cash sitting around is a waste. If you keep your cash in a box at a low return and there is a likelihood that it will go missing, you'll be losing out on hundreds of dollars over the course of a year if you leave it in the box at a 0% return. 

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Rather than a savings challenge, setting up a 401(k) or savings account to get a portion of your paycheck before it hits your checking account is a better way to boost savings over time. Savings accounts are typically set up with 10% of your income and 15% going to retirement. 

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The benefit of doing this is that you will no longer be able to justify why you can't save as much because of your finances and you will be less likely to save only what you are left with at the end of the month - an ineffective strategy for saving money. Saving more money over time or simultaneously when you receive a raise or pay off debt is another way to increase your savings rate. 

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There's nothing exciting about it, I know. It's for this reason that flashy savings hacks are so popular. Basically, they're the fad diet of the personal finance community. The methods get a lot of press, but most people just return to their original behaviors after a few months. Do not hesitate to try a savings hack if you are eager to do so. For real success, however, it must be coupled with consistently automated behavior.