Savings challenges work in the short term but ultimately aren’t sustainable and could result in people feeling demoralised as soon as they quit, says Erin Lowry for Bloomberg Opinion.
. Too often we try to make changes all at once through some short-term physical or lifestyle tests that don’t stick.
It's especially important to proceed with caution as they become more popular on TikTok and other social media platforms. Your financial behavior should be built on a foundation that is simple, easily automated and works for the long term.Several years ago, a popular method was the $5 challenge. It required you to pay for things with actual cash, and then whenever you received $5, you had to put it into savings.
You can go in order or you can shuffle the envelopes, put them in a box, and each day you reach in and grab one to see how much you need to save that day. On Day One, you might draw an envelope that says 45 and you must pull $45 out of your checking account to fill the envelope. Any of these challenges can be modified to fit someone’s financial situation - but that means the proclamation of saving $10,000 in 100 days will fall short.
It may not be as catchy as a savings challenge, but the best way to beef up savings in the long term is through automation: Setting a percentage to be routed to a 401 or savings account before a paycheque even hits a checking account. The rule of thumb is typically 15 per cent of your salary toward retirement and 10 per cent into a savings account.
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