The 100 Envelope Challenge is a viral budgeting challenge that originated on TikTok. It aims to gamify saving money, making budgeting more appealing and fun. The goal of the 100 Envelope Challenge is to save $5,050 over the course of 100 days. This viral challenge can be completed digitally with minimal alteration while the traditional method involves the use of 100 physical envelopes.
How does the 100 Envelope Challenge work?
The 100 Envelope Challenge uses 100 envelopes to store predetermined amounts of money over a set period of 100 days. The exact permutations can vary depending on time and budget. Still, the traditional version of the challenge should result in just over $5,000 being saved.
To complete the traditional version of the challenge you will need 100 envelopes, a storage box and a pen. Over the course of the challenge, you will need a cumulative total of $5,050 in cash. However, this amount can be adjusted based on your budget.
1. Label your envelopes 1-100
The first step of the 100 Envelope Challenge is to label your envelopes from 1 to 100. Depending on your budget, feel free to decrease or increase the scale of the challenge. For example, if you have a smaller budget, it may make more sense to label only 50 envelopes. Conversely, if you can save more, you may label 150 envelopes.
If you want to complete a more digital variant of the challenge, you may still wish to use physical envelopes but not put any physical cash inside them. Instead, depositing the money into a personal savings account. If you want to go completely digital, you can even remove the envelopes entirely and replace them with any online random number picker.
2. Store your envelopes
The next step is to store your envelopes. If you are following the traditional method, these envelopes will hold a significant amount of cash by the end, so ensure that your storage box is secure and safely stored.
If you are using a random number selector instead of physical envelopes, you can skip this step.
3. Decide on a deadline
Now, it's time to decide on a deadline for the challenge. The traditional method takes 100 days, with each day corresponding to a single envelope. Depending on your budget, this can be adjusted. For example, if you want to give yourself more time to save, you may deposit money into an envelope every two days or once a week.
Remember that extending the deadline will make the challenge more manageable, but it will take longer to reach the end goal. The crucial thing is to find a balance that works for you and your circumstances.
4. Save your money
Here comes the most important step—the savings part!
To save in the traditional version of the 100 Envelope Challenge, you must pick an envelope randomly once a day. You must then deposit the amount written on the envelope. For example, if you select the envelope marked ‘72,’ you must place $72 inside it. Follow this method according to the deadline you have set.
If you are following the digital version of the challenge but are still using physical envelopes, simply pick out a random envelope as usual and deposit the specified amount into a savings account instead of placing the physical amount in the envelope. Similarly, if you are using a random number selector, use it to select a random number between 1 and 100 (or whatever range you have set), and deposit that amount into a First Merchants online savings account.
If you have followed the traditional method, the total amount of cash you will save is $5,050.
5. Enjoy your savings
After 100 days of dedicated saving, it's time to take stock of what you have saved. While it’s important to enjoy the fruits of this challenge, it's equally essential to budget sensibly. This doesn't mean you can’t treat yourself or your loved ones with some of the savings accrued from this challenge, but it is important that all these savings mustn't be spent within a few days.
Does the 100 Envelope Challenge work?
Yes, the 100 Envelope Challenge does work as a method to save a large amount of money in a relatively short amount of time. As long as the plan is rigidly followed, it can be helpful as a one-off way of saving in the short term. However, for long-term savings, there are better options, such as a high-interest savings account.
Advantages of the 100 Envelope Challenge
The 100 Envelope Challenge has a few significant advantages, such as helping cultivate a savings mindset and being advantageous when it comes to short-term savings goals.
Save a lot of money in a short time
One advantage of the 100 Envelope Challenge is that it is highly effective as a short-term savings solution. This makes it worthwhile if you have specific short-term savings goals, such as a vacation or a large bill payment.
Helps with a savings mindset
The 100 Envelope Challenge requires participants to think about saving every day. This can foster a savings mindset that stays with them long after completing the challenge. By gamifying the process of creating a savings fund, it can change the way you think about saving. Instead of being a chore that is reluctantly adhered to or ignored, it becomes something fun and positive that not only rewards you in the future but is also satisfying to complete in the present.
Disadvantages of the 100 Envelope Challenge
There are also notable disadvantages to the 100 Envelope Challenge, such as the requirement for a lot of cash in hand and the fact that the suggested amount may not be financially feasible for many people.
It requires a lot of cash in hand
The most obvious obstacle in the 100 Envelope Challenge is the large amount of physical cash required to complete the traditional version. With cards and contactless payments becoming more regular, America is moving toward becoming a cashless society. This means it is unlikely that the average American will have over $5,000 in bills on hand.
Fortunately, this issue can be avoided by engaging with the digital version of the challenge, which does not require physical money.
Budgeting the default amount may not be financially feasible for some
Another issue is the amount of money required within the traditional timeframe of the 100 Envelope Challenge. For many Americans, as helpful as it would be to put aside over $5,000, it is simply not financially feasible to do so in just over three months.
This can be alleviated by adjusting the number of envelopes, the deadline, or both to make the challenge more flexible based on individual financial circumstances.
How to complete the 100 Envelope Challenge successfully
The 100 Envelope Challenge can be a great way to save money, but it does require discipline. Fortunately, there are ways to make the process easier. From starting a budget to temporarily boosting your income, here’s how to ensure your 100 Envelope Challenge succeeds.
Start a budget
Planning a budget not only sets you up to complete the 100 Envelope Challenge, it is also a vital tool to have in your financial locker. There are numerous ways to go about starting a budget and it can be made easier with the aid of tools like budget calculators, household spending trackers and personal finance advice.
Creating a budget related explicitly to the challenge can help protect you from overspending. After the challenge, you can use what you have learned to develop more generalized budgets for everyday living.
Find ways to cut your spending
One way to succeed in the 100 Envelope Challenge is to find simple ways to reduce spending. Your budget can help pinpoint specific expenses that can be reduced or eliminated (at least for the duration of the challenge). This could include something as simple as not ordering food delivery, temporarily canceling a subscription to a streaming service, or saying no to an expensive night out.
Have an accountability partner
Another way to make the 100 Envelope Challenge easier is with the help of an accountability partner. Completing the challenge with a friend, family member, or partner not only makes the experience more enjoyable, but it also makes it more manageable. This is because everyone involved can hold each other accountable for their spending. You can even have more than one accountability partner. In fact, the more accountability partners you have, the easier it will be for everyone to reach the end goal.
Temporally boost your income
If you’re partway through the challenge and starting to struggle, there are numerous ways to boost your income to get you over the finish line. Boosting your income doesn't necessarily mean getting a second job, either. It could be as straightforward as selling unwanted goods on eBay or picking up overtime at your current job.
Choose straightforward saving with First Merchants
The 100 Envelope Challenge is a novel way of making saving more engaging. The ability to complete the challenge physically or digitally, with its flexibility regarding deadlines and the amount of money required, makes it an appealing choice for prospective savers, especially those with a short-term goal.
However, for long-term saving, it’s always best to use the help of a traditional bank like First Merchants. With First Merchants online banking you can manage your personal accounts easily and efficiently. With First Merchants you can digitally open accounts, check your balance, complete transactions, and apply for loans as well as much more.
