It's easier to make New Year Resolutions than to keep them! Let's take a look at some strategies to keep your financial resolutions on track.
State the resolutions effectively.
Research by behavioral economists suggests that how we frame our resolutions may affect how successful we are. We pay more attention to losses than gains. For example, someone might have a goal to pay down debt on a credit card. Calculating how much money this person loses each month from interest charges can be motivating; for example, "Each month I carry this debt, I lose at least $95 due to interest costs." The focus on the loss -- versus "I can save $95 a month if I pay off my debt" – is motivating.
Reminders can help us succeed with our resolutions.
Small nudges such as a sticker on your credit card (for example, a boat to remind you about your travel plans), a picture on your bathroom mirror, or a jar to collect loose change placed in a visible spot can be helpful.
Peer pressure also can act as a nudge.
StickK.com is a website that applies behavioral economics theory and helps people reach their goals. Research shows that when people put up either money or their reputation against their goal, they are more likely to work towards that goal.
Basically the idea is that you use a stick to motivate yourself to meet your goal. At this website, you declare your goal and recruit friends to nudge and remind you. For example, at the website, you could set a financial goal to save 10% of your income in a retirement savings plan each paycheck.
In addition to your friends' reminders, if you fail to meet your goal, a stick (of your choosing) would be applied: a donation to a charity would be made at your expense or, even worse, a donation to an anti-charity! An anti-charity is defined as "any organization whose views you strongly oppose, or one which promotes values that are most contrary to your own."
You don't have to use a website; declaring your goal to friends and/or family may work as well for you. The embarrassment of not reaching your goals is a stick too. What type of nudge or motivation would help you with your New Year's resolutions?