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4 Commitment Devices to Help You Set & Achieve Financial Goals

By Nick Kennedy

determining financial goalsIf you’re like many people, you’ve set one or more financial goals for yourself. You might be trying to stick to a personal budget, save more for retirement, pay off your credit card debt, build an emergency fund, or buy a house.

There’s just one small problem: You want the reward, but don’t want to do the work it takes to get there. So you procrastinate and continue to spend and charge and dig yourself deeper into debt. What you may need is a commitment device, a way to keep yourself accountable in reaching your goals.

What Is a Commitment Device?

“Commitment device” is a term coined by Stephen J. Dubner and Steven Levitt, the economists who authored the bestselling book “Freakonomics” and currently produce a popular blog and podcast of the same name. They define a commitment device as “a means with which to lock yourself into a course of action that you might not otherwise choose but that produces a desired result.”

The earliest known example of a commitment device comes from “The Odyssey.” The hero of the tale, Odysseus, knows there is no way that he can resist the Sirens, the classic femme fatales who lure sailors to their doom. So he has himself lashed to his ship’s mast, making it physically impossible to leap overboard and succumb to their temptation.

Though it’s probably not a good idea to lash yourself to your recliner to keep from heading to the mall, you could try more modern ways to stay on track.

Commitment Devices to Help You Reach Your Goals

1. Make It Public

If you’ve ever set financial goals for yourself, you may have also put them in writing. But how do you hold yourself accountable? If you’re the type of person who doesn’t like to be outdone, try posting your goals on Facebook. You don’t need to describe every last detail of your plan, unless you want to. For example, you could say something like this: “I’m going to pay off my credit card debt in 12 months, and I’ll be posting monthly status reports. If you don’t hear from me on this goal, please feel free to ask about it.” By doing so, your friends and acquaintances know what you intend to accomplish, and you’ll make a commitment to share your progress with them.

Embarrassing? Perhaps. Does it require swallowing some pride? Of course. But there’s a good chance you’re going to get waves of support, while also feeling pressured to perform. Plus, it’s possible you’re going to inspire others to make their own goals public.

2. Write a Check to Your Least Favorite Cause

You know you have one: a nonprofit organization, political group, or movement that you really can’t stand. It represents everything you find revolting and wrong in the world. Now, write a check to that specific group and place it in a sealed envelope. Hand it over to a close friend or relative and tell them to drop it in the mail if you fail to meet a monthly saving or spending goal.

This tactic not only puts your pride on the line, but your sense of morals as well. Choose a friend or relative you don’t want to look bad in front of, and one who shares your feelings about the organization you choose. Then, they’re invested in your success, and you may get a motivational coach out of it as well.

enlist online help

3. Enlist Online Help

Some enterprising economists and psychologists have started websites to help you stick to your goals. For example, stickK offers commitment contracts that are monitored by a referee. You can optionally back your commitment with money to fund a friend, your favorite charity, or your least favorite charity in the event that you fail.

Beeminder, another commitment-geared site, helps you map out your progress and only charges you if you fail to achieve success. If you’re more motivated by peer pressure and encouragement, consider Goalmigo. This site can help you set, track, and share your goals with other users with similar goals.

4. Reward Yourself for Failure

Though counter-intuitive, this commitment device serves to amplify your failure and can be an effective way to meet your goals. Ordinarily, if you don’t pay enough toward debt this month, you might intend to make it up next month. Or, if you don’t save enough this month, you might plan to save twice as much the next. The problem is, most people can’t enforce their self-imposed punishment, so they get discouraged and quit.

Why not try something new? Write a contract with yourself that if you don’t meet certain goals this month, you must spend $100 on something frivolous at the mall or on dinner at a nice restaurant. This approach won’t work for everyone, but it can help certain people focus more on what they’re trying to accomplish. For example, if the result of not following your plan is a reckless increase in your shopping, then the very thought might make you work harder to meet the expectations you set for yourself.

The big disclaimer with this type of commitment device is that if it doesn’t work for you in the first month, drop it. Persistence is not your friend when it comes to rewarding yourself for failure. If this doesn’t do it for you, try another method.

Final Word

Another famous example of a commitment device comes from history. Legend has it that when Cortes set out to conquer Central America, he landed in what is now Mexico and promptly set fire to his fleet of ships. The message he sent his troops was simple: No retreat. To survive, they had to conquer.

If you have trouble finding an effective commitment device, be creative – and possibly be drastic. Remember, in order to conquer, you have to endure a measure of sacrifice.

What other commitment devices have worked for you?

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