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Want help reaching your goals? Use a financial incentive
Posted By Miranda Marquit On 10/21/2013 @ 2:30 pm In Personal Finance | 2 Comments
How many times have you set a financial goal, only to quickly fall short? You might start out with good intentions, but after a while you let yourself slide and soon your goal isn’t even on your radar anymore. How can you stay motivated?
According to the founders of stickK, what you might need is a financial incentive.
“I co-founded stickK with two of my professors from Yale,” says Jordan Goldberg, CEO of stickK . “They have done a lot of research related to incentive design, and found that certain nudges, when put into place, can help you reach your goals.”
The most effective incentives are those tied to money.
“It’s pure economics,” says Goldberg. “You set a price at which you are willing to change your behavior. If you want to lose 10 pounds in 10 weeks, that cheeseburger doesn’t cost $5. It might actually cost $20.”
Goldberg says that stickK.com raises the cost of bad habits. To use stickK, you are required to name a consequence for your action. Goldberg says that those who use financial incentives, such as paying a certain amount of money when they don’t make the appropriate progress, are three times more likely to change their behavior.
As part of the process, you provide a credit card number, as well as designate a referee who helps you track your progress — and determines whether or not you are performing satisfactorily. You report on your efforts regularly, and the referee, which should be someone in a place to know whether or not you are lying, and lets stickK know whether or not you need to be charged. “We’ll take the referee’s word over yours,” says Goldberg.
In order to make the habit change stick, Goldberg says that an emotional component can be added to the financial incentive. “You can choose where the payment goes if you aren’t meeting your goal. You might decide to give the money to your spouse, because you know that he or she will spend the money on something you hate.”
One of the common tactics, though, is to designate a cause that you hate. If you don’t meet your regular progress goals, your money supports something you disagree with.
“It’s one thing to lose that money,” Goldberg says. “It’s another thing to actively support something you hate. For best results, pick a designee that will really rile you up.”
For instance, a staunch Democrat might want to select the Republican National Committee as a designee, or a huge fan of University of Michigan athletics might want to pick Ohio State University’s alumni association.
Goldberg says the combination of motivation from your own pocket and the emotional motivation is what makes stickK effective.
He also points out that support is a big part of the equation as well. With stickK, you can invite supporters to cheer you along, as well as hold you accountable in a less threatening way.
“Reporting to people you know puts your reputation on the line,” Goldberg says. “Besides, sometimes you just need the positive support in addition to the negative financial consequence.”
Has anyone out there used stickK? What was your experience?
(Photo: Flickr user puuikibeach)
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