When one starts on a quest, no matter whether it is towards a financial or personal goal, one typically intends to see it through. Yet lofty goals and reality do not always converge, as moments of weakness destroy even the most solid of plans. Now individuals can utilize a powerful new tool to help them follow through on their goals in the form of commitment contracts.
Commitment contracts are exactly as they sound. One makes a commitment to achieve a goal. Often this goal is of a financial measure. For instance, one may be in debt and make a commitment to reduce that debt by a specific amount every month. Commitment contracts can be used for many other goals such as weight loss and personal growth. Yet merely making a commitment contract to reach a goal is often not enough. Adding financial stakes to the contract can be the different that gifts success to a venture.
There are many different ways in which commitment contracts with financial stakes can help someone achieve their goals. First, it makes them accountable. Some people “cheat” on their pursuits because no one else will know. They may quickly do it and then push it out of their mind as quick as they can. If they can make themselves forget about it, then they may feel like it did not even happen. The guilt may go away very quickly. They are not accountable to anyone.
When one has to report their progress, then they may feel like they are more accountable. They may be much less likely to cheat on their goals. People will often make decisions on what they are going to do based on the expected consequences. A commitment contract can provide the consequences that will help them make the right decisions.
Of course, the requirement to give a positive or negative report may not be enough for some people. This is why the financial stakes in commitment contracts can make such a large impact. The financial stakes vary greatly from contract to contract. For instance, you may pledge that you will donate $25 to a charity for every month that you do not reach your monthly goals. The money may go to a specific person. Knowing that they will lose this money if they do not reach their goals will propel a lot of people to do what it takes to reach them.
When one does poorly one month and sees the results of losing money, then they may be more likely to adhere to the plan for the following month. Another idea is to have the money go to an undesirable recipient in order to provide even more incentive to follow your goals. For instance, two friends might each be trying to work on financial goals in order to pay off debt. They may make a deal that if they do not reach their goals, the money will go to the other. This might invoke the competitive spirit and make them more likely to follow through.
There are many different ways that one can create a commitment contract with financial stakes. One can do it with a family member or friend. There are also websites that will create a commitment contract for you such as www.stickk.com. They will charge your credit card for a specified amount every time you do not meet your goal. At the end, this amount will go to a designated recipient. They provide other resources to help one achieve goals.
Commitment contracts are a powerful tool to help you achieve your financial and other goals. Individuals should consider them as a practical and easy way to influence achievement in a variety of ventures.
Resources:
http://www.nber.org/papers/w16624
http://www.newbizviews.com/2010/09/03/nbv-entrepreneur-jordan-goldberg-and-stickk-com/
http://www.spendonlife.ca/blog/stickk-financial-commitment-contract
http://www.stickk.com/