How to use a commitment contract to change your habits

This is a guest post from Pop at Pop Economics, a great new blog about investing, personal finance, economics, and more.

It's now 9pm on August 30th. I'll finish this guest post by 11:59pm on August 31. I know this, because if I don't, I'll lose $1,000.

Call it an incentive. I've written about behavioral economics over at Pop Economics for three-quarters of a year now. There are an infinite number of subjects to cover, but they all boil down to the same idea: People respond to carrots and sticks.

Commitment contracts can keep you motivated.And to make sure that I hit this guest post deadline, I gave myself a very big stick. About a month ago, J.D. and I set up a legally binding “commitment contract”. If he doesn't get a guest post from me in a few hours, I owe a set of charities $1,000.

Crazy? Yes. But it's also a brilliantly simple way to defeat laziness and procrastination. I've actually flaked out on J.D. before. Heck, I've flaked out on writing for my own blog before. I like the idea of building a hugely successful blog, but every once in a while, I lose the motivation to keep churning out stories.

Commitment contracts are used for all sorts of goals. In January, you decide to lose weight, but by March, the gym you signed up for is reaping the proceeds of a dormant membership you can't break. You decide to give up smoking, but doing it “just once” while at a party leads you back to addiction.

But how likely would you be to quit if you lost $1,000 every time you skipped going to the gym or lit up a cigarette? Commitment contracts are designed to set the penalties of missing your goal so high that breaking it isn't even an option.

How It Works

J.D. and I actually entered a formal arrangement, set up through Stickk.com. Stickk is a commitment contract website with a co-founder who has studied how effective the contracts can be.

In one study conducted in the Philippines, smokers committed to quit smoking for six months. If they failed a urine test that detected nicotine, they'd lose six months-worth of smoking money as a penalty. At the end of the program, the economists found that the the contracts improved the chances of quitting by 30%, which is better than the improvement other tools like a nicotine patch gives you.

But there's no requirement to make it as formal — and you don't even have to set financial stakes. Another common tactic is to make the contract and let your goals and progress be known to your friends. Rather than a financial penalty, if you fail, you have to broadcast that failure to everybody. The shame itself should help keep you on track.

But no matter the structure, the contract requires three basic components:

  • the goal
  • the stakes
  • the referee

Screwing up any of these three can doom your success.

Setting a Goal

Your ultimate goal might be ambitious and far-off — like to lose 40 pounds or to become a millionaire. But the commitment contract should be for small steps that are easy to measure.

A Harvard economist recently tried different ways of paying students to improve their standardized test scores. One experiment he ran in New York, where students were paid for higher scores, completely bombed. But in a separate test in Dallas, kids who were paid $2 every time they read a book achieved significantly higher scores on the reading comprehension section of the test. It was the incentive for the small steps that got the big goal accomplished.

Likewise, make sure the goal is something you can easily control. Sure, I want to add 100 subscribers by November, and I have a vague idea of things I could do to achieve it. But at the end of the day, that's 100 decisions to subscribe I can't make. On the other hand, the only thing keeping me from writing is me.

Setting the Stakes and the Recipient

As I wrote above, my commitment with J.D. was $1,000. I set it so high because I wanted to make failure nearly impossible. Note the “nearly”. If my computer exploded, you bet I'd get to a library and finish this sucker. But if a relative died? It might actually be worth $1,000 to buy me out of it.

My penalty for not blogging twice per week is $100 for every week I miss. That's considerably lower. So a more minor emergency, like something unexpected at work, could theoretically convince me to pay up one week rather than post. But $100 is definitely enough to keep me from heading out to the movies rather than writing.

If you just write an informal contract with a referee, you can make the recipient whomever you want. If you choose the more formal route — your Stickk contract is a legally binding commitment — you'll have the choice between charity, an anti-charity (a cause you're against), or an individual. With each option, Stickk takes a cut if you fail.

Picking a Referee

I've wondered if J.D. actually thought through his commitment to referee. If I don't turn this post in tomorrow, J.D. has committed to slapping me with a $1,000 charge. What if I begged him not to, citing all sorts of unexpected work commitments or family events? Would he cave? [J.D.'s note: Yes, I would have caved.]

Of course, the best referee won't cave, no matter what. For that reason, it's best to pick someone whom you trust but aren't too close to.

You also need to make sure you and your referee are completely on the same page as to what your contract means. I wasn't clear in my contract at Pop Economics, and that's led to some confusion between me and my referee on what constitutes success.

Remember: It's Not a Panacea

By establishing harsh penalties for failure, you're much less likely to fail. But it's so much easier (and more effective) to want to succeed. Getting things done shouldn't be a constant battle between your laziness and your wallet. And in the end, economists argue that changing your wants — that is, actually wanting to eat celery instead of a cupcake — is the most effective way to accomplish a goal.

The perfect contract is one that harnesses the drive you have at your height of enthusiasm, so that at times of weakness, the financial penalty can back you up. The $100 looms over my head when I feel too tired to post on my blog. It's not a replacement for the genuine excitement I have at building my community.

We'll see how that goes, but so far for me, commitment contracts have kicked procrastination's ass.

Now ask yourself this question: What could you accomplish if failure were not an option?

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Steph
Steph
10 years ago

I really like this idea. I often set myself goals that I never complete. Usually this takes the form of “finish x amount of assignment by this date”, but because there is no penalty for missing my self-imposed deadlines, they never work. Perhaps I will start doing this. Thanks!

Rob Bennett
Rob Bennett
10 years ago

Pop Economics is an A-Plus blog. I’m not so sure about this particular idea. I can certainly see how it would work. But it strikes me as being too artificial to have lasting impact. What you really need to do to change behavior is to change habits. If you are getting blog posts up only because of some financial incentive, what happens when the inventive is taken away? The other thing is that a lot of the great advances are not planned. A CEO can learn important things about how to improve his product by listening to customer service calls.… Read more »

bon
bon
10 years ago

I keep hearing about the value of keeping goals to yourself.

http://blog.ted.com/2010/09/02/keep-your-goals-to-yourself-derek-sivers-on-ted-com/

I would guess “do what works for you” is the best advice regardless

Dink
Dink
10 years ago

Negatively incentivizing creative tasks like writing will inevitably lead to sloppy and subpar work. If one stands to lose $1000 by not finishing a blog post on time and the deadline is looming, one is apt to hurriedly complete it without regard for quality. “By establishing harsh penalties for failure, you’re much less likely to fail.” I would argue that by establishing harsh penalties for failure, you’re setting yourself up to fail; a self-fulfilling prophesy. Similarly, rewards for task completion only really work on low-level, physical tasks — higher level, creative tasks require some sort of non-monetary, internal fulfillment to… Read more »

Edmundo Braverman
Edmundo Braverman
10 years ago

I really like the idea of sending money to an “anti-charity”. There are a few causes out there that I’d rather chew broken glass than see succeed. For me, the threat of funding an ideological enemy would be an extremely powerful motivator.

Nicole
Nicole
10 years ago

Dean Karlan is pretty awesome.

Still, I don’t think Stikk is the best way to improve my productivity while decreasing stress. We wrote yesterday on our blog about kinder gentler accountability methods. I suspect that Stikk might work well for Maggie but she isn’t up for trying it yet.

Sam
Sam
10 years ago

I walk with one of my neighbors at 5 a.m. three times a week, if I don’t show up she is standing out there in the street, in the dark, waiting for me. There are many mornings I’d rather sleep in but I can’t, the only excuse is moderate to heavy rain. I can’t call her it is too early in the a.m., it is too early to send her an e-mail and she doesn’t text. She even got up to walk on a recent school holiday (she is a stay at home mom) as we both forgot to rearrange… Read more »

MaryR
MaryR
10 years ago

This assumes that you are realizing that it’s time to go to the gym and saying to yourself, “Nah, I’ll just sit on my ass and watch a Jersey Shore rerun.” It wouldn’t help when the issue is attention or focus or disorganization. Sorry, but this has always struck me as a show-off stunt. See, I’m not really one of those loser procrastinators. If only the stakes were high enough or I had a bit of skin in the game. When it’s important, I’ll be there and get it done. Get over yourself. Recognize that you have a procrastination problem… Read more »

B
B
10 years ago

Behavioral economics does not boil down to “people respond to carrots and sticks”. Some of the most influential works show precisely the opposite; that people systematically behave contrary to the expectations of economic rationality.

Mike
Mike
10 years ago

I like the idea. I was recently listening to an audio by Wyatt Woodsmall. He talks a lot about carrots and sticks, in getting ourselves to do things. The other interesting aspect he brings up is that all people are made up of different parts. That while a part of us wants to do something, another part of us doesn’t. So, in order to work towards an objective, we need to get the parts working together vs. sabatoging us. In order to do so, he talks about focusing on the outcomes vs. the work required. We can do this using… Read more »

Shari
Shari
10 years ago

Wow. Surprising amount of negativity toward this idea. I really like the idea. I am an artist, but not full time. I have a full time job and I’m also going to graduate school, so I don’t have a lot of time to do artwork. I don’t want to completely let my art go while I’m going to school, so I’ve recently started an art blog. Every week or two I’m going to post a different piece on it. I am hoping that this will motivate me to keep up with the artwork (or at least the photography I do,… Read more »

Everyday Tips
Everyday Tips
10 years ago

It’s funny, I think back to all the incentives I used on my kids over the years (specifically when it came to toilet training), and I guess we never really change.

I think being accountable to someone is a great way to institute change. However if the stakes are too high, I worry about the lengths people would go to in order to not break the deal. (Especially crazy dieting if it is a weight loss deal.)

Interesting concept.

Kevin
Kevin
10 years ago

“You are what you do.” If you smoke, you’re a smoker. If you put up $1,000 to try and quit, you’re a smoker who’s afraid of losing $1,000, but you’re still a smoker. Not smoking is easy for a non-smoker. So the trick is to change yourself from being a smoker to being non-smoker (not a former smoker, or an occassional smoker, or a smoker who’s abstaining for a few months because he can’t afford to lose $1,000). A mental shift needs to occur inside your mind, and cash isn’t going to do the trick. You need to decide once… Read more »

Kevin
Kevin
10 years ago

It isn’t a commitment contract but I have a similar incentive in place to not touch my growing emergency fund. I keep it in a savings account so it is available in case the worst happens. But it can also be so tempting to see it sitting there. So I have strict penalties that I impose on myself if I touch the funds. Any withdrawal gets an instant 10% fee for the amount removed. And then there is a 12% APR (that I calculate as if it was a credit card) which is charged until the entire amount, plus the… Read more »

Alex
Alex
10 years ago

I have to say graduate school provides plenty of sticks to keep you motivated! If I don’t maintain my grades, (above a 3.0), I can be put on academic probation, lose my paycheck from being a teaching assistant, and if I am asked to leave, I have lost all the time I spent doing research in my lab. So needless to say when it’s “get an A or else your whole world crumbles” I don’t need a contract! LOL. I am not much of a procrastinator, so I don’t see much use for this. I totally agree with you Kevin!… Read more »

Alexandra
Alexandra
10 years ago

I read a Stephen King book about someone who wanted to quit smoking. It was all about using fear to motivate behaviour change (the smokers wife loses a few fingers, I think). I do think fear is the biggest motivator we have, for things we do not want to do. In university, it was the fear of failure and the fear of losing my GPA average that motivated me. It was the fear of not being able to pay my expenses that motivated me to work three jobs. Even now, it is the fear of not meeting set deadlines that… Read more »

Ken Marable
Ken Marable
10 years ago

I really like the idea, too. And it works all the time in subtler ways. For example, my work has a flexible schedule, so some days I would be terrible about sleeping in. However, after we got a dog, I am up early every morning for the simple reason that if I don’t get up on time, that dog is going to pee on the carpet. We do our dishes not because we *want* to, but otherwise we run out of things to eat on and the kitchen stinks. This is just a way to formalize something that happens everyday… Read more »

strick
strick
10 years ago

This idea sort of feels like it’s putting a bandaid on a much larger issue. Although it may help, eventually, and in my person experiences, it breaks down (we start making compromises with ourselves).

Still, I think this idea could be usefull as an added tool to solving the dreded motivation problem so many have. Thanks for the words.

Mac
Mac
10 years ago

I’ve actually done this and it helped me immensely. After putting my thesis off once (and seeing my friends doing it multiple times) I wrote up a contract containing a plan to complete the thesis. Each part of the plan had a monetary value and if it had not been completed the money was placed in a “holding” account overseen by a friend. If I then did manage to turn in my thesis on time I would get all that money back, if not.. then it would go to a “anti-charity”. Sure enough, the procrastinator fell behind on the plan… Read more »

Kevin M
Kevin M
10 years ago

Not even mentioned in this anywhere is the fact that the “carrot” should really be writing a guest post for one of the best PF blogs around. That exposure could be worth more than $1,000 I’m guessing.

I like this takeaway (but find it interesting it was ultimately the negative – $1k penalty – that motivated this post, rather than the positive – wanting to succeed in getting new subscribers):

“By establishing harsh penalties for failure, you’re much less likely to fail. But it’s so much easier (and more effective) to want to succeed.”

Justin
Justin
10 years ago

Not really a fan of the “stick” being “giving financial support to a good cause.” It seems pretty sh*tty to me (I had the same conversation with a friend who had arranged a similar disincentive for cutting his soda intake). Is it really so painful to help other people that you would rather finish a blog post? I think that @Edmundo’s “anti-charity” is a much better approach. Better yet, set a bounty for the action that you will pay no matter what. Say, $500 to a “good cause” if you finish it on time or to a cause you don’t… Read more »

AC
AC
10 years ago

rather than tell someone I will pay them money, I just set up classes and lessons. If I want to have a nice obedient dog, rather than just do it myself, it is better to take classes where someone else is holding me accountable with her progress. If I want to learn French I will pay someone to tutor me.

I think there was a study about how bonuses actually do not motivate people. But I guess that is different that losing money.

Brent
Brent
10 years ago

I don’t think this works for me, I have many procrastinated tasks. Most of the time they are already costing me money or inconveniencing my life. Almost all of these things are procrastinated because Its going to be a significant hurdle to fix. I get overwhelmed by what has to be done and then avoid it. More punishment adds to my distaste for it. For me I need to imagine my life once I stop procrastinating and remove the guilt for not getting something done. Once I get rid of the emotional negativity towards it and can picture that life… Read more »

KMJ
KMJ
10 years ago

As a practical matter, a commitment contract may erode a person’s sense of willpower. It’s basically acknowledging that you don’t have control over your decisions unless you set up an arbitary system of punishments or rewards. What’s next — shock treatments if you go over your caloric intake targets? How about just making a to-do list and having the desire to get it done? What’s wrong with having the sense of fulfillment or failure be motivation enough? My thought is that if you can’t seem to get something done, then maybe you weren’t meant to achieve that goal or you… Read more »

Kelley
Kelley
10 years ago

A friend of ours had a commitment contract with his father regarding alcohol usage under the age of 21. If friend did not touch alcohol until the age of 21, father would reward son with $5000. Now, that’s quite a bit of money and I’m not sure if it was on the honor system or how this was monitored, but it worked. And he got $5000. He also didn’t try to cheat the system and he enjoys beer on regular occasions now. I’m thinking about trying to do something similar with my children so I’ll need to get more info… Read more »

GHolmes
GHolmes
10 years ago

Great post. To quit cursing I paid my son $20 for each curse word he called me on. He was very motivated to keep me accountable. It worked for me.

e-Fables
e-Fables
10 years ago

This system is kind of like “opening up and account and we will reward you with 100$”. I think it works well with advertising and marketing products but not quite well with personal development. In order to change the attitude, we change the habits, a little bit at a time. If you are doing something just because you are afraid of losing money is like paying kids for doing housework chores. This system may work for certain people, but for me, losing 1000$ if I don’t do something will paralyze me to a point where I can even make a… Read more »

Andrew
Andrew
10 years ago

I also do not like the way this works with the money. We should not be discouraging from people giving to charities. It makes no sense to punish yourself by giving to charity. As another poster said why would you want to succeed and then hurt the cause that you would have supported? The carrot should be a reward not a punishment.

chacha1
chacha1
10 years ago

I wouldn’t argue that a commitment contract has no value, but I would suggest that someone who finds they are unable to follow through with what they *say* they want to do might benefit from counseling. Or at the very least, some heavy meditation on whether they truly want to do what they say they want to do. A lot of people go through the motions and say they want X, Y, or Z when all their behavior supports a different conclusion. Once people really decide what they want, they follow through without any further external motivators – in my… Read more »

Sara
Sara
10 years ago

I love this idea! It’s better than the opposite approach which is to reward good behavior, at least for me, as I’ve found that I start to just not care about my reward! The next thing I know, I suddenly don’t care whatsoever if I would get to buy a new pair of shoes after my month of going to the gym. Probably good for my random obsessions with buying nail polish and what have you, but not necessarily good for getting me to actually meet my goal 😛

Crystal@BFS
10 years ago

I would never put money as a punishment because that would stress me out too much to do good work. If $1000 was on the line I’d probably throw up. But if it works for you, woot! But I do put myself on the line by broadcasting my goals in my blogs – if I fail, hundreds of people will know (maybe thousands in the future), so I try much harder to make sure I reach the heart of my goals. I still fail once in a while, but I have never missed a post on my blog in 7… Read more »

KarenJ
KarenJ
10 years ago

It’s simple. Some people are motivated by pleasure and some people are motivated by pain. When I was overweight, the pain of NOT wanting what came along with being overweight was was motivated me. I did a lot of things I didn’t enjoy such as giving up sweets and exercising. Eventually, I came to see myself as a person with a healthy lifestyle, so the changes I made were no longer that difficult to maintain. There’s nothing wrong with motivating yourself to do something you don’t want to do, either by punishment or reward whatever works, if it eventually changes… Read more »

KMJ
KMJ
10 years ago

@32 KarenJ “Bad habits cannot be eliminated by willpower.” I disagree. All they are doing here is providing more reason to have willpower. There is still the choice to fail, but it is a choice. Increasing the odds does not take away the choice, it just makes that choice more important. The reason there are smokers, overweight people, and alcoholics, is that some people enjoy these activities, and do them to excess. Anyone that has “cured” a bad habit can always relapse, which indicates that willpower is key part of the equation. Figuring out the psychological aspects to these habits… Read more »

Andrew
Andrew
10 years ago

In business bonus/penalty contract clauses tend to work better than penalty only. That way there are opportunities on both sides. The ratio can even be two to one in favor of penalties. I agree with poster #20 that a guest post on a popular blog is carrot enough.

Jeff
Jeff
10 years ago

Great points in the comments! It’s true that life often presents its own sticks for failure, but this could be a great tool for self-imposed goals without natural repercussions.

I may need to use this myself, methinks. Thanks!

Steven Williams
Steven Williams
10 years ago

Now you’re talking! I love writing things down because it’s like signing a contract and making a commitment to what I said I would do.

I even take it a step further and write and re-write my goals over and over again.

I also say them to myself over and over again through-out my day.

This is an excellent strategy to break any bad habits.

Pop
Pop
10 years ago

Hey guys, thanks for all your thoughtful comments. First, let me say that I totally agree it’s more effective to want something intrinsically rather than to set up a system of punishment. But hey, we all know that we just don’t naturally do some things that are good for us in the long-run, like losing weight or quitting smoking. I don’t think most people want to say, “I guess I’m a smoker” and give up. The contract gives you something to weigh against the strong incentive to smoke (or eat, or whatever). Instead of thinking “I can love this cigarette… Read more »

Nancy L.
Nancy L.
10 years ago

The best theory on bad habits I’ve ever seen is that when we are small, if we touch a hot stove, we instantly learn to not (purposely) touch a hot stove ever again. We do not repeat behaviors where we only get negative feedback. If you are continually doing a bad habit–procrastinating, smoking, overeating, being bad with your finances–you must be getting something positive out of the situation, or else you would not continue to do it. Once you start to look at things this way, you realize that perhaps you prefer the push of adrenalin from rushing to make… Read more »

SF_UK
SF_UK
10 years ago

I’ve used this to finish my doctoral thesis (which I handed in today – go me!) Every chapter completed (i.e. once it had been read by my supervisor and all corrections made) earned me a reward. Not a big one, but enough (e.g. a book I wanted). This started out being an incentive to write the chapters, but towards the end became an incentive to bug my supervisor to read them (my natural reaction would be to be meek and patient). The really big incentive at the end? Now that I’ve submitted, I have completed all the requirements to allow… Read more »

April Dykman
10 years ago

I think being held accountable, however you choose to do it, is key. Maybe a money incentive isn’t for you, but there are other ways to be held accountable. I’ve wanted to start a blog for a few years, yet I never stick with it. So why is it that I can get a post to J.D. on schedule and meet my writing commitments to my clients? Because I have to “face” them when my work isn’t done on time. I hate disappointing people by not following through. I recently decided to try playing piano again, but rather than make… Read more »

Hugin
Hugin
10 years ago

I don’t believe in punishments as an incentive for achieving goals. You have to have an overall goal, a desire, that is stronger than everything else. In order to stop smoking, I think that the only way is to be so focused on the benefits of it that you don’t see any other options than to stop. I have notice the same thing with most of the people that have become rich in business. Even if business is mostly about hard work and tears initially, the people that have succeeded have never lost faith in their overall goal for their… Read more »

Arenda
Arenda
10 years ago

I’m a goal oriented person so I don’t generally have an issue with sticking to the plan, but that site looks like a great suggestion for one of my friends… maybe we can use it together, thanks!

Jessica
Jessica
10 years ago

I’ve actually used Stickk.com before to incentive my piano practicing (I’m a music teacher and professional musician). I love music but needed some structure and accountability to put in the work. Although I didn’t stick with it for the long run, it did work for a while, and while I was doing it I indeed practiced more. It’s interesting to see that many posters are resistant to the idea of the external incentive, as if it’s cheating. Isn’t that idea that for a LOT of things we do, there are external incentives and consequences? If we go to work, we… Read more »

Jessica
Jessica
10 years ago

One more thing – I think the idea that you “should have enough internal motivation” is silly. I teach piano lessons, and NO ONE, including me, has enough “internal motivation” to practice on a regular basis. There MUST be some sort of external incentive/pressure, which can take a number of forms.

Daniel Reeves
Daniel Reeves
8 years ago

I just wanted to mention a similar site to StickK: Beeminder.com.

Beeminder combines goal tracking with StickK-like commitment devices — keep all your data points on a “yellow brick road” to your goal. Ie, it’s StickK.com for data nerds.

Danny of Beeminder.com

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