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Personal finance

Turning resolutions into commitments

December 21, 2022

The beginning of the year is a good time for taking stock and making new resolutions. Is it a good idea? Perhaps, as long as our resolutions don’t turn into sources of stress or pressure to achieve unattainable goals. But why can’t we stick to our resolutions, for example, when it comes to savings? Here’s some information on how your brain works and some tips on how to get around it.

“First of all, I prefer talking about commitment rather than resolution,” explains François Delorme, a consultant and teacher at Université de Sherbrooke’s Department of Economics. He says that “sharing a commitment with those around you or even on social media makes it easier to stick to it.”

So, to a certain extent, the attention and encouragement of peers can have a healthy influence on behaviour: “The more public, visible and transparent it is, the more attainable. Since the brain tends to play tricks on us when it comes to resolutions, real change is more likely to happen through commitment.” Delorme also points out that putting certain mechanisms in place helps apply and stick to our so-called resolutions, drawing certain parallels with running: “You have to walk before you can run, over gradually greater distances.”

Set up the right mechanisms

The behavioural economist cites personal finance as an example: ”Activating automated payments into a dedicated account has proven to be truly effective for achieving savings goals.” The effort involved in manual operations can lead us to quickly give up this practice. Automatic payments can therefore give you a little “nudge” to reinforce your commitment to saving.

Reduce mental burdens

Many studies have shown that employees who automatically contribute to their organization’s RRSP will be more inclined to use this savings lever, especially if it’s activated by default and without the employee having to take any action. However, he notes that the effort required to contribute to an RRSP through personal initiative, rather than through an employer, significantly reduces the participation rate.

Turning resolutions into commitments, along with a few “nudges,” can therefore tangibly increase our ability to keep them.

It’s about getting around the mental burden of having to do things ourselves

François Delorme,

Consultant and teacher in the Economics Department at Université de Sherbrooke

From optimism to realism

The specialist cautions that overestimating your ability to save can sometimes turn into discouragement and disengagement, to the point where resolutions become a cause of anxiety. That’s true at the gym, just like with your savings.

“If a person decides to devote too much of their income to savings and fails to maintain this goal, they may eventually feel the negative impact of this excessive optimism. If you overestimate your ability to reach your goal, you’ll end up discouraged and giving up on your financial resolution.” It’s therefore better to be realistic.

From a resolution to a pleasurable habit

To counteract this sometimes over-optimism, François Delorme recommends setting a series of small, achievable goals that will foster the pleasure of gratification. For example, deciding to do three 15-minute exercise sessions per week is more realistic and achievable than setting three 1-hour sessions. “The easier it is from the get-go, the more the changes will become habits—sometimes even to the point that those habits become a need you can’t live without!” he illustrates by referring again to running.

Objectives: Where to start?

“Starting by automating a very small amount of savings each week is an achievable goal for most people,” says Delorme. “After a while, savers realize the potential of increasing this amount gradually over months and years.”

Like a coach or trainer, the support of a financial advisor also makes a significant difference: “The role of advisors is evolving, and clients are better off trusting their ability to find profitable solutions and recommendations.”

In the long run, these resolutions, turned into commitments and then into habits, are good for the mind, heart and wallet. Our so-called resolutions then become rewarding and soothing, free of stress and any external pressure. Happy commitment!