For the last several months, I’ve been hearing about this theory that the risk of losing money can be more motivating than the prospect of winning money. Last week, NPR reported on a website based on the theory. It was developed by two Yale professors and is called StickK. I’ll explain how it works.
The Stick Theory of Goal Motivation
Many people use positive reinforcement to reach their goals, but more recent studies have shown that the risk of losing something tangible is actually more motivating than the possibility of earning a reward. The theory says that if you put your own money on the table, you’ll work a lot harder to keep it than you would if you could earn new money for doing the same thing. It seems counter-intuitive – if you succeed and win $10 new dollars, you’re better off than you would be if you succeeded and simply didn’t lose the $10 you bet. But that’s not how humans think – the possibility of winning isn’t real. The possibility of losing something we already have is.
How StickK Works
StickK is simple and the service itself is free. The site was designed after one of the professors tested the theory with weight loss, but you could work towards any goal. Here’s what you do:
- Register and create a contract with yourself, the site, and your referee (a friend or relative)
- Set the goal, which can be anything you choose
- Self-report your success from week to week
- The referee verifies that your report is accurate every week.
Like many goal sites, other members are there to cheer you on, but here’s what makes this site different: the financial pledge. Although the pledge is optional, it’s the true motivator on the site. Here’s how it works:
- Pay the whole amount you choose to wager up front
- That amount is divided by the number of weeks you’ve set to reach your goal
- If you succeed one week, that portion stays in your account. If you fail, you lose that portion, but you don’t have to make it up the next week. For example, if you bet $200 that you’d lose 20 pounds in 20 weeks, that would be $10 per week. Losing extra weight the next week won’t earn back the money you lost, though.
- At the end of the designated period, you keep whatever is left in your account if you succeed and the rest goes to your charity.
Extra Motivation with Anti-Charities
As an additional motivation, you could designate a cause you hate to receive your money if you fail. For example, if you’re opposed to guns, you could designate your money to go to the NRA. If you support gun rights, you could designate the money to go to a gun control group. That might be the extra motivation you need to succeed.
Will This Work for Financial Goals?
I think it depends. If you’re trying to pay off debt, I don’t know if betting some of your hard-earning cash would be the right goal motivation tool. On the other hand, it might be a great way to get rid of a bad financial habit. For example, let’s say you buy a new CD or DVD every week. You could pledge the total cost of those CDs and DVDs for three months. Each week that you avoid buying any new CDs or DVDs, you would keep the cost. If you fail, not only would be out the cost of the actual CD, but that week’s wager, which effectively makes the CD twice as expensive. Whatever you have left at the end of the three months you could use to pay off credit cards or to shore up your savings.
If you’re like me and hate the very idea of losing money, then StickK is a great goal motivation tool. I probably wouldn’t be all the upset if the money went to a charity I liked, though, so I would choose an anti-charity. I think that would be enough to make sure I met my goal every week.