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A New, New Year's resolution

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A New, New Year's resolution.

It was a wonderful Christmas — lashings of fun, family and food. Unfortunately that other "f," fitness didn't do so well.

Like many of us, I face the New Year promising to be kinder to my body and exercise more. The only problem is sticking to those promises is hard work.

Thankfully help is at hand from the most unlikely of sources: economists. Behavourial economics is the study of how and why we make economic decisions. Somewhat spookily it also looks at how our behaviours can be influenced.

Understanding why we don't always do things that are in our best interest — like saving, eating sensibly or exercising — has been an important area for behavioural economists.

Their solution to my exercise challenge is a "commitment contract." That sounds a lot like getting married to your personal trainer; in a way it is.

Economists describe a commitment contract as a way "in which the present self offers inducements to our future selves to act a certain way." The contract involves not only writing down your exercise commitment but offering yourself incentives for success or penalties should you miss your goals.

Commitment contracts work. The effect of incentivising desirable behaviour, which is what they are trying to do, has been tested and proven in a number of ways.

Academics Gary Charness and Uri Gneezy looked at whether paying people to go to the gym would result in positive long-term habits. In their study ,they paid people to go the gym over a one-month period. They found even this short period of "incentivised behaviour" translated not only into a longer term exercise habit but also improved health outcomes for people in their study.

Similar studies have been conducted into other behaviours, from quitting smoking to saving more for retirement. All have seen the benefit of formal commitments with incentives for good behaviour.

It is likely the architects of KiwiSaver benefited from the insights of this research. The evidence is compelling that the "opt out" structure of KiwiSaver resulted in higher overall levels of retirement saving. It meant savers were automatically enrolled (a form of automated commitment) in KiwiSaver unless they chose to opt out.

Richard Thaler and Shlomo Benartzi, two US academics, go one step further in their research. They showed savers who committed to long term savings plans involving increased contributions as salaries increased ended up saving more than savers who hadn't made a pre-commitment.

So what might a smarter plan to improving fitness, both physical and financial, be? Write down your goals, share them with a friend and think of some rewards for achieving your goals.

There's even a website that automates this, stickk.com, that keeps your friends in the loop on how you are getting on. Facebook updates if you miss your training goals must be the ultimate incentive...

Committing to exercise has a lot in common with committing to saving. Both require short term pain with the promise of long term benefits. So maybe for 2016 we need not one but two commitment contracts — one for those elusive, I would say mythical, abs and one to build the life we dream of.

So, yes, I have put my plan in place. It involves a lot of walking, the odd jog and a slice of the best chocolate cake on the planet if I reach my goals. Wish me luck.

 

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