Tuesday, August 25, 2009

Why we fail to keep up our (financial) resolutions and how to change it?

Have you ever come across the following scenario, frequently or occasionally?

You are inspired by something. Say you read a great article in this blog (or another), or heard a great lecture from your favorite speaker. You are convinced that you need to change to be successful. So you decide to develop a new habit (say track your expenses).

You are sold that, tracking your expenses is a great habit and is your ticket to lasting financial success.

You get all excited, you want to start and today is the day. You adopt a tool or plain old pen and paper to track your expenses meticulously. You are on a roll doing the tracking expenses, surprising yourself for the first few days.

2 or 3 or x days later, you start to back slide. All of a sudden the prospect of tracking expenses, appears too much to do , and not worth the return on investment of your time. Over the next few days, you gradually give up and you get right back to where you started, or worse off than that.

This can also more commonly be observed among people trying to get rid of bad habits (e.g. quit smoking).

It is simplistic to dismiss it as a will power, interest, motivation or genetic (or a lack thereof) issue . You are still interested. It is possible that you still have power, you are motivated in certain other areas of life. but the damn effort seems overwhelming for some type of changes you are about to make.

It has happened to me a lot. I have always looked for a convincing explanation for this phenomenon, when I stumbled upon a possible answer in the book "Mastery: The Keys to Success and Long-Term Fulfillment" by George Leonard.

This is a small yet a great self-improvement book that talks about how one can achieve Mastery of anything in life. Note that it is not a book on Personal Finance.

It explains that Mastery is a continuous journey and process to be enjoyed in itself , rather than a destination or product to be reached. That Mastery is achieved by persistent practice and not by short cuts or hacks contrary to what our consumerist culture preaches us.

Leonard argues that Back sliding is a universal experience and that all of us resist significant change. Our body, brain and behavior have a built-in tendency to stay the same within a narrow limit and to snap back when changed. For e.g. when the body temperature or blood sugar or heart rate change significantly (say + or - 10%), our internal mechanisms tries to bring it back to normal (to avoid fatalities and protect us). This kind of equilibrium and resistance to change is called Homeostasis.

Leonard's contention is that all self-regulating systems from bacteria to humans to family to organizations are characterized by Homeostasis.

As a practical example of homeostasis in non-human systems, consider a simple home heating system, where you have a thermostat that measures the room temperature. When the temperature crosses a set point, there is a feedback loop that tells the heating system to stop the heating, so the equilibrium is maintained.

In the case of humans, the homeostasis mechanism is made up of millions of neurons, that provide the feedback to the Hypothalamus area of the brain, which acts as a thermostat. These neurons pick up the tiniest change in body temperature, or blood sugar, or blood pressure and feed it to the brain. Even social systems (read your friends, colleagues, relatives) and cultures have homeostasis mechanisms that resist significant change.

What is the problem with Homeostasis? The problem is that, it tends to keep things as they are, even when they are NOT good.

Homeostasis is why, when you decide to get fit, and start a jogging routine, after the first few yards , you begin to feel dizzy, sick to stomach, your feel that your heart is about to explode etc., The Homeostatic alarm signals scream 'Warning! Your heart rate has significantly increased, your metabolism is high. Stop what you are doing!'.

As you can see, all changes are resisted. Change for the better is interpreted as a threat. So you give up jogging, and decide to adopt another method.

Note that smaller changes are easier to accept. Homeostasis is fine with it. However if the change is not within your comfort zone,you'll meet with Homeostasis sooner or later. You might sabotage your own efforts.

How to work around Homeostasis to keep up with our resolutions?

Leornard suggests the following ideas:
  • Be aware of Homeostasis: First recognize and accept that Homeostasis is normal for everyone. When Homeostatic alarm signals go on, it doesn't mean you are crazy or lazy. Take it as a signal, that life is changing. Don't panic and give up at the first sign of trouble. Expect resistance from friends, family, co-workers. Note that the entire system changes, when a part changes. People who you love start to covertly or overtly undermine your self-improvement.

  • Be willing to negotiate with your resistance to Change: This is key. Negotiate your way through on everything. Don't back off or bull your way through. If you ignore warning signals, you risk daring the system (which is not sustainable). If you bull your way through, you are almost sure to back slide. Stay alert. Be prepared for a serious negotiation on the magnitude, frequency and/or schedule or any other aspect of change.

  • Develop a support system: Try to team with other people with whom you can share the joys and perils of the the change you are making. Tell them what you want to achieve and seek their support. Seek mentor ship and mutual support from relevant people. Your mentors will brace you up when you back slide. For e.g. ask that your friend at the Gym to be a whistle blower, when you don't show up for more than 2 days in a row. If you are alone, ask for other people (close) to support you and be your conscience.

  • Follow a regular practice: Here Leonard gets in to his pet theme for Mastery, but this topic is very relevant for making a change. By regular practice you gain stability and comfort on a regular basis. Any regular practice provides a sort of underlying homeostasis, a stable base during the instability of change. So, get ready for regular practice. Successful athletes, and artists, are great examples of the power of practice.

  • Dedicate to life long learning: Leonard exhorts us to continuously educate ourselves for our entire lives. To learn is to change books, body or behavior. Don't stop education at college or at age 40, 60 or 80. The best learning of all involves learning how to learn, i.e to change.
I would like to add a few things to this list that can make the process of making change easier and permanent. That way you are likely to honor your resolutions more often than not.

I have observed the following things to be very helpful in my personal life
  • Accept change as inevitable and prepare for it ahead of time (Change is the only thing that remains constant)
  • Take on changes in baby steps, instead of as giant leaps
  • Reward yourself when significant milestones are reached
  • Choose appropriate tools depending on one's orientation and preferences (for e.g. if you are a visual person, you are not going to enjoy audio lectures about a change you want to make)
  • Champion the benefits of change to others.
What do you to making permanent changes in your life? How do you change your bad financial habits in to good ones , or good ones to better ones? Let me know your comments.


  1. I might have an unusual way of keeping habit.

    I try to put stake in my blood relation about their health or something I value the most and tell myself, if I dont follow I might loose them or it.
    That way, I will be afraid to do. It has worked for me.

  2. Excellent article so true. I perpetually keep hearing these signals. Good to find a solution to navigate around it.

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