resolution habits

The 4 Easy Steps to Finally Stick to Your 2020 New Years Resolution and Slay the New Decade

As we get close to the end of December and into the new year, new decade, many of us are taking stock and ready to start fresh.  We are thinking about New Year’s resolutions. How many times do we say “oh, I’m going to get my finances under control” or “I’ve gotta do money better this year?”

But how can we make new years resolutions stick and not fall by the wayside (yet again)?


Recently I went to a lecture given by James Clear, author of Atomic Habits.  Atomic Habits has been on the New York bestseller list for the past 12 months and has sold over a million copies. In this lecture, Clear gave us some good tips on how we can approach habits. Some of these things were very counter-intuitive.

First a review of how habits are formed.

How to Form a Habit in 4 Steps

First, you get a cue.  This is something that gets your attention.  In our example, you see something to buy. There could be on TV or sponsored posts on your social media feed,  product placement in movies.

Next is craving. You start to have a feeling about the cue and that is a craving. But what is a craving? We are led to believe that cravings are a form of motivation.  But it’s actually just the brain making a prediction about that cue.

For example, if you see someone drinking a coke, your brain is making the prediction that Coke is going to be so refreshing and sweet.  A cashmere sweater is going to be so soft next to your skin. And that prediction is what spurs everybody to action.

That action is the response. The response is a behaviour or action. So you see the sweater, you buy it, or you see the coke, and you order it.

Then comes the reward. The reward is not what you think either!  It’s not like a treat that you give your dog for obeying a command.  It’s not the sweater or the coke. It’s not the tangible thing you purchased.  But it’s actually the satisfaction that your prediction was correct. When you get a prediction right, your brain gets a little hit of dopamine. The hit of dopamine says, oh, pay attention to this. We’re going to do this again.

4 Laws of Behavioral Change

In addition, To the four stages of habit formation, James Clear outlines for laws of behavioural change. The four things that must be in place for us to develop a good habit or break a bad habit.

The first law is to make it obvious. Number two is to make the action attractive. Number three is to make it easy. Number four to make it satisfying.

The first law: make it obvious. When I was little, to encourage us to save money, my parents gave us a piggy bank.  It was a tangible item that I could see in my room.  And if I opened it, I saw all the coins in there. When I got extra coins, I would deposit it in my piggy bank.  I liked the clink of the coin hitting the other coins and I liked opening the piggy bank up to see the pile of coins grow bigger and bigger. Charities do this all the time to raise money; you know that red thermometer that measures how they are getting closer to their goal? That’s a great example of making it obvious.

The next law is to make the habit attractive. This is the case where if you got a running partner, you’re more likely to show up for the run.  The running partner is an accountability partner or what Clear calls a commitment device. If your running partner is a friend, showing up is attractive to you.  You get to hang out with your friend and catch up.  It also makes now showing up unattractive because then your friend thinks of you as a flake and you’ve disappointed them.

So the third law is to make it easy. Retailers know this law very well.  Amazon has the 1 click buy option.  It’s so easy to just click and the item shows up as if by magic!  It’s the same when any retailer’s website offers to store your credit card information for “next time”.  They know that you’ll be more likely to buy next time if they made it easier. So if we want to save money, the easiest way is to set up automatic transfers to savings accounts.

The final law of behaviour modification is to make it satisfying to do. This is the same “reward” from habit formation.  The reason a lot of people stop going to the gym after January is because they made the habit a punishment.  They work out so much that their muscles ache and their lungs hurt.  And they do this day after day for 31 days.  They now associate the habit they want to form as totally unsatisfying.

Here, the accountability friend can make going to the gym satisfying. Most habits fail to take in our lives is because what is satisfying; building up savings, losing weight; take a relatively long time to show up. We don’t get that satisfaction of seeing the fruits of our labour for weeks if not months.  To help, habit trackers can give us that intermediate reward because we like to visually see all our days of sticking to our goal.  We don’t like to break that chain.

Habit Hacks

Start Small

First, he recommends that we start small. Small habits are a better start than making these wide-sweeping changes.  Doing big things is hard.  If it were easy to do the big things, we’d already be doing them and wouldn’t need resolutions! So he says focus on something small, as small as a 1% improvement.

1% doesn’t sound like a lot, but add them all up at the end of the year, it can create the big changes we are looking for.  It’s kind of like compounding interest, the idea is that if you have good habits that time is on your side.  As time goes on, your habit gets better and better, and the results in your life are better and better. But on the flip side, if you are deteriorating 1% every day, then over time, that really starts to have a negative effect.

Don’t Rely on Motivation

Well, if 1% matter so much, you know, why can’t we just do them? His argument is that our intention might be there, but motivation waxes and wanes. His philosophy is that you do not rise to the level of your goals, but you fall to the level of your systems. So our goals might be lofty they might be to save x percentage of our income, it might be too hard for many people to take the steps to stop wasting money.

So it’s really the systems that we have in place that will determine what if we meet our goals at the end of the year. The systems will always win. Outcomes are a lagging measure of your habits, and the alignment between your desired outcome and your daily habits is what we’re striving for.

Your Tribe is Your Vibe

One thing is that Clear mentions that since he wrote the book, he’s noticed is that the social environment is the top determinant of whether the behaviour sticks or not. So You are your tribe.  You know that saying, you are the average of the five people you hang around the most. if your five people are people that are always shopping spending, you know, going out for drinks, the likelihood that you’re going to overspend is higher. But if your tribe are people who are willing to make the change, swap books with you, entertain at home, do potlucks, then perhaps it will be easier for you to create and keep those good habits. If you know your physical environment doesn’t allow for that we can seek these communities online. That could be our daily dose of the interactions that we want.

How to Break Your Over-Spending Habit

We actually take the 4 laws of behavioural change and flip them on their heads to break a habit that no longer serves us.

Make the cues invisible: A great example Clear gives is that many people want to watch less TV.  But how are our living rooms set up?  Most of the seating faces a giant TV.  It leads us to sit down and flip on the boob-tube. Same with spending, our emails and social media is inundated with retailers trying to get us to spend.

Go unsubscribe to all of those emails before you delete them.  Unfollow these retailers on social.  Don’t worry, you won’t miss a great sale. When you want to buy something, there will be a promo code you can use.

Make over-spending unattractive: It already is, you say.  You feel guilty when you do.  But somehow that’s not enough to actually get us to stop. What if you had to post on social everything you bought everyday?  The first couple of times might be fun especially if you bought something cool.  But what about the 240th day? You’ll start to feel pretty silly and frivolous. No, I’m not suggesting posting everything on social.  But you can keep a log to yourself.  Over a period of time, you’ll tire of having to log everything and seeing all the ways you might be wasting money.

Make spending difficult. I admit I don’t use cash.  I just swipe swipe swipe my credit or debit card.  I keep it handy & accessible.  We all have our wallets organized in a certain way.  The bank card goes here, the credit card goes there.  But to increase the friction of spending, how about mixing the cards up?  Put your usual card in an unusual slot.  Disable the 1-click buy feature on Amazon. Use your money to subscribe to things you use all the time.  If you have them automatically delivered, like groceries, then you don’t need to go to the store where you see things that you impulsively throw into the cart. All of a sudden, to buy extra things, you actually have to schlep to the store.

Make over-spending unsatisfying. This is difficult because the act of proving our prediction true is inherently satisfying. The most effective deterrent is actually more money.  Richard Thaler in the book Nudge set up a deal with one of his graduate students that the student had a series of weekly deliverables ie, make certain progress on his thesis.  If he missed the deadline, then Thaler would cash a cheque that the grad student put down as collateral. The prospect of having the cheques cashed was so unsatisfying (ie psychologically painful) the student rather complete their work instead.  So make the deal with a friend, spouse or accountability partner.  For every month you over-spend your budget, they cash in a cheque and donate the money to a charity of their choice.  This works especially well if they want to donate to a political campaign you oppose.

Finish the Decade Strong

So there you have it. We now know how our habits are formed.  The four stages are cue, craving, response, reward. This was how all our habits were formed either we want to keep them or not.  With this understanding, we can analyze our surroundings and behaviour to identify what are the cues of habits we want to break.  What cravings they elicit in us and how we respond.

Knowing this, we can now use the 4 laws of behavioural change to mould them to habits we want to create. We can highlight cues that prompt good habits and hide the cues of the bad habits we want to break.  We can design our physical or social environment to make unhealthy habits unattractive and good habits socially rewarding. Setting up automatic systems, be it grocery delivery or automatic savings and investments makes good habits easy and adds fiction to our bad habits. While satisfaction is sometimes delayed, we can surround ourselves with like-minded people to keep us on track and encourage our small steps.

This new decade is filled with promise and opportunity.  What systems are you going to implement to rise to them?

Hint: Subscribe here to get the cues for you to follow through on your financial goals!


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