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Lifestyle Focus on identifying cues that will trigger the desired action, writes Amantha Imber.

Can you recall the last time you set a goal?

Maybe it was a New Year’s resolution, a plan to shed some kilos or to escape the hypnotic grip of social media.

If you’re a member of the mere mortal club like I am, it’s quite likely that you never achieved all those goals, despite the best of intentions.

A meta-analysis conducted by Thomas Webb and Paschal Sheeran from the University of Manchester analysed 47 studies on the relationship between goal intention and goal achievement.

They found a significant gap between intending to do something and actually achieving it.

A big reason for this gap is it can be hard to start or find the right opportunity to act.

When hitting a goal involves giving up something you love, such as the daily block of chocolate during your 3pm work slump, and replacing it with something less desirable – and let’s face it, most food is less desirable than chocolate – motivation can be hard to find.

The best of intentions often ends up with us failing to change our behaviour.

Implementation intentions

Psychologists have found that one of the most effective ways to bridge the gap between intentions and behaviour is by having a plan, or an ‘‘implementation intention’’.

Implementation intentions connect opportunities to act with a particular behavioural or cognitive response. In other words, an action is linked to a situation, so the desired behaviour becomes natural or automatic.

A goal is simply ‘I will achieve X’, whereas an implementation intention identifies the context or situation that will trigger the desired behaviour.

Implementation intentions are typically expressed as ‘‘if-then’’ statements. Some examples:

If I am feeling tempted to skip my workout, I will remind myself of my fitness goals and do the workout.

If I am struggling to finish a report and want to procrastinate by checking social media, I will set a timer for 10 minutes and push through on the report until the timer goes off.

If I come home from work and feel tempted to snack on junk food, I will eat a piece of fruit instead.

If I find myself sitting for more than an hour, I will stand up and take a short walk.

Identifying cues to act

When thinking about the first part of the statement, you need to specify an internal or an external cue.

An internal cue is a sensation or thought, such as feeling stressed. An external cue refers to something happening in your environment, such as opening the pantry and spying chips to snack on, or opening Instagram on your phone.

Cues can be related to good opportunities to act, such as when you are in an environment where it becomes easy to perform the desired behaviour. Alternatively, cues can focus on specific obstacles, such as a couch and a television.

To optimise the effectiveness of your implementation intention, research has found it will be more likely to work if you are as specific as possible with your cue and behaviour. Specify ‘‘eating an apple’’ as opposed to ‘‘eating something healthy’’.

Make sure you will actually encounter the cue. While this may sound obvious, don’t use the cue ‘‘when I get home from work’’ if you work from home most of the week.

And ensure the plan is viable. If your cue is ‘‘arriving home’’ and the behaviour is ‘‘eating fruit’’, make sure you have fruit in the house. Again, this may sound obvious, but ‘‘obvious’’ does not always equal ‘‘applied’’.

Making implementation

intentions work

Write down the behaviour you want to change. For example, you might want to stop sleeping in on the weekend so you can wake up at the same time every morning.

Think about a cue that would present a good opportunity to engage in the behaviour.

Your alarm going off is an ideal cue to change behaviour by getting up immediately rather than reaching for the phone.

Craft your implementation intention as an if-then statement: If my alarm goes off in the morning, I will remind myself of my goal to improve my sleep and get out of bed immediately and go for a walk in the morning sunlight.

Pin your implementation plan somewhere prominent in your home – so you are constantly reminded of it. Even better, pin up the plan where your cue occurs, such as the kitchen, the office, the bedroom.^AFR

This article is an edited extract from the book The Health Habit.

Behavioural economics Daniel Kahneman transformed our thinking, writes Tim Mackay.

Despite winning a Nobel Prize in economics, Daniel Kahneman was an unlikely economist. For one, he never undertook a single course in economics. For another, he was a psychologist. His body of research is vast and multifaceted, but at its core it challenged conventional wisdom on how we make investing decisions.

With Amos Tversky, Kahneman was the pioneer of behavioural economics and is well known for debunking the idea that people always make rational decisions in their own self-interest.

Kahneman died on March 27 at the age of 90 after transforming our understanding of investing. His research shows the intersection of personal finance and psychology is far more ‘‘personal’’ than it is financial. Here are some of his critical discoveries for investors.

Kahneman’s greatest insight was that investors make mistakes, which sounds obvious. But his groundbreaking realisation was that our mistakes are the norm, not the exception.

We rush to judgment using mental shortcuts (or heuristics), leading to persistent biases in our decisions. Even when evidence suggests we ought to rethink, we often cling to our initial judgments.

None of us like being wrong. But once you accept mistakes are inevitable, you can seek to understand them and become a better investor.

Kahneman found we hate losing money far more than we enjoy gaining it. Losing $100 hurts twice as much as the pleasure from gaining $100. It has been shown golfers play better when putting for par (fearing the ‘‘loss’’ of a bogie) than when putting for the ‘‘gain’’ of a birdie.

As humans evolved, threats were always far more consequential than opportunities. If you spotted a deer, it could feed you for a few days. But if you spotted a lion, it could end everything.

Our objective as investors is to gain returns, but our behaviour is driven more by fear of loss. We tend to prematurely sell assets that are gaining value and retain assets that are losing money. We desperately want our losers to win. One solution is to accept you will win a few and lose a few, but it’s the overall portfolio performance that really matters.

Avoid looking at your portfolio too often. A ‘‘loss’’ each day for a week could still be a ‘‘gain’’ over a month. When you look more often, you trade more, and you lose more money.

A study revealed 74 per cent of professional fund managers think they are above average. The other 26 per cent thought they were average. Mathematically, this is impossible – half must be below average.

Kahneman believed this was our key bias. ‘‘What would I eliminate if I had a magic wand? Overconfidence,’’ he said.

The vast array of financial information available online creates the illusion of understanding. This leads to excessive trading, timing the market, under-diversification and risky investments.

When we research investments, we typically seek out and value more highly any information that supports our existing view. And we downplay information that calls it into doubt. .

Seek objective feedback, diverse and contrary opinions and stick to an objective re-balancing plan.

Kahneman and Tversky provided important insights into ‘‘anchoring bias’’ and the ‘‘endowment effect’’.

Anchoring bias describes the fact that investors rely too heavily on the initial opinion or piece of information they are given on any topic. Imagine you were told a widget sells for between $85 and $100 but is available for $75. You might view this as a good deal.

However, if you were simply told a widget costs $75, you’d be far more likely to ask: what is a widget? And you’d question its true value. The deliberate ‘‘anchor’’ placed first in the information you are given distorts your analysis and is a common pitfall in financial decision-making.

The endowment effect is a term coined by Richard Thaler, and in a 1991 study, Kahneman and colleagues proposed that it occurs, in part, due to loss aversion. When we own something – such as a BHP share – we give it more value than it might objectively hold. This leads to a paradox where we are more likely to keep a BHP share we own rather than acquiring one we don’t, despite the result being the same in both scenarios – ownership of the share.

This cognitive bias skews our perception, often preventing us from selling assets when it might be prudent to do so, as we overestimate their worth due to personal ownership. SI

Tim Mackay is an independent financial adviser at Quantum Financial.