Can you think of the time you made an impulse purchase, satisfied in the moment then that feeling became quickly replaced by buyers remorse? We have all been there. Wouldn't it be great if there was some way to help you to be "good" when you know, left to your own devices, you will likely give into temptation?

It turns out there is. The answer lies in Greek mythology and the Ulysses pact, the ultimate solution to pre committing to our good intentions today to avoid future regret.

Ulysses' story takes place on his return home from the Trojan war. He and his crew had to sail past the Sirens, beautiful creatures who sang enchanting songs causing seafarers to steer off course and shipwreck. Ulysses wanted to hear the Sirens' songs but didn't want to risk his life so he hatched a plan. He had his crew tie him to the ships mast so he could not steer the ship off course. He instructed his crew not to untie him from the mast no matter what he instructed them to do until the ship had had safely passed the Sirens. To protect the crew he filled their ears with wax, so they couldn't hear the Siren songs (or him for that matter!).

These pre commitment decisions worked well for all. Ulysses was indeed affected by the songs but his careful planning and his crews commitment to the plan meant they all lived to fight another day.

How does this story of shipwrecks and siren songs link to financial success? When it comes down to it, like Ulysses, much of a person's financial success can be attributed to managing your own behaviours. If we can make better decisions and minimise poor decisions, we will likely achieve better outcomes.

There are a number of examples of pre-commitment options that can be found within financial products to help people to both limit spending and encourage saving.

Managing spending

Credit and debit cards have several design features that allow customers to control their spending in advance via:

  1. spending limits
  2. blocking certain transactions (gambling-related)
  3. a cooling off period (gambling-related)

Managing credit card limits is well known method available to consumers to help limit spending. Once the spending limit is hit, subsequent transactions cannot be entered into or if they are they will be denied.

On top of this a number of credit and debit card providers allow their customers to pre-block transactions related to gambling. This means a person can implement a decision today about their future gambling expenditure to avoid the risk of making a poor decision in the heat of the moment. This is a simple way to encourage good behaviour when you know left unchecked you are likely to overspend and have regrets.

"I feel something so right, doing the wrong thing" (Counting Stars lyrics, OneRepublic)

Innovations in product design are iterative. In the past to set up a block on gambling transactions may have required you to ring a person and request a block to be set up on your behalf. Now the blocking process has become easier to implement via the click of a button. The blocking feature also involves a cooling off period so should a person be tempted to change their mind they will have to wait. Usually for a period of at least 48 hours. Hopefully by then the temptation has passed. It is a way ratify good intentions protecting a persons good self from their devilish self.

Savings

Banks also provide an option to block access to cash transactions on credit cards, yet another way to manage spending temptations. Typically a cash withdrawal on a credit card attracts interest charges as soon as the transaction occurs; it can be a costly way to access money.

Improving savings

Pre-commitment options related to improving saving habits are:

  1. regular savings plans,
  2. products that automatically round up your spending and invest the excess for you
  3. reinvestment of dividends and distributions

Regular savings plans take the effort out of making ongoing investment decisions. Without a plan in place a person has to consider whether or not they want to invest, how much and when and into what each time they receive money. Every decision is a friction point opening up the risk to change your mind and the potential to fail to deliver on your good intentions to invest. However once the savings plan is set up no more conscious decisions are required, savings occur automatically without you having to do anything, you don't even have to think about it.

Products that round up your spending and invest the difference as well as reinvestment plans follow the same premise. Pre commitment occurs in the set up phase and after that it is automated. Whilst the amounts may be small initially, over time small regular investments can add up to sizeable amounts. This type of pre commitment epitomises butterfly effect, when a small event like a flap of a butterfly's wings can cause a larger than anticipated outcome such as a tornado hundreds of miles away.

You don't need to rely on product features to help you make better decisions, there is nothing prohibiting you making a Ulysses pact on your own behalf. I recall an interview with a British actress who became obsessed with ordering from Uber Eats to the point she begged the platform to suspend her account to help manage her spending and eating behaviours. And they did! Her rationale was if she couldn't access the platform she couldn't buy from it. A perfect example of a Ulysses pact.

Warren Buffett, a well known billionaire has made a Ulysses pact via his giving pledge. He has pledged that 99 per cent of his wealth will be donated to philanthropic causes during his lifetime or at death. It seems to be working well for him and his charities as he has already donated more than $37 billion of his wealth with more to come.

Who would have thought that making successful financial decisions could be linked to a story found in Greek mythology? Can you think of any good financial intentions you have but you can never quite land? If so it's time to set your own Ulysses pact.