Let’s be honest, most of us make New Year’s resolutions and most of us terribly fail at them and by february we would rather forget all about them. But it doesn’t have to be this way and behavioral experts can offer us much help on how to make them work and actually change our behavior for the better. Starting to save for one’s retirement or starting to build some emergency savings are on the wish list of many, so let’s look at some behaviorally informed advice on how to make the first steps this January that will stick.
Why do we fail at resolutions?
In the beginning it’s good to look at the most common reasons people fail at New Year’s resolutions. Many set unrealistic goals for themselves, which can be difficult or impossible to achieve. If you have never even saved for retirement, the goal of saving $10.000 by July is a tad bit overly optimistic. Another reason is that they may lack the motivation or discipline to consistently work towards their goals. Additionally, people may fail because they do not have a clear plan or strategy in place to help them stay on the right track. Just saying I will start saving for my retirement in 2023 doesn’t quite cut it, you have to get much more specific. Finally, life events or unexpected circumstances can sometimes interfere with a person’s ability to follow through on their resolutions. We have seen many unexpected scenarios in the last years, from the Covid-19 pandemic, to the outbreak of war in Ukraine.
What can we do?
To follow through on our New Year’s resolutions we should:
- Set specific and achievable goals – be concrete and realistic and instead of setting broad or vague goals, be as specific as possible about what you want to achieve. This will make it easier to track your progress and stay motivated. For example, I will open a retirement savings account and contribute $200 monthly and by year’s end I expect to have approximately $2.400 in my account give or take fees and yields.
- Make a plan: Break your goal down into smaller, more manageable steps and create a plan for how you will achieve each one. This will help you stay on track and avoid feeling overwhelmed by the daunting task, like how to start saving for retirement. Break it down into parts, decide on the optimum product like a 401(k) plan or a savings app like Acorns or Qapital, as a first step also check with your employer if they already offer a company retirement plan in which you can join, maybe there is also an employer match option by which the employer will match your contributions up to a certain amount. Decide on the level of monthly contributions you will make, … and your are already closer to your goals,
- Keep a record: Writing down your goals and tracking your progress can help you stay focused and motivated. You could use a journal, a spreadsheet, or a planner to record your progress. Tracking progress will give you positive feedback you need to stay on the right path and you will also know what needs to be done next to get to the next stage. Most retirement plans nowadays have online accounts where you can monitor your balance and smart saving apps, like Acorns or Qapital, can give you even more positive feedback on your saving goals.
- Find an accountability partner: Having someone who you can check in with and who will hold you accountable can be a great way to stay on track. If you plan to quit smoking, share this with your co-workers or roommates. This will serve as extra motivation, as it’s much easier to disappoint ourselves, then to disappoint the whole office. We also want to present ourselves to others in the best possible way, so keeping up with our New Year’s resolutions is for sure a great way to do this. If you can’t find anybody to share your resolutions with, there is a growing online commitment platform called StickK where you can post your goals and the whole online community will check in on you and hold you accountable. Maybe you will also find there are many people with similar goals and that you are not alone. Goal setters on the platform can interact, offer support, and share best practices.
- Super important – don’t be too hard on yourself: It’s important to be realistic and understand that setbacks and challenges are a normal part of the process and life. So don’t get discouraged if you have a tough day or week – just pick yourself up and keep going. Review again your written plan in steps and keep grinding.
- Last but not least, celebrate your successes. It’s important to celebrate your achievements along the way and give yourself a pat on the back, no matter how small they may seem. This will help you stay motivated and motivated to keep going.
In the end always keep in mind, as with any behavior change, it’s super important to keep on the right track and not slip back into the old ways. One of the best tools, when it comes to saving money, is automatic payroll deduction of contributions. This way each month contributions are taken from your paycheck immediately and you don’t have to do any thinking about it. This way you are staying on the right track even if you have totally forgotten about it and at the end of the year you will be positively surprised by how much assets you have accumulated. Can’t stress enough the power of automatic payroll deduction and you should definitely harness it to help you build retirement and emergency savings.
The New Year represents a fresh start and is often seen as a time of renewal and a chance to leave behind any negative behaviors or habits that may have been holding one back. So, let’s muscle up all the fresh start energy and start saving towards a more financially secure future now.
Further reading:
Hengchen, D. (2017). A Double-Edged Sword: How and Why Resetting Performance Metrics Affects Future Performance. Academy of Management Annual Meeting Proceedings. Retrieved from: A Double-Edged Sword: How and Why Resetting Performance Metrics Affects Future Performance | Academy of Management Proceedings (aom.org)
Krockow, E. (2020). Why Now Is the Time for a Fresh Start. Psychology Today. Retrieved from: Why Now Is the Time for a Fresh Start | Psychology Today
Milkman, K. (2023). 5 science-based strategies for nailing your New Year’s resolutions. CNN. Retrieved from: How to set New Year resolutions that stick | CNN
Irrational Retirement 