New Year’s Resolutions: 3 Tips

Each year, Fidelity Investments conducts a Financial New Year’s Resolutions survey. The most interesting finding this year is that the percentage of people making financial resolutions is at an all-time low. Only 27% of respondents planned to make a financial resolution, down significantly from 43% just four years ago. It appears that people are feeling pretty good about their financial situations as stocks enter the ninth year of a bull market and real estate prices increased for a sixth consecutive year.

Notable findings of the 2018 New Year’s Resolutions survey:

  • Save More – The top resolution, by far each year, is to “save more,” as cited by 55% of those who made a resolution for 2018.
  • Give More – 58% of respondents planned to increase their charitable giving. It will be interesting to see whether this occurs since the new tax plan will cause more households to take the standard deduction, which negates the tax benefits of charitable giving.
  • Reduce Financial Stress – 70% of survey respondents who made a resolution reported that setting financial goals made them feel less stressed.

How to succeed with your New Year’s Resolutions:

One commonly cited study claims that only 8% of New Year’s resolutions are kept. Another article in U.S. News claims that 80% of New Year’s resolutions fail by the first week in February. So, that begs the question: “Why are so few resolutions achieved, and what can you do to increase your probability of success?” New Year’s resolutions typically involve making short-term sacrifices for long-term payoffs. (Eating healthier today in order to look and feel better in the future, or…spending less this year, so you can spend more in the future.) Some changes are hard and others easier. Nevertheless, successful changes share a common pattern.

One of the best books on making successful changes in your life is called, Switch: How to Change Things When Change Is Hard, by Chip and Dan Heath. The authors identified three elements for successfully changing behavior.

Three Elements of Successful New Year’s Resolutions:

1)  Change your situation. The authors of Switch gave an example where people ate more popcorn when they were given a larger bucket. The size of the bucket should not have mattered because even the smaller bucket was more than a person could eat. The bottom line is, “changing your situation” (in this example) is buying the smaller bucket. Another simple example would be buying low-fat milk instead of whole milk if you are trying to reduce your saturated fat in-take. People tend to drink whichever milk is in the fridge.

Changing your situation is more effective than relying on willpower, logic, or psychology. Along these lines, my favorite tip for eating healthier is: Put the serving dishes of the healthiest items on the dinner table so it’s easier to take a second helping. Leave the less healthy items on the stove. Nothing prevents you from getting up to get a second helping of the less healthy items, but studies show people will take seconds of whatever’s in front of them.

2)   Make fewer resolutions. It turns out that self-control is an exhaustible resource. Research has shown that we use up our willpower in a variety of ways: solving problems, restraining emotions, controlling impulses, reading instructions, etc. Understanding this is important because these activities use the mental muscles we need to change behavior. What looks like laziness is often exhaustion. Having fewer resolutions makes it more likely that you will have the willpower to follow through on what is most important.

3)  Have clarity. “Saving more” is a vague resolution that is likely to fail. A better resolution would be “save $300 more per month, by boosting my 401k contribution from 7% to 10%.

Final Thought:

I love New Year’s. It’s the perfect time to take stock of all our good fortune and think about how we can be better, happier, and more authentic. Let me know how I can help make 2018 a truly great year for you and your loved ones.