Whether it’s retirement or a down payment, New Year’s is one of the best times to make a financial plan, behavioral economists say. Here are some of their tips and strategies.
New Year’s is when many people feel motivated to make a savings or financial plan, and research shows that it’s a good time to do so.
A recent survey from Fidelity Investments found that 67% of Americans are considering a New Year’s resolution that relates to their finances. More than half of the 3,012 respondents said they want to save more for goals including retirement.
But success is far from assured. Fidelity says about half the people who made financial resolutions for 2019 failed to keep them.
For those who want to boost the odds of success, behavioral economists have some strategies to consider.
Set retirement goals in January (or on your birthday)
Academic research shows both New Year’s Day and birthdays are good times to initiate change. Because both mark the start of a new year, they help us “wipe the slate clean,” said Katherine Milkman, a professor at the University of Pennsylvania’s Wharton School.
“We rationalize that it was ‘the old me’ who failed, but this year will be different,” Prof. Milkman said. This boosts self-confidence, a key to success.
In a forthcoming study by economists including Prof. Milkman, researchers invited about 8,600 employees to start saving for retirement or increase their contributions. Those prompted around their birthdays saved more over the following eight months than those urged to take action around dates that aren’t generally associated with new beginnings, such as Thanksgiving or Valentine’s Day.