Across the globe, people from all walks of life will be making resolutions on New Year’s Eve, aiming, as they do every year, to have another stab at doing better in the areas they’ve lagged.
For financial advisors, the end of one year and the beginning of another is an excellent time to get their clients to commit to making at least one sound financial decision. Research has shown that New Year’s Eve inspires positive behavioral tendencies in most people, said Katherine Milkman, the James G. Campbell Jr., assistant professor of operations and information management at the University of Pennsylvania’s Wharton School.
However, Milkman’s research has expanded the available body of evidence on the so-called New Year’s Effect by showing that human beings actually make positive resolutions at any number of different points in their lives.
“There are many points at which people start new cycles,” she said, “including the beginning of a new month, the start of a new week, their birthdays and a whole list of other landmark dates.”
Studying this Fresh Start Effect, she said, can prove extremely valuable in many different ways, particularly as it relates to financial planning, because it has the potential to help people overcome willpower problems that often limit goal attainment.
Milkman and her team studied three different data sets to formulate their theory. They looked at the number of Google searches done on diets and examined data on gym attendance, two very important markers of aspirational behavior, especially after major holidays like Thanksgiving and Christmas.
“We extended our data search to birthdays, which also exhibit the Fresh Start Effect in areas like gym attendance,” she says.
In order to rule out any incidence of the rise in gym memberships and attendance or commitments to new diets as purely a short-lived compensation act for gluttony and indulgence during the holiday period, the group also monitored action on the website StickK.com, a goal-setting platform where users can create an online commitment contract in any area they choose, with a referee to monitor progress toward their goal and an agreement to forfeit a certain sum of money if that goal isn’t met. The site enforces the contract, Milkman said, “and we looked to see whether people created more commitments on landmark dates.”