Personal Finance

The New Year Isn't the Only Time to Set New Goals

Around the world, people celebrate the start of each year as an opportunity for a new beginning. And, in addition to the fireworks and kisses, there's often pressure to set resolutions to mark the occasion. However, New Year's Day isn't the only chance you get. Every year is filled with public and private opportunities to make important changes that can improve your future.

The Science Behind Picking Your Start Date

Perhaps you've had a personal experience of using a meaningful day to prompt a behavior change. The birth of a child might mark the day you stopped smoking. Or you finally made a significant change after a birthday— birthdays that mark the beginning of a new decade of life can be particularly good catalysts for change.

Professor Katy Milkman at the Wharton School of the University of Pennsylvania studied how people may be more likely to achieve goals if they begin on a specific temporal landmark. Dubbed the "fresh-start effect," the idea is that some days are better at marking a break from the past, giving you a physiological boost that can help you become the "new you."

Particularly when you're trying to implement a new practice or habit, picking a culturally or personally significant day could help. Some common examples include:

The anniversary of a special day
A religious holiday
A major life event
The beginning of a season
The start of a new school year or job

Subsequent research suggests the fresh-start approach isn't always the way to go. For example, if you're doing something well, but there's a setback, or you aren't progressing as quickly as you'd like, you might not want to hit the reset button. Instead, acknowledge what you've accomplished and build on top of your successes.

However, if there's a habit you want to break or a change you want to make, consider which upcoming landmark could mark your fresh start.

Choose a Money Goal

As April is Financial Literacy Month, you'll be part of a large community of like-minded people if you choose to start a new money goal this month. Some popular options include:

Work on your FICO^® Score
Build your emergency savings
Start investing
Get ready to buy a home
Pay off your debt

Sometimes, finding the initial burst of effort is all you need to be successful. For example, if you want to start investing, it might be as simple as setting up automatic contributions to a retirement account. And, if you invest in a target-date fund, you may be able to put your retirement investing on autopilot for the most part.

But most money goals require months or years to achieve. This means you'll need to get over the hurdle of starting and find the willpower (and resources) to follow through.

Set Yourself Up for Success

As with other types of goals and habit changes, it's easy to get discouraged if you set unrealistic expectations for yourself. Instead, consider which small, short-term actions could help you achieve your long-term goals.

For example, if you want to work on your FICO^® Score, you could break the goal down into actionable steps:

Check your FICO Scores to see where you're at right now
Review your credit reports and dispute errors
Bring past-due accounts current
Understand how your debts can impact your FICO Score
Make all your account payments on time

If negative marks are hurting your FICO Score, it might take some time to see a significant change. However, by focusing on actionable areas, you'll be steadily making progress in the right direction.

Learn More About Behavior Change

There's a lot at play regarding personal finances, including forces that may be completely out of your control. However, learning about behavior and psychology could help you achieve all sorts of goals, including ones that aren't related to finances.

If you want to learn more about the fresh-start effect, in particular, Professor Milkman has a podcast called Choiceology that covers the topic in season two, episode five. You could also listen to Dr. Laurie Santos, a professor of psychology and head of Silliman College at Yale University, interview Professor Milkman in a 2019 episode of the Happiness Lab podcast, which goes on to explore how to maintain new habits.

Louis DeNicola

Louis DeNicola is a finance writer based in Oakland, California. He specializes in consumer credit, personal finance, and small business finance, and loves helping people find ways to save money. In addition to FICO, Louis works with a variety of financial services firms, credit bureaus, and educational websites, including LendingTree, Credit Karma, and Experian.