The Psychology of New Year’s Resolutions | Katy Milkman

Why We Make New Year’s Resolutions

Dan Loney: We certainly know that the new year is a time for people to think about change. What they can do to either improve themselves and their lives or potentially improve their professional lives. It’s a very important time for individuals at this time of the year. But it could also be an important time for companies when they’re thinking about the change that they want to make, and involve their employees as well. Katy Milkman is a professor of Operations, Information and Decisions here at the Wharton School. She’s also co-founder and co-director of the Behavior Change for Good Initiative, and she has studied a lot of this for a long period of time.

Katy, it is amazing, the work that you and Angela Duckworth and your teams have done about looking at behavior change. But for those people that haven’t thought about it a lot, why do you think it is? Is it just the calendar? Is it the flipping from one year to the next that make people start to think about change in their lives?

Katy Milkman: It’s a great question. A little over a decade ago, I studied this with a former student at Wharton, UCLA’s Hengchen Dai. She and I, along with Jason Riis, started digging into what it is about certain moments that make them particularly attractive to us as times to make a change. What we’ve found in our research is that when there is what we perceive as a chapter break in our life story — and we really actually see our lives as if we’re characters in a novel, with these chapters. We think about the college years, the years working at company X, the years living in Boston. Whatever it is, we put these brackets around time, and we don’t experience it continuously as a result. And whenever there is a chapter break and we enter a new era that feels like a new beginning to us, we’re more motivated to pursue our goals. We feel disconnected from our past self. We can say, “That was the old me. This is the new me. The new me will be different.” Those chapter breaks arise at predictable moments on the calendar, as well as times when we make meaningful change, like a move to a new job, or becoming a parent.

New Year’s is the biggest of the dates that signals a fresh start and a new beginning. But it actually happens every Monday. At the start of a new month. It happens when we celebrate birthdays. These come up a lot. And the psychology is around this thing we do. It’s called “mental accounting,” in the words of Nobel laureate Richard Thaler, where we don’t perceive time and other resources as fungible across boundaries, but instead we bracket them. Fresh starts arise a lot, but the New Year’s is a really big one, and we should seize it when it arises.

Loney: You mentioned even it will occur on Mondays. Just having that weekend break is something that can make people do somewhat of a reset.

Milkman: It’s not even the break, which is an interesting point. Because that doesn’t hurt, right? Having some disruption to your routine. Your intuition is right that that also can create a sense of a fresh start. But it’s not a necessary condition. In fact, there’s a really clever study that was done following our work on the fresh start effect by some researchers at UVa, showing that if you change the calendar someone’s looking at, and you make it look like the week starts on Sunday — which it, by the way, does in some religions and some cultures. If you randomly assign some people to see calendars where the first day of the week is a Sunday, and others see a calendar where the first day of the week is marked as a Monday, it shifts when people feel it’s most appropriate to start pursuing a new goal to Sunday. It’s not necessarily about the break and the refresh, so much as it is giving us a sense of when a cycle begins.

Loney: From the economics perspective, there are many things that we have in our lives — whether it be our retirement savings, investments, whatever it is — that come up over the course of the year and probably align with some of these dates, where it’s probably a good thing to do a rethink on some aspect of our financial life.

Milkman: Absolutely. There are many decisions that we make where it would be great if we were more focused on the long run. In fact, there’s a very well-known behavioral bias called “present bias” that leads us to focus too much on now, and not enough on our long-term outcomes, and it leads to all sorts of problems for us, like under-saving for retirement. It contributes to that. Policy decisions contribute, too. But it contributes to under-saving for retirement. And P.S., not having enough money contributes to under-saving for retirement. But present bias is part of it. It contributes to bad decisions we make about exercise, eating, smoking, you name it, if we’re too focused on the here and now and how good things feel right in this moment, we won’t make those long-term-oriented decisions.

The fresh start effect gives us, at least temporarily, a little extra motivation to focus on the future and our future goals. What we want to do with that extra motivation is, ideally, put in front of people and put in front of ourselves opportunities to make small changes in the moment that will have big long-term effects. For instance, saving for retirement. Starting to set up automatic deductions to a 401(k), for instance, if you work for an employee that offers one of these tax advantage savings plans. We did some research a number of years ago looking at whether or not inviting people to start saving for retirement by contributing to a 401(k) plan at their employer, on a moment where it felt like a fresh start, would increase savings in the long run. And what we found is that relative to inviting people to save at some other future date that felt more arbitrary — “You can put it off and procrastinate two months, three months, whatever you prefer.” — it was better to tag that opportunity to a fresh start like the start of spring or someone’s birthday.

That’s one item that people might have on their mind, something where you can make a one-time change because it is temporary. That’s a big problem with fresh starts. By Wednesday, it’s not a fresh start anymore. You want to seize that feeling that you have at the beginning of a new year, that this is a good time to make a change, and try to think of what’s something consequential I can change once that will have big benefits? Savings decisions are often such a choice. You can think about signing up for life insurance, if that would really be a good decision for your family. You could think about if there’s an important screening test that could have a big impact in the long run, whether it’s a colonoscopy — I know that’s a weird thing to talk about at New Year’s, but they’re important. Or a mammogram you’ve been putting off. Some of these big, one-time [decisions], you don’t have to do it that frequently. But if you use that motivation to make a big one-time change, that can be particularly helpful.

Loney: Is it important for people to review and potentially make an adjustment on the change that maybe they made a year ago?

Milkman: In an optimal decision-making model, you’d be constantly reviewing. “Oh, I got a raise.” Or, “I lost my job,” or “I got married.” All of these things, there’s in-flows, and out-flows. In an optimal world, you’d be constantly reevaluating and making sure all the choices you made remain perfect at this moment. But realistically, we don’t have the cognitive capacity to do that. This could be one of your New Year’s resolutions. Thinking about making a plan for the right frequency at which you do want to re-evaluate all the big decisions you’ve made in your life. Maybe it’s monthly, and the beginning of each month could be that little kick in the pants you need to say, “OK, this is the moment.” But maybe you don’t feel like you need to do it even that frequently. Maybe it’s quarterly, or maybe it’s once a year, at the new year. That’s when you’re going to sit down and reevaluate. “Do I have all of my beneficiaries defined for all of my accounts, and am I happy with them? Is my will set up the way I want it to be? Have I gotten all my doctors’ appointments and checkups in?”

I don’t think there’s a one right answer. But we should acknowledge that we don’t do this continuously. And these fresh starts could be a good opportunity to set up a plan for the evaluation frequency that feels right in our life.

How Businesses Can Use the ‘Fresh Start Effect’

Loney: When you think about fresh starts from a business perspective, is it easier for a company, especially one that might be publicly traded, to do this [at the new year] because they already have part of it built into their year-by-year process?

Milkman: Companies tend not to be the target of research on the fresh start effect, insomuch as companies have a lot of procedures and planning in place both for legal reasons and reporting reasons. I don’t think of a company as the place where there might be major mistakes made, so much as I think within the individual working in a company who makes choices both for themselves, the people they manage, and their own advancement. That’s where I think about fresh starts as being particularly useful.

Actually, this research initially came from making a visit to Google’s headquarters out in Mountain View, California, about 15 years ago, for a big retreat where I was invited to present some research on how we could help employees make changes that would be beneficial for themselves and for their employer. HR professionals at Google are called “people analysts.” The People Analytics team was trying to figure out, how do we get more employees to opt in to benefits we’ve offered that are beneficial for them and for us? Things like taking advantage of educational programs that they offer, taking advantage of their 401(k) match, taking advantage of their wellness programming. I got this great question. The question was from a senior leader there named Prasad Setty. He said, “When should we be putting these opportunities in front of people? I get that we should be nudging them to adopt these things, and using behavioral science insights when we present them. But are there opportune moments?”

That’s where the work really came from, was the idea that for managers who are trying to figure out what are the right moments to set up a goal-setting meeting with an employee who’s underperforming? When can I best nudge someone on my team to take advantage of an educational program we’re offering so they could level up their software development skills? When are those times? That’s what this research tried to answer. There are actually moments when your employees are going to be more open to making a change.

By the way, it’s not just at these calendar moments. But also at these cycle ends within a company. They use it at Google now. They have a “moments” engine that triggers nudges and encouragements for people to take advantage of these kinds of programs at moments that they know are fresh starts.

Loney: Isn’t it how that nudge is delivered, as well? From the company’s perspective, you probably don’t want it to seem a little bit like bullying. You want it to be viewed as, “Hey, we’re trying to help you out. We’re trying to see if your life, your professional life, your personal life, could be better.”

Milkman: Always.

Loney: The messaging is very important here as well.

Milkman: A hundred percent. That’s true whether we’re talking about a fresh start moment or any other moment. To be persuasive and to change behavior requires understanding that people will react against anything that feels coercive and designed to extract value from them without creating value for them. It must be aligned.

That’s what we study at the Behavior Change for Good initiative. I don’t work on projects where there isn’t an alignment between the employee and the company, or the customer and the company’s best interest. When that’s the case, we absolutely want to make sure that the communication is conveying that. That these are benefits, everyone is better off. Right? The employee is better off if they build their human capital by taking advantage of this educational programming. The employer is better off because they now have a better-trained employee. The same is true for wellness programming. You’re lengthening your life. But the employer is also getting more benefit from you because when you’re healthier, you actually perform better at work. The idea is that you want to make it clear you’re not coercing.

Loney: One of the things you have talked with me in the past about is not only making the promise, it’s following through and not breaking the promise. And we talked about the costs that can be incurred by somebody when they don’t follow through on a promise.

Milkman: We often fail to follow through. Follow through failure is a major challenge. In fact, if you look at data on the fraction of people who follow through on an important health goal that they say they’re going to execute on, or even something like turning out at the polls in an election. It ranges in the data from 50% to 80%. It’s almost never higher than 80% of people following through on a commitment to their future selves, unless we do a bunch of intervention work to try to really make it easy and really support planning.

A lot of the work we do at the Behavior Change for Good initiative is to identify, what are the tools that we can give people and companies to help increase follow-through on everyone’s best intentions? Some of the most powerful tools are just making it insanely easy. How do I set you up for success so that, for instance, if you do literally nothing, you don’t lift a finger, the best outcome ensues? There’s this wonderful research on defaults, which means the option that happens even if you take no action. If you are defaulted into having a day on your calendar blocked for educational training, or you’re defaulted into automatically having a portion of every paycheck sent to a 401(k), these are the kinds of things that lead to particularly big benefits. Just removing friction so it’s as easy as possible for people to do the things that are in their best interest is really important. Short of that, we can help people make clear plans about when they’re going to do it, where they’re going to do it, how they’re going to follow through. And that also really increases success.

Loney: What are some of the areas that you’re most interested in looking at right now around behavior change?

Milkman: That’s a great question. I would be remiss if I didn’t mention the buzzword that’s in every hallway at the Wharton School, which is AI. We’re thinking a lot about how LLMs can be supportive in this journey. How can they best be harnessed to help people achieve their goals? What are the ways that we can design LLMs that help people set up plans, that help people follow through on all the best behavioral science advice that we know can create greater success rates when it comes to goal pursuits? That’s absolutely one of the areas that’s actively being pursued by our team. But we’re interested in so many questions about habits, and can machine learning be used in other ways? Not just as a tool to help support people, but also as an analysis tool to understand, what are the strategies that people are using successfully over the course of their lives, that we could then study and help others adopt? We have a lot of work underway using a wide range of different tools. But with the new availability of LLMs, there’s a lot of potential there.