A sideways look at economics
As the holiday season quickly approaches, and we begin to set our eyes on ringing in the new year, I would like to offer my personal philosophy on New Year’s resolutions. I am a big fan of personal growth and achievement, so yes, I do see merit in setting resolutions. However, I understand why sentiments around New Year’s resolutions are less than stellar these days. From the behavioural economist’s point of view, keeping resolutions can be quite an uphill battle. I’d argue that often we do not put enough time and intention into picking the right goals, but instead settle for general, cookie-cutter resolutions, like eating more healthily and saving more money. Furthermore, we set out to initiate these changes in a month that does little to support us. My suggestion? Start the new year in February.
Resolutions tend to fall into two categories: habits (like exercising more) and accomplishments (such as taking a trip to a faraway country). I find habit resolutions a bit more difficult to achieve since, by definition, a new habit should never end. They also tend to be more common, as the graph below shows – so let’s focus on them.
Behavioural economists have found that we use habits, or heuristics, all the time to make our lives easier. They reduce mental load, enabling us to switch into autopilot mode for simple tasks while preserving brain power for more critical work. Heuristics do not usually result in the most optimal outcome, however; rather, they just do the job. They also tend to become so ingrained in our routines that we don’t even notice them. Identifying these suboptimal behaviours, although not necessarily easy, could prove a useful starting point for a New Year’s resolution. Plus, economics tells us that people act in their own self-interest, so tailoring resolutions to our own needs, rather than going with the most common, generic resolutions, can fuel personal motivation.
There is a typical pressure to think of your resolutions in December and start acting on them come 1 January. But December is a month that in many ways is out of the ordinary. It is particularly hectic time for travel, family, holidays and wrapping up work for the year. It is hardly the best time to meaningfully reflect on the year and our habits, or to set goals for the future – in fact, it can be hardly possible to find any time to do so at all.
Another complicating factor is that humans crave timely, positive feedback. The ‘habit loop’ concept (a cyclical pattern of cue, routine, reward) speaks to the importance of rewards in reinforcing behaviours. We will more enthusiastically continue behaviours that offer positive rewards. Further, through the lens of temporal discounting, we see that people opt for, or value more, the rewards that are closer to the present than those farther away. In short, forming a habit thrives on quick, positive reinforcement, which January simply fails to offer.
January is widely considered the most depressing month of the year. The post-holiday slowdown, return to regular life and the gloomy, dark and freezing weather, coupled with heightened financial strain both from overspending and from a longer wait between pay cheques, make it a really hard month. Incentive and resources are scarce, and we face the hardest hurdle to achievement first as January is a long month. Achieving a perfect month takes more time, therefore postponing a sense of accomplishment. The human desire for positive reinforcement is hard to meet in a month like January.
But this does not mean January is a lost cause. It my view, making a conscious decision to start the new year in February solves all of the negative issues and, in my experience, brings better results. Instead of attempting changes and challenges while ill-prepared, I spend January planning and testing for the new year. Once I decide on the big changes that I want for myself – let’s say, reducing my frivolous spending – I begin to analyse how I would need to adjust my behaviour so as to achieve that. Making coffee at home rather than buying it, for example, could prove fruitful assuming that I can make it taste good. I also like to consider how societal nudges, like ‘Buy 7 get the 8th free’ coffee-shop cards, have led me to my current, serial-latte-buying behaviour.
I mentioned that I also use January for a time of testing, which I find to be a vital part in sticking to resolutions, but one that is rarely considered. To continue with the coffee example, what would happen if the opportunity cost of making coffee at home plus all the upkeep of it turns out to be higher than just buying one? What if I am really bad at making coffee? And what if buying a coffee brings me a spark of joy that one from home simply cannot? The rational thing to do would be to give up on this, but that’s where testing comes in. By trialling resolutions, I get a chance to see what works and what just sounds better on paper without the pressure to stick with it.
Another benefit of February is that it is the shortest month, so starting here plays into temporal discounting. It’s just that bit easier to complete a perfect month of your resolution, fuelling ambition with positive reinforcement. Further, the extra financial strain in January lessens, making it easier to afford expenses like a gym membership or healthier food.[1] And, last but not least, in February the days become noticeably longer, helping to rejuvenate motivation and clear away the winter blues as sunlight exposure is associated with improved mental health.[2]
I hope my philosophy reinvigorates your opinion on New Year’s resolutions and makes them all the more approachable. See you in the new year (February)!
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[1] The 2025 Broken Plate Report found that healthier foods are more than twice as expensive per calorie as less healthy foods.
[2] Wang, J., Wei, Z., Yao, N., Li, C., & Sun, L. (2023 ’Association Between Sunlight Exposure and Mental Health: Evidence from a Special Population Without Sunlight in Work’, Risk management and healthcare policy, 16, 1049–1057. https://doi.org/10.2147/RMHP.S420018