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Why New Year's Resolutions Fail
Sharing my 2023 Goals with you!
Most New Year’s resolutions fail, but with a good understanding of economics, you can make sure that you stick to your goals and make this year your best year.
The Business of Failed Resolutions
We are 8 days into the new year, and some of us are already struggling to keep our new year's resolution. Today, I will talk about the economics behind new year's resolutions. Knowing this information will help you keep your goals and resolutions. At the end I will share my new year’s resolutions using the principles I discuss here.
There are whole business industries that are profitable because they understand the economics of failed resolutions. For instance, Planet Fitness has made a whole business model by attracting price-sensitive individuals with goals to improve their fitness but lack the ability to stick to their goals. A New York planet fitness reported that it can hold 300 people, but the club has 6000 members. Planet Fitness and other health clubs rely on paying members that never show up!
If you have not stuck to your workout resolution, you are not alone.
To better understand why most resolutions fail we need to discuss behavioral economics.
Behavioral economics is a field that combines psychology and economics to understand how people make decisions. It is based on the idea that people's behavior is not always rational, and that there are many psychological factors that can influence our decision-making process.
There are several behavioral economic factors that can contribute to the failure of New Year's resolutions. I will highlight some that apply to me here:
Present bias or Hyperbolic Discounting: People often have a bias towards the present, which means that they value immediate rewards more highly than future rewards. This can make it difficult to stick to a resolution that requires long-term discipline and sacrifice, because the rewards of following through on the resolution may not be immediate. You experience the pain now, but the gain is felt in the longrun, making it hard for you to stick to the work. This also happens to students. With the new semester starting, you might want to keep this in mind. Present bias is why you always put studying off till later. This is also known as Hyperbolic Discounting.
Loss aversion: people are more motivated to avoid losses than to achieve gains. We call that loss aversion. This can make it difficult to stick to a resolution that involves giving up something that we value, because the pain of losing that thing can be greater than the pleasure of achieving our resolution. Try to reframe your goals with gains rather than losses. This is why dieting rarely works, because you are often presented with what you cannot do, rather than what you can do.
Overconfidence: People often overestimate their ability to follow through on their resolutions, which can lead to unrealistic expectations and a lack of planning. This can make it more difficult to stick to a resolution over the long term. Failing to meet part of the goal can lead you to give up entirely on the goal. This happens with savings and working out. When you set a goal of saving a certain amount for the year and run into a bad spending day, it is easy to throw in the towel and give up totally.
How to Overcome the Bias
There are several strategies that you can use, based on principles of behavioral economics, to help you stick to your New Year's resolutions:
Make your resolution specific and measurable: Instead of making a vague resolution like "exercise more," make a specific resolution like "exercise for at least 30 minutes, three times per week." This will make it easier to track your progress and see if you are making progress towards your goal.
Use commitment devices: A commitment device is a strategy that you can use to make it harder for yourself to back out of your resolution. For example, you could sign up for a gym membership or hire a personal trainer to help you stay motivated. Or you can do what I do and that is publicly state your goals so others can hold you accountable.
Think Marginal. Break your resolution down into smaller goals: Instead of trying to achieve your entire resolution all at once, break it down into smaller, more achievable goals. This will make it easier to see progress and stay motivated. It will help you adjust your expectations so that you do not give up. Also, goals are easier to achieve in smaller pieces. When setting goals we tend to make drastic changes, best goals take advantage of marginal adjustments, meaning small adjustments compounded over time and lead to big changes.
Reward yourself for making progress: When you achieve a small goal or make progress towards your resolution, reward yourself with something that you enjoy. This can help to reinforce your behavior and make it more likely that you will continue to make progress. This will help with loss aversion and present bias. Make meeting your goal about gaining something and it will allow you to look forward to the future.
Seek support: Surround yourself with people who will support your resolution and hold you accountable. This can make it easier to stick to your resolution, especially when you are feeling discouraged. Support helps with accountability. You all are part of my support.
My Goals for 2023
My goal for 2023 is easy. It is to write and create more. Over the past year, I have found that I love creating and it is a big part of what makes me happy. So, in 2023 I will do more of what make me happy. My more specific goals are:
Write a blog post 3 days a week. This can be a simple reflection, economic news to share, or an analysis of some data. I will keep the stakes low and put a limit of 500 words on the posts. You can keep track of this on my website. Lowering the cost of writing, will make it easier for me to write more often and hopefully setting a goal of 3 times per week will allow me to remain consistent since it is not an overwhelming number. However, over a year that will add up to 156 posts for 2023.
Write one newsletter a week. This can be a repurposed blog post, or it can be a stand-alone post. But the post needs to be in short-form. If you aren't subscribed to my newsletter, you can do so below. Expect 52 emails from me this year about economics and how it impacts your life.
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I am keeping my goals simple and focused this year. I want to make my creative process my priority.
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