28 Sept 2022

Making Cents: How the ‘Fresh Start Effect’ works

Making Cents: How the ‘Fresh Start Effect’ works

Don’t move forward too fast. Radically altering your behaviour e.g. saving too much of your income, could affect other areas of your life

It’s that time of year again, when we look at making a fresh start, turning the page, hitting the reset button, call it what you like, on many aspects of our lives.

And Covid has made many of us re-evaluate what our priorities are and what’s really important to us, which is why we’re probably more committed than ever, to doing things differently this time round.

I’ve read that people are better at tackling their goals or committing to making change when they start on so called temporal landmarks i.e., start of a new year, beginning of a month or week.

And they’ve dubbed this term, the Fresh Start Effect.

The inference with a fresh start is that there has been some failure in the past, so from a financial perspective, perhaps people didn’t save as much, or create a budget, or increase their pension contributions. But they promise themselves, that this year will be different.

And when people go it alone and make their new year financial resolutions, it’s all very good and commendable but their chances of success, unfortunately aren’t good.

The evidence is overwhelming that new year resolutions don’t work with most studies suggesting the failure rate is about 80% and anything you’ve promised to do, is a distant memory by the end of February.

That’s not to say, you shouldn’t commit to them, perhaps you’ll be one of the 20% that achieve what they set out to.

But with any resolution you make, remember the most important part of any plan is to plan on the plan not going according to plan.

You might be super motivated and making plans based on your mindset on a particular day, and in that heightened sense of enthusiasm, you end up biting off more than you can chew, because your best of intentions, go out the window, in their first encounter with the real world.

So, whatever you’d like to achieve from a financial perspective in the year ahead, I would encourage you to take your time and perhaps don’t commit to anything until the start of February. Spend these weeks in January thinking about what it is you’d like to expand on and bring into focus this year, and what the desired outcome you’d like, to create is.

You might have saved much more in 2020 because of Covid 19 and it looks like you’ll continue in this vein into 2021, and if that’s the case, your focus this year might be to optimise those savings by getting a better return and moving them into a higher yielding account.

There are many areas you might want to focus on, but don’t have too big a list either.

Richard Wiseman, a professor of psychology at Hertfordshire University, suggests that people should just pick one, and focus all, of their energies on it, rather than spreading themselves too thin among a number, of different areas.

So, write down all the different areas you were thinking of tackling this year, and some of them could be:

  • Reviewing your mortgage
  • Getting a better return on savings
  • Moving current account providers
  • Evaluate pension fund and size
  • Reviewing utility providers
  • Saving for a deposit on a house
  • Making a will
  • Claiming tax reliefs/reviewing current method of assessment
  • Buying a second property/holiday home
  • Reviewing insurance coverage
  • Setting up and maintaining a monthly budget
  • Paying down debt
  • Building up a fund for your children’s future educational costs
  • Preparing for the unexpected/establishing a rainy-day fund
  • Increasing your savings/retirement rate

And then whittle this number down to 2 maybe 3 and forget about the others because they’re just a distraction and taking time away from the ones that are most important.

So, choose the areas from your list that have most meaning for you.

If moving your current account to another provider doesn’t have much meaning for you other than your annoyed at your existing bank for increasing their charges, then don’t spend much time in this area. You might be better advised to focus your time on what pension fund you are saving into, and whether it’s appropriate or not.

That’s more important because if you’d like to retire at 60 and you want to make sure you’re on track to achieving that, your fund choice is a key determining factor in making that happen, so you’re going to carry out a new risk assessment on yourself, you’re going to review your investment mix, you’re going to review how the fund performed last year, you’re going to measure its performance against other funds you could save into etc. That’s what you should spend your time doing.

I’m not saying, by the way, that moving your current account shouldn’t be one of the things you commit to doing this year. It might be at the top of many peoples list, and I’m going to post an article in the coming weeks explaining how you can move providers and I’ll compare the various offerings as well.

My point is not to get distracted, by promising yourself to do things that have don’t have a big enough meaning for you. If they don’t, your motivation will wane, and you’ll end up taking no action and that’s just another year of broken promises to yourself.

This year make things different. And whatever you’d like to achieve, before you commit to anything, I would bear the following in mind:

  • Understand your current financial position. And know what you’d like it, to be and focus on how you can bridge the difference.
  • Build your goals and your living expenses into your monthly spending, they go hand in hand.
  • Changes to your finances don’t just happen, they require sustained action. They will take you out of your comfort zone and is that something you’re up for?
  • Understand why you want to achieve the goals you set yourself and what the motivation behind them are.
  • You have, to develop a plan outlining what steps need to be taken and what milestones you are going to measure progress against.
  • Get outside help if you’re not confident you can create that plan or feel you won’t hold yourself accountable if you do.
  • Make sure what you want to achieve is realistic and achievable in the time frame you’ve set yourself.
  • Don’t move forward too fast. Radically altering your behaviour e.g. saving too much of your income, could affect other areas of your life causing your plans to derail. Yes, it can be frustrating if you don’t see immediate progress but focus on those smaller steps because it’s easier to stick to them and they will increase the likelihood of long-term success.

I guess one of the things I’ve learned from 2020 is that our futures are filled with more unknowns than we ever could have imagined. And if we didn’t know or believe this before Covid, well we certainly do now.

But that doesn’t mean we shouldn’t continue to make financial plans, on the contrary, what 2020 has shown us is that it’s imperative we have contingency plans in place, but they should embrace and emphasise the room for error and terror!

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted by emailing or at

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