The start of a new year often brings a renewed focus to health and well-being including financial resolutions. However, we don’t have to wait until January 1 to embrace new financial habits. Life is filled with moments that naturally inspire change (e.g., birthdays, the start of a new season, or the beginning of a new job/role). These "fresh starts" allow us to pause, reflect, and reset our priorities. Research shows that fresh starts can be powerful motivators, particularly when it comes to improving financial habits.
A study conducted by Besearsh et al. (2021) suggested that framing a future savings opportunity around a meaningful "fresh start" date — such as the beginning of spring or a birthday — can encourage individuals to take advantage of that opportunity and increase their retirement savings contributions.
Financial professionals can use the touch points throughout the military family life cycle to introduce “fresh start” framing. Some examples of fresh starts include:
- Birthdays
- Anniversaries
- New job or pay increase
- A loan is paid off
- Childcare expenses end
- Beginning of the month or pay period
Military families have a unique opportunity to reassess and set fresh financial goals at intervals that are integral to the touchpoints along the military family life cycle (e.g., relocation/PCS move, when a deployment begins or ends). Because military families often experience multiple life events simultaneously, identifying meaningful dates with your clients will make it easier to implement changes at a specified future “fresh start” moment.
A fresh start will mean different things for each family. For example, some clients will opt for additional Thrift Savings Plan (TSP) contributions or sinking fund savings. Participating in a savings challenge or using a "round-up" savings method can enhance confidence and foster a sense of hope in one's ability to set financial goals and save for short and long-term goals. For other clients, a fresh start may create space in the budget to prioritize student loans or other debt repayment. Another example of a fresh start moment is noticing months that may be easier to go without some subscriptions or to start a “no spend” challenge.
Fresh starts can give meaning to big and small points in time and build a service member’s Financial Self Efficacy (FSE). FSE is defined as, “the belief in one’s abilities to accomplish a financial goal or task, such as saving for a comfortable retirement.” (Sturr et al, 2021). Financial professionals and clients can work together to foster financial self-efficacy. In addition to punctuating opportunities for future change, financial professionals can also remind clients of their past financial accomplishments and celebrate their progress.
By embracing a financial mindset that anticipates and celebrates change, fresh start framing can help shift the thinking from reactive budgeting to a proactive cycle of financial management. This financial checklist from the Office of Financial Readiness can be utilized to assess the current financial well-being of service members and their families and to create client-specific goals.
One way we like to celebrate the end of one year and ring in the next is by looking at all of the research, trends, and events that have impacted military personal finances throughout the year. The tenth annual Personal Finance Year in Review webinar will be on Wednesday, December 18 at 11 am EST - 12:30 pm EST. The webinar recording will be available for replay on the event page.
References
Beshears, J., Dai, H. Milkman, K., Benartzi, S. (2021). Using fresh starts to nudge increased retirement savings. Organizational Behavior and Human Decision Processes. https://www.sciencedirect.com/...ii/S0749597821000698
Sturr, T., Lynn, C., Lawson, D. (2021). Financial self-efficacy and retirement preparation. Financial Planning Association. https://www.financialplanninga...tirement-preparation
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