Now that spring has sprung, many of us are setting big new goals. New year’s isn’t the only season for that, after all. With flowers blooming, birds singing, and summer holidays just around the corner, spring signals a fresh start to many of us. So this month, I’m sharing an interview from a 2021 episode of Choiceology that touches on one of my favorite ways to boost your chances of making progress on a big goal.
Before diving into this month’s Q&A, here are a few of my favorite recent listens and reads.
Recommended Listens and Reads
To Fight Bias, Consider Highlighting Your Race or Gender: This Scientific American op-ed offers some surprising advice on a strategy that can make women and underrepresented minorities's requests for career help more compelling.
Combatting Climate Change: I recently joined Climate of Change, an audible original podcast hosted by Cate Blanchette and Danny Kennedy, to talk about how the science of behavior change can help address the climate emergency.
The Power of the Situation: A recent Choiceology episode digs into why we often blame the person rather than the situation and features an interview with legendary social psychologist Richard Nisbett.
Decision Leadership: Two of the scientists I most admire have a new book out that can empower people to make better choices. I can’t wait to dive into this season’s must-read behavioral science title and encourage you to pick up a copy too.
Q&A: The Power of Breaking Down Big Savings Goals
In this Q&A from Choiceology, I talk with UCLA Anderson School Professor of Marketing and Behavioral Decision Making, Hal Hershfield. Hal explains why breaking big savings goals down into smaller subgoals makes them more palatable and attainable.
Me: Could you talk about your study on breaking down big savings goals into smaller parts?
Hal: I’d be happy to. This is a project I did in collaboration with Shlomo Benartzi and Steve Shu. We worked with a basic savings app and asked new users if they wanted to enroll in a recurring savings program that took money out of their checking account every so often. Some people were asked if they wanted to save $150 a month. Others were asked if they wanted to save $35 a week. And then we had a group that was asked if they wanted to save $5 a day, which you can probably tell is all the same amount.
Me: And how did that turn out?
Hal: Four times as many people signed up for this program when it was framed as $5 a day, compared to when it was framed as $150 a month. About 28% signed up in the $5-a-day framing, about 11% in the $35-a-week and 7% in the $150-a-month framing.
Me: Why do you think this simple reframing changed behavior so much?
Hal: I think there are a couple reasons. One is that we have different mental buckets for our monthly, weekly, or daily expenditures. So, from a monthly standpoint, we think of things like mortgage and rent, maybe car payments, or a cell-phone bill. And when you think about $150 a month there may not be that much wiggle room. But if I think about $5 a day, for most people that boils down to a coffee. And so we say, “Sure, I think I can add that.”
Another reason here could be that saving for the future is often painful because you have to make a sacrifice today to get a benefit later, and you see it come out of your paycheck. I think this shift from a monthly expenditure to a daily expenditure really lessens the psychological pain of that sacrifice. Now to be fair, we did see some people drop out because they realized, “Oh my gosh that was $150 a month.” But way more people were enrolled in the $5 a day savings program even after the first month.
Me: Is there anything you do differently now based on this insight?
Hal: It’s funny that you asked that because we were just going through the process of refinancing our mortgage. Without going into all of the boring details, I did the translation in my head to say, “What’s going to be best in the long run versus the short run? And how much will this really cost us?” I broke it down into weekly amounts and it helped put things into perspective.
However, sometimes things that are broken down for you can end up being really expensive. I remember when we were talking to our internet provider and they said, “Well, it's only another $25 a month to get the super high-speed internet.” And I thought, “That doesn't sound awful.” Then I started adding it up to a yearly amount, and it’s actually a lot. That’s when I asked, “Do we really need this?” So, I think the reverse is important, too.
Me: I love that. Do you think there are situations when it could actually be harmful to break a big goal into smaller components?
Hal: If you have a big, important goal and you break it down to smaller parts, I think it’s going to help you. But I do think there are cases in the spending space when breaking it down could be problematic. We’re seeing this rise of websites that allow consumers to basically put purchases on layaway. So, you can purchase a big product and pay only $8 a month. That can be really beneficial if there’s something you've had your eye on or it’s going to bring you some utility. The problem is if we do this for all our expenses, and now we’re left with a big portion of money to spend every month.
Me: You make a nice distinction between a tool that can be used for good - if we break down savings, which is something that most of us wish we did more of - but can also be weaponized and used to convince us to buy junk we don’t need, right?
Hal: Right, there are times when a more expensive product could be better — it could last longer or be higher quality. I think if used well, some of these payment plans could actually help consumers. But you have to be smart and disciplined and keep in mind the big picture.
This interview has been edited for clarity and length. While it focuses on the benefits of breaking your savings goals down into bite-sized chunks, my brilliant PhD student, Aneesh Rai, has done terrific work extending social psychology research from the 1970s to the field and demonstrating just how powerful it can be to break an effortful goal into bite-sized pieces. Rather than planning to work 200 hours per year towards a goal, Aneesh’s work suggests you’ll get more done if you commit to 4 hours weekly or 8 hours every other week.
To learn more about research on the power of breaking big goals down into bite-sized pieces, listen to the episode of Choiceology where we dig into the topic.
That’s all for this month’s newsletter. See you in May.
Katy Milkman, PhD
Professor at Wharton, Host of Choiceology, an original podcast from Charles Schwab, and Bestselling Author of How to Change