The Planning Fallacy

Optimism Bias
September 11, 2018
Are we being too SMART?
October 30, 2018

Why are most of us so cynical whenever we hear the word Budget? Why do we scoff at delivery timeframes on large projects? Why are forecasts often not considered worth the paper they are written on? Why is it that most plans fail?

Behavioural Economists have proven that it is basic human nature to over-estimate our expected success rate on new ventures, and to under-estimate the time they will take to complete, and hence the cost involved. They have come to call this behaviour the Planning Fallacy, which is a derivative of the Optimism Bias that we explored earlier.

I think part of the reason for the Planning Fallacy rests with our inability to foresee what events we can control, versus those we cannot. We tend to over-estimate the level of control we will have over a particular outcome.

When setting goals it is important to keep in mind that it may take us longer to achieve them than we plan, and we may have to overcome more obstacles than we foresee along the way.

The message? We should not leave our future to chance. It may take us a lot longer to realise our goals & dreams that we would think at first glance. Life has a habit of throwing up a number of surprises which can impinge upon our plans. So don’t leave it too late to develop your life plan, as achieving financial freedom may take longer than you think.

We also have to be flexible with our plans. We can’t let the first unexpected obstacle push us off path, to throw out the plan as unachievable & too unrealistic. This game of life can be tough, our plans have to be flexible to overcome life’s knocks, and we have to be resilient if we are to overcome them.

Do you have a plan to achieve your goals?