Exploring the Planning Fallacy

Exploring the Planning Fallacy

The most difficult element in attaining well-being is behaving like someone who is well.

For example, say I decide to start integrating 45 minutes of movement into every day because I know this has benefits for my mood, blood pressure, and overall health (to learn more about all of the benefits of movement, check out my podcast with Grace Melek). This seems easy when I write it down and decide it’s something I want to do. When initially planning to commit to 45 minutes of activity, this is how I think it will go:

Then, I start implementing 45 minutes of movement into my everyday life. For the first few days, it goes great! On day 4, I have to stay late at work to finish a project and miss my daily movement session. The next day, I’m tired because one of the kids was up all night and there was a snow storm and I can’t make it to the gym. Now, I find myself face to face with the planning fallacy. The Decision Lab writes, “The planning fallacy describes our tendency to underestimate the amount of time it will take to complete a task, as well as the costs and risks associated with that task—even if it contradicts our experiences.” In reality, my journey to better health looks like this:

There are more pitfalls waiting to derail my journey to better health than I can imagine. This is true in most cases where I am working to adapt a new behavior or achieve some goal. The planning fallacy stems from people’s innate bias towards optimism. As a species, we don’t often plan for how we are still going to work towards our goals when adversity strikes. Here a few methods that would help combat the planning fallacy when laying out a strategy to achieve a goal:

  1. Envision adversity on the bad days (we all have them)- What will my 45 minutes of activity look like when adversity strikes (a pending work deadline, snowstorm, etc.)? What is the minimum I can do on the worst days and still feel like I am making progress towards my goals?
  2. Ask for input- Share your goal, your timeline, and your strategy with someone you trust and grant them permission to give you open and honest feedback. An outside source will likely point out something you missed.
  3. Find accountability for the journey- The hardest part of achieving anything is executing the steps it will take to get there day in and day out. Ask someone you trust to keep you accountable. It’s even better to have multiple sources of accountability.
  4. Change the way you describe yourself- Rather than saying I want to be someone who is healthy, say, “I am a healthy person.” Then, you are more likely to act like a healthy person and eventually you will be a healthy person. For more on this idea, see Atomic Habits by James Clear.

Behavior change is hard. Which is why so many plans for better health, better budgeting, heightened work productivity, etc. fail miserably. Many of these plans fail because they never leave the planning stage. They remain unexecuted. To achieve anything, we must act. We must adapt our behavior to the goals we have. Then, we must be prepared for adversity and exhibit the stick-to-itiveness to achieve our objective in non-ideal circumstances.

Overcoming the planning fallacy is one of the primary benefits I provide to my clients as a financial advisor. Often, people seek my advice to achieve their financial goals. Such goals can vary from starting a business, to buying a house, to planning to fund their children’s college tuition, and beyond. People can easily fall victim to the planning fallacy when thinking about financial goals because they fail to consider what could go wrong. People don’t consider how they are going to reach their goals if they lose their job, or if the market goes down, or if they incur unexpected expenses. My role as an advisor is to help people consider how they will respond when adversity strikes and what goals will take priority.

Furthermore, my work with clients also includes some expectations setting. Sometimes it’s hard to know how long it will take to achieve a certain goal and what actions are required to achieve the goal. Or if the goal is even feasible based on my client’s situation. As an outsider that’s less emotionally tied to the goal, I can provide open and honest feedback and help level set expectations.

Once my client and I establish the necessary actions that need to take place to achieve a goal, I also act as an accountability partner to encourage my client to stay the course when times become inevitably more difficult. The achievement of lofty goals requires consistent action even during the most difficult times.

When working to set goals of any type, we must be aware of the planning fallacy and know that the achievement of that goal will likely be more difficult than we express. Then, we must adapt our behavior to mimic the necessary actions to achieve that goal and maintain that behavior even during the unexpected.

Do you want to experience financial well-being and start financially thriving? Book a financial well-being lab session on my calendar here:


The only cost is your time and there is no obligation.

Alex is a registered representative and investment advisor representative of Securian Financial Services, Inc. 3951318/DOFU 12-2021