Planning fallacy
The habit of underestimating how long your own tasks will take, even when similar tasks ran late before, partly because tasks can overrun by far more than they can finish early.
In plain English
When we plan, we picture the steps going as intended and ignore how long similar projects actually took. On top of that, task times are lopsided: a task can be a day early but a week late, so a plan built from each task's most likely time is too short on average. The cure is to start from how long comparable projects really took, the outside view, and plan for a high level of confidence rather than the most likely case.
Uncle Gary explains
Cousin Kevin planned ten tasks of 'two days, most likely' and promised 20 days. In our simulation the project had a 13% chance of finishing on time and took 26 days on average.
Why it matters for your money
Savings goals, renovations and retirement plans are built from optimistic steps too. Plan from what usually happens to plans like yours, and leave room for the bad tail.
Where we tested it
Related terms
All glossary terms. Educational content, not financial advice.