The Over-Under Fallacies of Personal Finance

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“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

-Mark Twain


There are many fallacies people mistakenly believe in that screw them over financially. I like to think of them as the ‘Over-Under’ fallacies of personal finance.

Here’s a few.

We overestimate the importance of investment returns. We underestimate the importance of savings rates. 

Most people (especially young people) obsess over investment returns when their focus should instead be on their savings rate.

Someone who saves $20k per year earning 0% investment returns will save $100k faster than someone saving $15k per year earning 10% investment returns. Wrap your head around that. 

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We overestimate what we can accomplish in the short-term. We underestimate what we can accomplish long-term.

It’s a good idea to set massive goals. It’s a bad idea to set unrealistic timelines for those goals. 

It’s nearly impossible to go from a net worth of $0 to $100k in one year. But it’s far more realistic and manageable if you give yourself three years. Income, skills, and experience tend to compound at a nonlinear rate over time. The more money you have working for you, the faster it compounds. The more time you spend acquiring skills, the faster you pick up new skills. The more experience you gain, the higher your salary. The higher your salary, the more money you can save…

It’s a cycle. 

It’s hard to go from $0 to $100k when you’re young with few skills and no experience. It’s much more realistic to reach this goal in three years through saving, gaining skills, and acquiring experience.

We overestimate our ability to be an overnight success. We underestimate the power of consistency. 

One of my favorite rappers is a guy named Russ. Recently he has started gaining popularity online and is beginning to make a name for himself, going on tours, making massive radio hits, and climbing the charts. Most people think he came out of nowhere and turned into a success overnight. But if you dig a little deeper, you’ll find that he has been making music for ten years straight, with virtually no recognition until 2017.

He’s not an overnight success. He’s a product of a decade of consistency. 

Another example is Joe Udo, the blogger behind Retire by 40. In a recent financial update, he revealed that he earned $4,222 in blogging income during October, which is actually a “low month” for him. After looking through his blog archives I discovered that he started blogging back in 2010.

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That’s nearly 8 years of consistent blogging. 

His impressive blog income is not a result of an overnight success. His secret is years of consistency.

We overestimate the power of goals. We underestimate the power of systems. 

Setting financial goals is a great idea. Failing to set up systems that will help you achieve those goals is a bad idea.

Suppose you want to save $10,000 over the next six months. Simply wanting to achieve that goal will get you nowhere. You need systems in place to ensure you save that much.

Set up a recurring deposit to automatically transfer a portion of your paycheck into your savings account every two weeks. By keeping your checking account artificially low, you’re subconsciously convincing yourself that you have less money to spend.

Set up a habit of meal-prepping on the weekends for the week ahead. This ensures that you have meals ready to eat during the day and will help you avoid dining out excessively. 

Vow to sell one item you no longer use on Craigslist each week. Then throw that money immediately into your savings account.

Systems are the key to achieving financial goals.

We overestimate our importance. We underestimate the joy that comes with recognizing we’re not that important.

When we overestimate our importance (which we all do), we have a tendency to think the people around us care deeply about our lifestyle. We think people are constantly judging our clothing, the car we drive, and the house we live in. This causes us to purchase things to impress people and spend more than we need to in order to feel accepted.

The truth is, most people aren’t concerned with your lifestyle. At least not as much as you think. 

Everyone has their own lives to live. They have their own issues, relationships, money problems, career ambitions, and a whole little world where they’re the center of the universe. They might give you a hard time about your frugal lifestyle for a few minutes, but then they’re right back to their own universe.

There’s a profound sense of freedom that comes with recognizing your own insignificance. If you want to embrace frugality without fear of being judged, go for it. Most people won’t care anyway. The only person holding you back from living a life true to yourself is you.


These are only a handful of common fallacies that screw us over financially. Recognizing these fallacies for what they are can help us avoid the common pitfalls that prevent most people from achieving financial freedom.


My favorite free financial tool I use is Personal Capital. I use it to track my net worth, manage my spending, and keep an eye on my monthly cash flow. It only takes a few minutes to set up and it makes tracking your finances simple and easy. I recommend trying it out.

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9 Replies to “The Over-Under Fallacies of Personal Finance”

  1. It’s actually refreshing to come and realize we are not as important as we may think we are to others. As a result, we can be free to do what we want with our lives without the pressure of society. We can live in a way that makes us comfortable and happy without thinking we are happy based on the approval of others 🙂

  2. I love what you say about overnight success, because too often that’s the story that people love to share. No one wants to hear about 10 years of hard work; it’s juicier to hear about how you can quickly copy someone for the same results. But if there were a magic bullet, wouldn’t everyone be FIRE’d?

    1. If there were a magic bullet, indeed everyone would be FIRE’d instantly and nobody would have to work for it. But that’s not the case, and I’m glad it’s not because all the personal growth occurs in the process, not in the end result 🙂

  3. PREACH!

    I love all of these so much. The more we learn these lessons about how our brains can sometimes lead us astray, the more power we have in changing our thoughts and actions and reaping the benefits.

  4. Great article! The last point has been top of mind lately. I’m a newish blogger and devoting a lot of time to it. Every time I’m tempted to go on and on about to my IRL friends I have to remind myself that while my friends are happy that my blog is making me happy, they really don’t want a play-by-play of all I’m doing.

    1. Thanks, Jenny! I don’t see anything wrong with sharing your blogging experience with your friends, I’m sure they’re happy for you. It’s always good to keep things in perspective though. Thanks for the comment and I look forward to watching your blog grow over time 🙂

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