Overconfidence is what leads people to underestimate traffic or overestimate how much they can fit into a day. It is also what has led some of history’s most successful leaders to their downfall. As a business owner, the same confidence and decisiveness that helped you build your company can create blind spots when it comes to your personal wealth.

In simple terms, overconfidence is our tendency to overestimate what we know or what we are capable of. It usually shows up in small ways, giving us blind spots about our own abilities, like how quickly we can finish a project or how well we can read a market compared to the professionals who study it full time.

Overconfidence has been the subject of extensive research. One well known study found that 93% of Americans believe they are above average drivers, which is a statistical impossibility. Another study out of Harvard found that students believed they could predict daily egg production in the United States with 98% accuracy, but were only accurate 60% of the time.

When it comes to money and the markets, overconfidence can create the illusion that past success came down to skill alone rather than timing or broader market trends. It is why overconfident investors often believe they can time the market, despite the high failure rate among those who try.

For business owners, overconfidence can also mean underestimating the odds of a costly life event, such as an illness, a divorce or a disability. According to AARP, roughly a quarter of people age 45 and older are not financially prepared to pay for long term care if they suddenly needed it. Overconfidence can also lead owners to assume they have more time than they do to build a succession plan or fund retirement, deferring important decisions until the window to act comfortably has narrowed.

Overconfidence can undermine even a well built financial plan, but it does not have to undermine yours. Start by taking an objective look at your past successes. How much came from your own actions? How much came from timing, luck or broader market conditions? How much came from careful planning?

Apply that same lens to the future. If you have a strong instinct about a particular investment or business decision, consider what is really motivating that feeling. Is it grounded in research and data, or is it closer to a hunch?

Staying objective is difficult when yours is the only voice in the room. That is why I work closely with business owners and their families to provide the information, resources and experienced perspective needed to make sound decisions about wealth and the future. Believing you can beat traffic rarely has serious consequences, but overconfidence in complex financial matters can. By taking steps to counteract it, we can help keep you appropriately confident as you work toward your goals.