The Biggest Money Mistake Muslims Make

reflections saving sharing spending systems

The biggest money mistake Muslims make is the same money mistake everyone makes. (Try saying that five times fast).

We expect too much from our future selves.

Most of us have a general sense of what it means to be financially responsible. Don’t spend more than you make. Don’t be wasteful. Be generous. Keep it all halal.

We imagine future versions of ourselves making perfectly rational financial decisions that align with those principles. But it’s never that easy.

In the heat of a financial decision, we are pulled by our desire in one direction and our intellect in another. Impulse meets restraint. Fear meets hope. Throw in external market actors — the credit card company, the advertiser, the salesperson — and we’ve entered a maze. Yet, we somehow expect that we’ll dance our way through this minefield on vibes alone.

Today, we have the luxury of ignoring the complexity that awaits us tomorrow.


The High Costs of Over-Expectation

Behavioral economists call this the “overconfidence bias” - our tendency to overestimate our abilities in complex situations. I call it our “over-expectation bias”: our propensity to expect future versions of ourselves to cut through the chaos and make sound decisions. We think we’ll be fine, so we do not prepare adequately for what lies ahead.

Here are a few examples of what financial over-expectation leads to —

  1. Inaction: You know investing is important, so you tell yourself you’ll do it when you have some extra cash…eventually. When you happen to receive a little more money than expected on your tax return, you spend a few minutes looking for investment opportunities and quickly feel overwhelmed by financial jargon. What's halal what's not? What's safe what's not? As a result, you choose to do nothing, missing out on opportunities for wealth-building and long-term financial stability.
  2. Avoidance: You have a hunch that you may be overspending on restaurants and takeout, but instead of confronting the issue head-on, you avoid logging into your account or opening your bills. When friends or family members bring up financial matters, you quickly change the subject or excuse yourself from the conversation, hoping to escape the discomfort.
  3. Regret: You realize that you've been unintentional with your money the past year, leaving you with little savings and no significant contributions to charitable causes. This realization fills you with regret as you acknowledge that your financial habits haven't aligned with your core values.


How Do We Combat the Over-Expectation Bias?

Relying on our intuition on its own is an insufficient method to make sound financial decisions. But suppressing it entirely Is not the answer either.

Instead, we need a system to guide our intuition as we deal with day-to-day money choices: a personal finance system that renders decision-making easy, efficient, and in line with your values.

This system can help you navigate the complexities of money without feeling overwhelmed or paralyzed by uncertainty.

An effective personal finance system is

  • Principled: Establishing clear guidelines and boundaries from the outset removes much of the guesswork from the decision-making process. It will ensure that your future financial choices will be consistent with your beliefs.
  • Flexible: Life circumstances and priorities can change over time. A flexible system allows you to adapt to accommodate new goals or financial realities without compromising your core principles.
  • Simple: A well-designed personal finance system should include mental shortcuts to reduce complexity and the cognitive load we endure as we navigate the money labyrinth. A simple system is a resilient system.

A personal finance system confronts the over-expectation bias head-on. It paves the way for more intentional and responsible financial decision-making.

Designing a system today to help you make good choices tomorrow is more than just prudent planning. It’s an act of kindness to a future version of yourself

What's Your Financial Wellness Score?

Answer a few short questions and get your personalized score in less than 5 minutes.

Get Your Score

Written by Farooq Maseehuddin

Farooq Maseehuddin (Muslim Money Guy) is a financial educator and writer. He holds both a Bachelor of Education (BEd.) and a Master of Education (MEd.) from the University of Alberta. He's been a high school teacher and Muslim community organizer for nearly two decades.

Insights on Muslim Money

Sign up for the Muslim Money Guy newsletter for tips and reflections on Muslim personal finance.