Wednesday, April 27, 2016

Y$10K - Average Sucks

One of the reasons I started the Y$10K blog series is the research released in January that 63% Of Americans don't have enough savings to cover a $500 emergency. What? $500? They don't have $500 in savings that they can get their hands on. That's very serious.

Let's look at some other scary statistics. But first, let's agree on what we mean by average or above average. See the chart.

In a "normal distribution" there's something called a standard deviation. It is based on the variance or the variation between individuals. One standard deviation is represented by the symbol Sigma.

Graphic adapted from the one at

So we see that one standard deviation accounts for 68% of the variation and two standard deviations account for 95% of all variance. Now if you only care about being ABOVE average - to the right of center, then two standard deviations puts you above 97.7% of the population. A third standard deviation would get you to 99.8%

The good news is: It's EASY to be above average. Basically, you have to try. That's it. Pretty much anything you do to try to be better results in placing yourself far above the crowd.

Here are a few things to think about:

- The Average American family savings account balance: $3,950
- The Average amount saved for retirement: $35,000
- The Average American household debt: $117,951

And on the non-finance side:

- The average American is overweight (63%).
- The average American watches 2 hours and 49 minutes of television a day.

I'm just speculating here, but I think there's a huge connection between all these things.

The basic choice we have to make at any minute is whether to act for our immediate comfort and pleasure or delay gratification. So many people choose to eat rather than to feel empty. They plop down in front of the TV instead of reading a book or doing something else that might help their career or just exercise their mind.

At any given time, you have all the excuses you need. You can't save a dollar today. Or this week. And certainly not this month. But when it goes on like that year after year, your excuses become clear. At some time in the decade that just passed, you COULD have figured out how to save some money. Failing to get started on this is why most people have less money saved than it takes to live for a year.

Unless your plan is to retire and then die right away, you need to prepare for it!

But you need to have a plan. Being just like everyone else sucks.

Put out the effort to be at least one standard deviation above the crowd. And to be honest, your goal should be two and then three standard deviations.

Once you put your focus on that, you will make very fast progress.


Sources: (March 2016)

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Update 2017: I have been informed that the Wikipedia articles are not very friendly or accessible for people with disabilities. Here is a much more accessible article describing the standard deviation. It has been edited for accessibility.

Thanks to Ava for the note!
- KP

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