Budgeting for Lady Luck

They are prepared for emergencies, for setbacks, for unexpected life changes. In fact emergencies don't seem to happen as often to them. YNAB'ers are a lucky set, it seems, but maybe there's more to the truth than a roll of the dice.

 

Survivorship bias is a logical fallacy in which you focus on a group of people or things that made it past a selection process, without considering those that failed. This bias can lead to a number of erroneous conclusions. In finance, survivorship bias occurs when evaluating the returns of, say, companies in a certain sector of the economy. If you only look at current technology firms, you might look at the technology sector and determine that it radically outperforms the market… but those same returns may look very different if you consider all the technology firms within the same time period that went bankrupt.

 

Survivorship bias appears everywhere in life, and YNAB'ers are no exception. At first glance it may seem like those in good financial health just didn't have the same number of setbacks that those in poor financial health did. But maybe it's not just luck. Maybe those with good financial health stay that way because they budget responsibly.

 

Sign up for a free 34-day trial of YNAB at www.youneedabudget.com

 

Also, go to https://www.youneedabudget.com/bootcamp/ to sign up for the YNAB Debt Bootcamp!