“Statistics: Worse than Lies and Damned Lies” is a post by Adina J, a freelance writer, TimelessFinance contributor, and author of Blue collar / Red lipstick.
I think Statistics Canada has it in for me.
Before you run off to tell Joe that I’ve revealed myself to be a card-carrying conspiracy theory nut, let me explain.
Mark Twain was not the last person to comment on the unreliable nature of statistics (nor, apparently, the first, although there is some debate as to who actually was). Lots of people hate statistics, and many of them weren’t even forced to take the intro course in university (Editor Joe’s note: I enjoyed Statistics for Economics but I had a great prof, Dr. Torben Drewes). Not the government, though; the government loves statistics. And practically every time it puts out another batch, I end up feeling really, really inadequate. Why does the government do that to me?
Earlier this year, the ‘ment made a bit of splash with its latest report on Canadians’ household debt figures. Chez Adina’s, this proved to be a rollercoaster-by-the-numbers. Let’s start with the big one: average debt load. In 2009, the number was $114,400 per debtor. Right off the bat, this was bad news for yours truly; even if we divide our debt equally (though, technically, each of us is responsible for the full amount), my husband and I carry significantly higher balances. Yikes! But, wait! Families with children have higher debt loads than the overall average, at $144,600. Nope, ours is still higher. What about people with post-secondary education? There are four university degrees in our family. Although university graduates have a higher average debt load than those with less impressive papers on their walls ($145,400 versus $90,900), they still register lower than us. Ooh, what about people who have mortgages? After all, our debt is exclusively mortgage-related. According to the government’s statistics, mortgagees carry an average debt of $161,200. Sigh. Alright, last chance: what about high-income earners? In households with at least $100,000 in income, the average debt was $172,400. Well, at least we’re getting warmer (and closer to the norm).
The bottom line is that, if Canadians are generally in poor financial shape, then according to these statistics, my family is truly in some dire straits (Editor Joe’s Note: “Money for Nothing” was too obvious a choice, and it might have gotten me kidnapped by the CBSC’s Thought Crimes Unit).
Hold on, though. What about another metric? Perhaps something like net worth might give us a better perspective on our true financial situation. Again, based on 2009 numbers, the average net worth of a Canadian household was $385,000. Whoa, Nelly! We’re not even not close – we’re in a different (and much less exalted) stratosphere altogether. That seals it; we’re doomed. Or are we? Let’s tweak that metric a little bit, and look at median net worth. Things are starting to look up for us (and down for 50% of Canadians): the median is a mere $170,000, less than half of the average. Still a bit more than what’s sitting in our bank accounts, but we’re at least in the ballpark now (if out in left field). Drilling down further, the net worth of a household headed by someone under 35 was typically $145,000 below the median. If my rudimentary math skills don’t betray me, that would put those households’ net worth at around $25,000 – over 4 times less than our number. Suddenly, my husband and I are looking like financial rock stars. And that doesn’t even account for the fact that, unlike the figures above, our net worth does not include the intangible (like the equity in our home) or the hypothetical (like the value of our paid-off car).
So, which is it? Are we paupers, or are we princes? The most accurate answer is probably “neither”. We’re doing better than most of our peers, though we carry more debt than the “average” Canadian. This is why statistics suck: taken individually, they provide a very one-sided picture. Hardly reliable, and quite possibly stress-inducing for anyone inclined to bench-mark their financial situation by external markers. Moreover, statistics are descriptive, not prescriptive — even when used for extrapolations or projections. In light of Canadians’ abysmal saving rates, a number like the average or median net worth isn’t necessarily the ideal standard against which to assess financial success. Sadly, neither are arbitrary formulas, like the one advocated in The Millionaire Next Door - according to which, my husband and I should have accumulated in excess of half a million dollars already. (Show me a pair of 32-year olds with half a mil in unencumbered assets, who are not celebrities, celebutantes, trust fund babies, or some unholy combination of all three, and I will bow down to them as my new financial gods. (Editor Joe’s Note: be patient, I’ve got 6-and-a-half years.)) As much as I hate to pull out the old “special snowflake” argument, it can be nigh impossible to accurately gauge your personal financial situation by reference to some external standard, because you’re almost guaranteed to end up comparing some variety of apple to an orange, or worse, a leek. (No one actually likes leeks, do they?)
So forget statistics. If, like me, you’re obsessed with rating your own financial performance – ooh, that sounds naughty – then ask yourself two questions. One, are you maximizing your earning potential? Not everyone is possessed of the talents and career ambitions that might put them in the top income-earners’ bracket; that’s ok. Just ask yourself if there is more you could do, within the ambit of your education, abilities and interest, that could get you more money. Second, are you saving a reasonable portion of your income every month? You may think that the use of the modifier “reasonable” in this context is a cop-out on my part. It’s not intended to be. It’s simply intended to recognize that a number like a 50% saving rate has different practical implications when the income in question is $30,000/year versus $100,000/year. Put more bluntly, what is “reasonable” in this context is not meant to be correlated with (or determined by) lifestyle inflation, but rather with a standard of living some degrees above subsistence. I don’t see the virtues of living like a hermit when you don’t have to, unless you get some form of psychological pleasure from it. I won’t judge you, if that’s the case. (OK, I’m probably lying. Who really wants to walk around in a hair shirt all the time?)
As far as both questions go, the hard part is always going to be accountability. Because only you can know whether you’re doing enough to meet your income and saving potential. Whatever you do, don’t go easy on yourself. If you’re part of the XYZ generations, you’ve had plenty of people cut you slack already. Aim higher than their expectations, and if someone tells you that what you’re doing is crazy, then give yourself a pat on the back – chances are, you’re doing alright. (Editor Joe’s Note: unless Greg tells you that you’re crazy (or worse); then you’re doing it wrong.)
After writing this post, I came across yet another statistic. The average non-mortgage debt for persons living in Alberta (my home province) is just north of $33,0000. I have no idea what the median is, but I shudder to think that it might be higher, considering that there are (as unlikely as it seems sometimes) consumer debt-free people around, myself included. Although I know well enough how meaningless these sorts of statistics are, this figure definitely made me feel better about our financial situation. Which … totally goes against everything I just advocated, doesn’t it? Damned statistics!