Budgeting for Lady Luck
The Jesse Mecham Show
YNAB
4.7 • 1.1K Ratings
🗓️ 24 February 2020
⏱️ 5 minutes
🧾️ Download transcript
Summary
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!
Transcript
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| 0:00.0 | Hello, Winebbers. My name is Jesse Meekham and this is podcast number 417 for |
| 0:09.0 | Wineb, where we teach you four rules to help you stop living paycheck to |
| 0:11.6 | paycheck, get out of debt and save more money. |
| 0:15.2 | I've been talking a lot about options and we want to remember that everything we do has some |
| 0:19.9 | options, some things remove options from us, and some things add options to us. |
| 0:24.3 | And the more options we have, the better, all else equal. |
| 0:27.1 | So if you're owning a home, you have options, like being able to hang a picture on a wall. |
| 0:30.8 | If you're renting a home, you do not have that option. If you are renting |
| 0:33.7 | a home you have the option of perhaps moving very quickly without a lot of baggage, right? |
| 0:40.9 | If you own a home that makes that transaction a little bit more difficult. |
| 0:45.0 | Everything has the options built in and as I've been reading more of Telev in the Black Swan, |
| 0:51.0 | I need to have him somehow on the show I would just be so intimidated I don't know if I could pull it off but I was reading about the evidence of things that |
| 1:00.8 | disappear and so they're removed from the population of evidence, |
| 1:05.0 | therefore giving you a construed idea |
| 1:08.0 | of what the truth is. |
| 1:11.0 | It's survivorship bias, so only people that are really good investors stay. is have the luck involved that it actually does. All of those quit. The idea of |
| 1:24.7 | beginners luck in gambling is real, not because it's actually real, but because |
| 1:30.2 | all of those beginners that did not have that luck quit. |
| 1:34.0 | So when you interview a person that is still gambling, |
| 1:37.9 | they would say, yeah, when I was a beginner, |
| 1:39.8 | I was far more lucky. |
| 1:40.7 | And you interview all current gamblers and say well how did it go |
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