Why Being Average Is a Horrible Strategy for Your Finances

Mr. or Ms. Average (or Mx. Average for you non-binary folks), is that you? Congratulations if you live in the world of average income, drive an average car, and even have an average of 1.93 kids (which actually might be tragic even though it’s the average for families right here in the good old USA). Being average is, well, average.

Man reclining on seat, just being average

But here’s the thing, despite what Seinfeld said when he said “not that there is anything wrong with that”, being average isn’t a very good be all end all goal for anyone to have, is it? Even those who are currently at the bottom of the scale financially speaking shouldn’t shoot for average. Average is not full human potential. Average is not the final stage 5 place you go to die. Average is non-distinct and is a horrible financial strategy.

Do You Want to Be Just Like Everyone Else?

What does being average financially say about you and your goals? To me it says you are nothing very special. Is that what you want to be, ordinary or average? If average were spectacular, then maybe you would be more than happy to be labeled that way. But what actually is average?

If I dig a little deeper here, you will probably recognize it.

There Are Goals and Then There Are Goals

You already know if you’re a regular reader here that I firmly believe in making goals. If you are just starting out in a career in anything you want to do, having a plan to do it must include your goal(s), short- term and long-term ones. It’s my guess that when you start out on this journey, you don’t look up whatever the numbers are about income and say, “yeah, that’s it. I want to be right there, Mr. Average. That’s my goal and where I want to be.”

That just doesn’t seem to make any sense. If you are the way I was, your ultimate goals included fame, fortune, and living the life of Riley. If you don’t know who Riley was, look him up. It simply means that he had it made, lived in a world of ease, and perhaps never ever worried about money at all. A pretty good way to live, or should I say dream? But even though Riley never quite made it, he had his goal!

Having goals includes steps along the way. Being average is a step. It’s not the destination where you stop. You need to keep climbing the steps. So how do you do that?

Does Education Scare You?

Going to school is a given. If you live here, you attend school or you’re taught at home in some cases, but it’s education and it’s required. But I’m not talking only about reading, writing, and arithmetic. I’m talking about “education” and how that affects you and reaching your full potential. That is also a requirement if you want “Rileyism” or avoiding being just “Mr. Average”.

That education I am speaking of can be different for each of us. Street smarts are a part of it for sure. Learning by observing at home from your parents is another. Having role models and mentors is a third way of it. Going to formal institutions to further your knowledge and career is another. The point is that all of them are part of the fabric of your plan and goals, and getting to higher levels must include them if you want to be financially sound. It doesn’t guarantee you will, but it gives you a good framework.

I Have Always Said…

One of the things I have always said is that it’s really important to know what you want to do in life and to do what you love to do and are really good at. It really helps if you have a talent or aptitude towards something specific, but it doesn’t always happen that way. I have always said to myself, “wouldn’t it be just wonderful to have a career in something that you would just do for free anyway like being an artist or a baseball player playing the same game you did as a kid but now making millions doing it?” Follow your dream is one way to say it, but oh if it were only that easy.

The important thing is having a focus on a goal and finding out exactly what your real aptitudes are. The sooner you know, the better off you will be.

The Financial Part of Goals and Planning

Humans are loss averse. That means we have the fear of losing about twice as much as we like the idea of winning. That affects just about every part of how we act and what we do. It certainly affects how we present ourselves to the world.

That kind of thinking explains why you or your neighbors try to be just a tad flashier than they really are financially speaking. They may drive a leased BMW and go on an expensive vacation when they really shouldn’t, and you have no idea that they do any of that, but you care. That’s why you probably do the same thing when you could actually do it without any smoke or mirrors and, wait for it…debt.

Raising Income Vs. Lowering Expenses

It’s no surprise that so many get-rich-quick gurus have adopted the “focus on just increasing your income, not cutting your costs” approach to personal finance. Wrong.

The argument goes something like this: “There is a limit to how much you can cut your costs, but there is no limit to how much you can increase your income. So instead of tightening your belt, just focus on making more money. Eventually your costs will be insignificant.”

I take a much more conservative view of the “focus on income, not costs” path to financial freedom. Some claim that “cutting some costs makes sense” or that “you can and should cut costs on the things that don’t make you happy to spend on the things that do.” But the emphasis on income over costs is still the one most talked about.

It should include both of these parts. There is no shame in being frugal and you are not a loser if you use it as a step in the plan to avoid being average. In a world dominated by consumerism, tightening your belt feels like admitting that you have failed. It’s not!

Cutting costs isn’t sexy or cool. Making more money is. That said, there are reasons to think that strategic, focused, aggressive cost cutting is still an important component of achieving financial freedom. In reality, it is a stage to escape the world of average.

The Averages About Debt

American household debt hit a record $14.96 trillion in the spring of 2021, according to the Federal Reserve. Lucky for you, that debt is shared by about 340 million people. As of September 2021, consumer debt for the average American consumers is at $92,727.

When people talk about the need to get control of their costs, they usually aren’t talking about the fact that they are investing too much. They are usually saying that they feel their unnecessary spending is out of control.

If you look at your budget (you do have one, right?) and find that you are spending most of your money on liabilities and material possessions instead of assets and opportunities, maybe it’s time to do some soul searching. Maybe the amount that you are spending isn’t the problem. Perhaps the problem is that you are spending money on the wrong things.

Cost Cutting Is One Way NOT to Be Average

Is there any cost cutting in the materialistic world of 2021? A world where you can purchase a phone for more than $1,000?

In some ways, the most valuable part of any cost-cutting exercise is the analysis phase. Until you sit down and look at your costs in detail, you have no idea what you are prioritizing.

I’m not suggesting that cutting costs is the path to financial freedom. As many people have pointed out, “your costs are finite, but your earning potential is infinite.”

I’m simply saying that getting control of your costs will give you more ways to invest in growing your income. And when you finally do start making that better income, having a solid grasp of your financial situation will help you to avoid being the next “riches to rags” story. When the rags part hits you like that, being average may actually be attractive.

Final Thoughts

Do you strive to be average? If so, how does that make you feel when you say it out loud? To avoid being average and make “potential” your new most important word, why not try cost cutting? Even in a world of inflation you can do it.

When it comes to achieving your financial potential and even freedom, what’s more important: cutting costs or increasing your income? Why? Do you agree or disagree that fiscal discipline is an important part of achieving financial success? Why not take the step above average right now?