Are You Normal About Money?

How much do families spend on food? How much has the average person saved for retirement? Do others balance their checkbooks every month? Every week? Every day? When shopping for homes, how much time do people take?

I recently spent $4 on a book that answers these questions and others like them. Are You Normal About Money? by Bernice Kanner purports to offer a statistical representation of the financial lives of normal Americans. While I question the methodology — it mostly comprises the results of surveys at bloomberg.com, hardly a scientific sample — the results are interesting.

Here are some typical questions and responses:

If the service isn't what it should be, do you tip less? More than half of us — 54 percent — scale back when the service doesn't meet our expectations. Twenty-three percent still tip the usual amount. Nine percent leave nothing or pennies. Two percent say they speak with the manager.

Would you keep a job you hated for big bucks? Twenty-three percent said they would … collect the cash for a short time at least. Ten percent wouldn't take this Faustian bargain for a minute. Seven percent confess they are already doing it.

Do you consider the moral, social, or environmental implications of your investments? Two out of five investors (38 percent) avoid involvement with socially irresponsible companies. Almost as many (35 percent) only care about the return.

How much time do you spend in the supermarket? The average shopper spends only 21 minutes buying groceries and covers only 23 percent of the store during each [trip], according to a study by Frito-Lay.

How often do you switch car insurers to save on the premiums? Seventy-one percent of us say that we switch at least once a year to trim costs. But for most of us there's got to be at least a 20 percent savings on what we're currently paying before we'll switch.

The math on that last answer makes my head spin. It seems to imply that most people are getting rate reductions on their car insurance every year. Is this true? I've had the same insurance carrier my entire life — he's a small-town agent who plays an active role in the community, and I have a friend who works for him. In this instance, I value social capital more than money. But 20% a year?

I can't recommend buying Are You Normal About Money?. I distrust the validity of the numbers because they come mostly from online surveys. But there are some gems here. I'll share some in the coming months. (If you're really curious, borrow this book from your public library.)

There are better ways to compare yourself with your peers. Throughout the year, government agencies and research groups release surveys and findings on a variety of financial topics. For example, earlier this year the Employee Benefit Research Institute released its annual Retirement Confidence Survey. This survey measures retirement savings and investments, and then analyzes the data. The report is 28 pages long. Here's one table, which demonstrates how much people have saved for retirement based on age. How do you compare to the average?

Retirement Savings All Workers Ages 25-34 Ages 35-44 Ages 45-54 Ages 55+ All Retirees
Less than $10,000 39% 54% 34% 31% 36% 30%
$10,000-$24,999 14% 19% 15% 13% 6% 12%
$25,000-$49,999 12% 11% 14% 14% 8% 14%
$50,000-$99,999 12% 7% 16% 12% 12% 11%
$100,000-$149,999 5% 1% 7% 5% 7% 7%
$150,000-$199,999 6% 3% 5% 10% 5% 6%
$250,000-$499,999 6% 1% 5% 8% 13% 12%
$500,000 or more 6% 4% 4% 8% 13% 10%

I'm 37 and have $63,840.40 saved for retirement. This puts me in the top 25-30% of my age group. I'd like to be higher. When I've eliminated my final debt (in March of 2008), I'll attack retirement savings.

You can download a PDF analyzing these survey results at the Employee Benefit Research Institute web site. Or you can view a summary of the report. Vincent forwarded an article that analyzes the RCS numbers from 2005 and concludes that they're not pretty. (Motely Fool: Prepare for a gruesome retirement)

Most of us are curious about how others handle money. How do people cope with debt? How much do they save? How do they handle the unique crises that make up life? During the coming months, I hope to conduct a series of interviews through which I will profile average families and how they handle their finances. My guess is that there's no such thing as “normal”.

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joe
joe
14 years ago

i’m with you on the car insurance one. I really call BS on that. At BEST, what it meant was “who has changed car insurance in the past year” to save money. Even at that, I still wouldn’t believe 70%. You can’t get 70% of the population to do ANYTHING together (except dissaprove of George W Bush 😉 ), much less 70% each year to do something. An informal survey of my co-workers shows about 2 in 10 who have changed in the past year, so about 20%, which sounds good to me.

Alan Wild
Alan Wild
14 years ago

I’m shocked at the 4% of 25-34 year olds with $500K or more. I’m 30 years old today (about 6 weeks from being 31), and I save aggressively for retirement. Assuming I continue my contribution rates that I’m at now, and my account grows at 12% per year (which I think is probably optimistic) I will only have $381K four years from now (right before I turn 35). I know, nothing to turn your nose up at, but how in the heck are so many young people hitting such a high mark so early? I didn’t click though to the… Read more »

J.D.
J.D.
14 years ago

Alan, it is my assumption — perhaps false — that those with large amounts saved at a young age have had help. That is, they’ve inherited money, or have been given it by some other means. It seems unlikely that this savings would have been the product of their own labor. Again, I could be wrong, but it seems unlikely. You’re right about what the survey considers for retirement savings. It doesn’t include home equity or defined benefit plans, but all other savings and investments. One thing that I didn’t note is that the EBRI is alarmed that though few… Read more »

Matt
Matt
14 years ago

Interesting info; but the analysis of the data is only as good as the data itself. Did the results also put it into a geographic context? For example if you’ve got $64,000 saved up for retirement that might last you a few years in say New York if you own your own place but what about a quiet rural town in montana where you don’t have as many expenses?

While its interesting to see what people are spending I think the context of the data might skew the numbers beyond usability. Though it might make for interesting trivia.

Brad
Brad
14 years ago

Regardless of whether 70% of people actually change car insurance providers yearly, 100% of people should shop around every time their current policy is up. In my experience, switching providers every 6 months has ALWAYS been cheaper (note: I get the state-required minimum coverage across the board).

It takes about an hour on the phone or online to get the quotes, but 20% savings isn’t unrealistic.

Cindy
Cindy
14 years ago

IMHO comparisons to Average (especially in the area of “personal” finance) are, at best, misleading and, at worst, give a false sense of security. I prefer to use more mathematical-based yardsticks that are personalized for my situation, such as the one described in The Millionaire Next Door.

Is it important how fast or slow one is running compared to other lemmings?

icup
icup
14 years ago

“100% of people should shop around every time their current policy is up”

I disagree. You get (sometimes substantial) discounts applied for being a loyal customer. But beyond that, because I’ve stuck with my company for so long, they will ‘forget about’ a future at-fault accident, meaning even if an accident is my fault, my rates won’t go up.

Also, I did try shopping aorund once and the quote I got from Geico was substantially more expensive than my current carrier.

VinTek
VinTek
14 years ago

Cindy makes an excellent point. I believe that the article at Motley Fool is an interesting “gloom and doom” type commentary, and it’s a little scary to see how many people are unprepared for retirement.

However, with respect to one’s own finances, what others are doing is irrelevant. There are 2 major questions each person has to answer for himself or herself:

1) How much will you need to retire?
2) Are you doing enough to reach your goal?

Roger
Roger
14 years ago

I think the financial services industry and experts do people a disservice with their “you will need this much money to live in such-and-such fashion” articles. The numbers given–often $2M, $3M or more–are simply inconceivable for the average Joe, and make retirement savings seem like something for the rich. They’re often the result of calculations like “you earn $100K a year now, how much money must you have saved to earn that in retirement, adjusted for inflation?” The problem with that premise is that unless you’re really a jet-setter, you probably don’t NEED that much money when you’re retired to… Read more »

Kim
Kim
14 years ago

Seems like the trend is more and more young people are saving up for retirement which is a good thing! Interesting post. It reminded me I need to shop around for new car insurance!

Ian
Ian
14 years ago

20% seems pretty possible on car insurance. Mine seems to go up every year by 15%, so I wait 2 years and then move to save about 20%, which is still leaving me up by more than inflation every year. The accident forgiveness and long term customer discounts are all tricks to get you to stay. If another company is cheaper than your company with “long term discount” applied, what good is that discount doing you? The math on the chances of having an accident are pretty basic and appling that chance of premium increases versus the savings are easy… Read more »

NLG
NLG
14 years ago

Does anyone here want to be ‘normal’ about finance? Not me, I’d rather try to stay well-ahead of the curve!

Check out the stats on NetworthIQ. You’ll see that the averages are skewed because some people jump in there and say they have a NW of $26 million at age 30… ok. The medians sound reasonable in most cases.

NG

Kathy
Kathy
13 years ago

If poverty level for a single person is about $10,000/year…. then your $63,840.40 should allow you to live at poverty level for around six years.
If it’s not unusual now for people to live 30 years past retirement (age 65), then JUST to have a poverty level income, you’d have to have $10K x 30 = $300,000.
I guess if we’re all in the same (poverty) boat together… prices will have to adjust to meet us, because as a people, we will be unable to meet them?

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