I'm posting this as Public Service.
I doubt it will do any good, but here goes--
Ace of Spades HQ
Articles
like this make me wonder if the bien pensant journalist-and-pundit class knows any actual poor people. I was born poor, grew up poor, and spent a good chunk of my 20's poor. Not genteel poor, either -- I mean hard, stony-bottom, empty-pocket poor. I come from poor people.
Poor people don't think about money in the same way that more well-off people do. When you're poor, money -- and the lack thereof -- informs your every moment, waking and sleeping. You know exactly, at any given moment, how much money you have, down to the penny. How much in the bank, how much in your jeans, how much in the coffee can on the counter at home. Every purchase is a choice -- if I buy this six-pack now, that means hot dogs instead of hamburger for dinner tomorrow; if I pay my cable bill, that means that instead of dinner and a movie my best girl and I get to spend a night at home watching the TV. You triage your bills -- rent comes first, then heat. Then...you decide: cable or cellphone? Who can you put off the longest? How long can you float things?
You start with the credit cards because you figure you have the right to treat yourself once in a while. If you have to sit at home instead of going out, what's wrong with having a nice flat-screen TV to watch? And then the car went south, and that blew a $500 dollar hole in your budget, so you had put your groceries and gas on the credit card that week just to make ends meet. The kids needed new clothes and shoes and supplies for school. You've got to pay the minimums on the card just to keep things going, and the balance just creeps higher and higher until you're butting up against the limit. Then you get another card, and maybe the old lady gets one too. And pretty soon...well. You wake up at night in a cold sweat because you know that bankruptcy and ruin are only a breath away. It's not just a question of if you lose your job or get sick and can't work; it's a question of losing the overtime hours you've become accustomed to, or if the wife goes back to part-time instead of full time. You realize you're barely treading water as it is; it would only take a small wave to drown you.
The thing is...when you're poor, credit isn't a way to live a life beyond your means. Your day-to-day doesn't change much. Yes, some people splurge on stupid shit like vacations and electronics and clothes. But lots of poor people just get accustomed to living just slightly beyond their means.
It's stupid because it's perfectly possible to live reasonably comfortably on even a fairly low wage, but it takes one critical thing that many poor people lack -- the ability to think ahead. To plan not just a week or two ahead, but months or years ahead. Poor people don't think about the future much because honestly they feel that it doesn't hold much for them (and they're often right). The future is the end of the week; it's having enough money to make the rent and have enough left over to go to the clubs on the weekend. Credit buys little pleasures, not big ones: new shoes, a dinner out with the wife, a small gadget or some DVD's. Something to bring some pleasure into an otherwise pretty drab life.
Poor people, in short, are not stupid. They just don't see their options as being particularly varied, and they have very short time-preferences. They spend their money where they figure it will do them the most good in the short term. They don't actually use their credit differently than other people -- they use it at need, for critical out-of-budget stuff (car or home repairs, medical bills) or to purchase entertainment items (electronics, movies, etc.). The problem is that poor people can't pay down that debt. Most poor people don't go extravagantly nuts with credit cards, but the burden creeps and creeps and creeps because they can only ever pay the minimums.
I always push Dave Ramsey's course on people, and you can get some of it free through churches and civic groups. I don't agree with everything he says, but he's one of the only financial planners I know who focuses on lower-middle-class and poor folks with financial advice. Rich people don't need financial advice -- poor people do. Poor people, in general, are not victims. They are not poor because they were cheated, or because they were hampered in their careers by someone else. Mostly, they are poor because they are unskilled and made bad life choices. But even then, it is not only possible but not all that difficult to live a moderately comfortable life with a small income -- all you need is to follow some simple rules. The first of which is: avoid debt like the plague. If it's a question of buy it with cash or do without, then learn to do without.
To boil it down to gravy: poor people are poor because they behave differently than wealthier people. Change the behavior, and you change your financial situation. It really is just that simple.
