It Cost More to Be Poor

While it may sound counterintuitive, being poor often leads to higher costs of living due to the lack of resources and options available to you. Living a poor lifestyle often leads to paying higher interest rates on everything from your car to your home, higher insurance premiums as you are seen as more risky, and potentially even more in fees for necessities such as a checking account. Living a poor lifestyle can sometimes even lead to paying higher prices for goods and services as you may not be able to take advantage of sales or save money with bulk buying. With all these odds stacked against you, living a poor lifestyle can be very hard to break and difficult to dig yourself out of, but it can be done!

So yes, it can cost more to be poor.

Here are a few ways being poor may cost you more: 

• Higher interest rates

  • Many people who are poor often have lower credit scores limiting their availability to get low-interest rate loans. If they do need a loan, they are forced to pay higher interest rates, and in some cases may even have to rely on loan sharks at payday lending services.

    • Your credit score may even affect the auto insurance rates you pay as they claim those with lower credit scores often have more claims, so if you have a low score, you may be paying higher insurance premiums.

• Acquired interest

  • When you have debt, only making minimum payments will drag out the life of the loan, and this causes you to pay extra in interest alone. If you can afford to pay extra on your debts each month, then you can shorten the life of your loans hence paying less in interest.

• Extra cost/fees (It sometimes costs money upfront to save money over the long run.)

  • This is true for some goods and services such as auto/home insurance. Most of the time, you can save money by opting to pay insurance premiums every 6 months or even on a yearly bases rather than monthly. This can also be true for some subscriptions, however, anyone not in a position to pay this upfront cost could pay extra in fees for the option to pay monthly.

  • This can also be true when purchasing items in bulk. Sometimes you can save money by buying items in larger quantities or stocking up when something you use frequently goes on sale, but if you do not have the available funds or the space to store these items, then you can end up paying higher prices to purchase these items a little at a time.

• Overdraft and late fees

  • True story: A long while back, someone I know bought a candy bar with a check. (That’s how you know it was a long time ago. No one writes checks anymore.) They didn’t have the funds in their account for this 50-cent candy bar, so the check bounced incurring an extra $20 fee. This made that candy bar cost over $20. That was an expensive candy bar. I know people don’t use checks anymore but think about the number of times people swipe their credit cards for small items like this only to pay high credit card interest rates and/or fees on those items. This will not help you move forward on your financial journey.

  • Overdraft and late fees could also accrue if an emergency came up (say an unexpected auto repair) that took your available funds causing other bills to be late or your account to overdraft. This is why having an emergency fund is so important.

• Reconnection fees

  • These are fees that may be required to reconnect services that may have been shut off for lack of payment.

• Higher energy bills and maintenance costs

  • Poor housing conditions can lead to higher energy bills and/or costly repairs.

• Physical health

  • As stated above, it can be very hard to break the poor cycle with higher costs for everything. You may need to work longer hours or even multiple jobs leading to a lack of time to cook and/or exercise. Many will turn to buying cheaper-prepackaged foods or even eating out at unhealthy fast-food restaurants and slack on any exercise they should be doing. An unhealthy lifestyle could lead to higher healthcare expenses later in life.

• Mental health

  • Chronic stress affects every aspect of your life, and if you are poor, a small emergency could become a huge deal financially. The stress of this can affect your ability to focus, regulate your emotions, and affect your job performance and relationships. Stress can lead to all sorts of health problems which again, could lead to higher healthcare expenses later in life.

• Loss of job opportunities

  • Sometimes the only way to get good careers is through paying for education or training, or even through networking and unpaid internships, but if you are poor, this option may be harder to take advantage of.

• Higher taxes

  • o    The wealthy could fall into lower tax brackets by utilizing tax incentives and write-offs, such as owning businesses and/or properties. This is much harder to do without the cash to do so which could make you fall into higher tax brackets thus making you pay more. Robert Kiyosaki says, “How much money you make does not make you rich, but rather, how much money you keep is what makes you rich.” This is why learning the tax codes and laws is so important as well as being financially responsible so you can have the option of taking advantage of the benefits listed in the tax codes.

“You owe it to humanity to become successful.”

I heard this from Economic Ninja, and it changed the way I look at everything I do.

Many like to complain about greedy wealthy people, but if you are a good person, wouldn’t you want to become successful so you can then help others in the way you feel greedy people lack? Money is not evil. Money highlights the qualities you already have. If you are a greedy person before money, then having money will generally highlight your greediness making it more evident to others. If you are a good person with money, then having money will more than likely highlight your good qualities making them more evident to others. We owe it to the ones around us to become successful so that we can then help others become successful.

Let’s make this contagious, and help raise up more good people with money. Let’s change our world!

Do all you can to stay out of the poor lifestyle, because once you get into that, it can be hard to escape. However, if you are there, hope is not all lost.

It will take hard work and dedication, but you CAN climb out of this, and just imagine the story you will have that could help others escape as well.

• Be sure to find and follow a good financial plan. Dave Ramsey’s Baby Steps are probably the best of the best when it comes to climbing your way out of financial problems, and you can check out the Make a Plan page for other plans and steps.

• Read Budgeting, Saving, Paying off Debt, and Groceries and Gas for ideas and tips to help you succeed financially so you can then help others around you.

• Finding a good financial planner could be a great investment as well.

Show me your 5 closest friends, and I’ll show you your future.

You become who you hang out with, so be sure to choose your friends wisely. If you are trying to dig yourself out of a poor lifestyle, then you should limit hangouts with friends who like to go out wasting money on unnecessary things. Find friends with a similar mindset as you, and who will help hold you accountable when you have the urge to shop or spend money.