It Is More Expensive To Be Poor

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Why is it more expensive to be poor than rich? The poor have limited access to simple yet necessary resources such as groceries and banking services that the rich enjoy. There are more reasons why but those are the biggest reasons.

According to a 2020 Census Bureau study, Americans living in poverty in 2019 had fallen to some of the lowest levels ever at 11.1%. However, the pandemic made that number rise up, even with record stimulus payments to Americans.

That number is shocking. America is the richest country in the entire globe yet we have millions and millions of people in poverty. It shows you that there is no perfection in the world. Good always has bad behind the numbers.

The frontline workers are the most heavily affected. Personally, I work in a white collar job where my work can be done with a computer and an internet connection. I invested less money to get to my job because of the lack of commute and work from home measures. Therefore, my expenses went down while my income stayed the same.

However, the shutdowns as a result of the pandemic led to millions of Americans filing for unemployment. This is one example where it is more expensive to be poor. The rich get richer and the poor get poorer because of how the game is designed to be played.

No matter how bad your life is today, there are people who has it even worse. Be grateful for everything that you have because millions of Americans don’t have what you have. You may have already won the birth lottery by living in the most developed country on Earth. Seize the opportunities and take advantage of everything you’re given.

Why it is More Expensive To Be Poor

Below are 10 ways on how it is more expensive to be poor. One way that you can tell is to DESTROY that social share button and post to your favorite social media. For the Google algorithm! The almighty algorithm!

In seriousness, below is valuable knowledge that you and your friends can learn from to be more informed. If you don’t experience the things below, count your lucky stars because you have access to what millions of people don’t.

1) Buying in Bulk

When you foresee a recurring expense that you’re going to use every day, there’s a good chance you can afford to buy in bulk. Grocers sell things like toothpaste, paper towels, toilet paper, hand soap, and more in bulk. When you do, it becomes cheaper per product than if you bought them individually.

That’s fantastic! In my local grocery store, they sell a bundle of six paper towels for $5. What! That’s even cheaper than if I go to the dollar store and buy six individual paper towels at a dollar each. That’s the power of buying in bulk. The sellers incur less costs and they pass on the savings onto you.

However, the poor doesn’t even have the power to spend the $5 to get the paper towels. They are barely scraping by and making ends meet. That’s why it’s more expensive to be poor. They resort to buying the paper towels individually for $6 and end up paying more by the end of the year.

If you have the means to buy in bulk, you’re in a good spot.

2) Bank Charges the Poor for Being Poor

Expensive to be poor to get banking services.
Banks aren’t too kind on the poor.

If the poor doesn’t have enough money in their bank account, they get charged what are called overdraft fees. Overdraft fees are fees that a customer incurs for spending more money than what they have in their bank account. The banks literally punishes people for being poor!

Overdraft fees are expenses that the majority of the population don’t have to deal with. The rich literally get rewarded for being rich and the poor get punished for being poor. Sure, maybe once in a while you forget that you don’t get paid until Friday and end up spending more than intended.

99% of the time though, you haven’t intentionally incurred overdraft fees in your life. That’s one of the reasons why it’s more expensive to be poor. How the banking fees are structured for their customers. These days, having a bank account is a need, not a luxury.

It’s difficult to cash in a paycheck without a bank.

3) Higher Proportion of Income to Living Costs

The poor has to spend a significant amount of their income on necessity living. Things like rent, food, and water take up a huge amount of their income. The federal poverty level income for one person in 2021 is $12,880. $1,000 a month will barely cover rent in many parts of the country, let alone food.

When there’s a high proportion of income that’s allocated to living costs, there is zero margin of error. They have to cut back on so many things and avoid buying in bulk, like the above reason. There is no excess amount of money to build up an emergency fund.

It’s not a matter of if life will throw a curveball, it’s a matter of when. The poor doesn’t have any leftover funds to cover an emergency expense that is bound to come up. The lack of safety, security, and assurance that comes along with that makes it more expensive to be poor.

4) Higher Borrowing Costs For the Poor

When the poor gets a loan and has a low credit score, they pay higher interest rates. Banks require additional compensation for taking on the additional risk, even if there is less chance of them collecting the money. What if the poor has an absolutely awful credit score to get a loan so the banks don’t even give them a second thought?

Their next option is payday loans. Payday loans have interest rates of 400 – 600%+ APRs. That’s a huge price to pay just for being poor. If it’s money that they absolutely need to make rent, buy food, and survive, they have no other choice. So they go ahead and sign up for a payday loan, even if it is very expensive.

It’s a harsh reality that it is more expensive to be poor than it is to be rich. Credit scores aren’t just three digits on a scoreboard. It’s a real world number that has a huge impact in the ability of a person to get a loan. While it isn’t ideal, loans are a necessity for the poor.

5) Quality Purchases are Harder for the Poor

The poor usually buys the cheapest option that actually ends up costing more in the long run. Why? They can’t afford the high upfront bill. As we all know, buying quality products is better than buying the product that costs the least. Why? The cheapest product is prone to breaking down much more often.

Things that are bought from China can be high quality but you have to do your research. Otherwise, you’ll have to buy the same thing again and again and again. Which means you’ll have to pay more money in the long run than buying an expensive product once. That’s what the poor goes through.

When they buy a car, they are forced to buy the one at the lowest cost. Which forces them to pay more in maintenance fees. The cheapest cars are more prone to breaking down with their car batteries, transmission, AC filters, and more. Purchasing quality products is almost out of reach for the poor.

6) Health

The poor does not go to a doctors appointment and as a result keep getting sicker. The medical bills snowball even further into a mountain that can’t be conquered. They could have gotten it taken care of with one $100 doctor’s visit. Now, they may be looking at thousands of medical bills because they couldn’t afford $100 in the first place.

It doesn’t just apply to when they are sick. Maintaining their health becomes difficult as well. Healthy foods cost more than cheap and unhealthy fast food. As a result, they buy more fast food and end up on a downward trajectory in terms of their health.

Health makes it much more expensive to be poor. They can’t quickly take care of their problems with a simple doctor’s visit. They have to dwell on it until it literally becomes a life or death situation. That’s not a great way to approach life.

7) The Law

Expensive to be poor because of the law.
Justice isn’t too kind on the poor

When the poor receives a parking ticket, they can’t pay it. So then they end up getting a fine on top of the parking ticket fine. Then it continues on and on until the end of time. When I received a $144 parking ticket, I paid for it without hesitation in 30 days.

While I should have fought it, the point is that I could afford it, no problem, without paying additional fines. It just hurt me psychologically but I could still make rent that month. The poor cannot pay a simple parking or traffic ticket that easily.

It’s not that difficult to get a traffic violation from an officer of the law. Because it is not that difficult, the law makes it expensive to be poor. The additional fees a municipality generate from writing tickets is enormous, so the practice will not be stopped.

8) Can’t Buy Time

The poor cannot make a quality car purchase that costs $10,000 or more. As a result, what do they do? They take public transportation. However, the thing with public transportation is that it is cheap but it costs time. Time is MUCH more expensive than money.

When I was a student, I received public transportation for free. However, was it really free? I had to research when the buses arrive and the place where the bus arrives. The time that I lost waiting and standing in line was enormous. I estimate I spent close to 200 hours a year just sitting and waiting for the bus to come.

The poor have to do things like wait for the bus, go to a community laundromat, and more in order to do basic life necessities. It’s not expensive to be poor in money terms but in terms of time as well. Time is money, people.

9) No Money Leftover to Invest

All of the money that the poor earns has to go to food, water, and rent. There is no leftover money to invest. The S&P 500 may be expensive, but these days, it’s easy to buy fractional shares of a security. Anyone can literally invest with one dollar.

However, the poor is barely scraping buy and can’t afford anything else but their living expenses. This is the most expensive cost that the poor faces. They don’t have money leftover to invest. As astute personal finance blog readers, we all know that compound interest is the best thing since sliced bread.

It’s not just thousands of dollars they lose, it’s tens, if not hundreds of thousands of dollars they lose. With proper savings and budgeting techniques, everyone has the ability to become millionaires by their 60s. However, the poor does not have access to the opportunity.

This is the most impactful and expensive reason why it’s more expensive to be poor than to be rich. They can’t afford to do anything else but to survive. The opportunity cost is sky high.

10) Food Deserts Affect the Poor

Expensive to be poor, because food deserts exist.
Like this desert but for food

I had no idea what a food desert was until I started researching. Food deserts actually exist in the real world. What are they? They are areas where the convenience stores avoid because the neighborhood is too poor. So with no easy access to convenience stores, what is the poor supposed to do?

They have to take public transportation, which costs time and money, and buy individual packages of products because they can’t carry all of it at once. As a result, they are hit in more ways than one. Boy, is it expensive to be poor. The rich enjoy easy access to quality, healthy, and nutritious food just for being rich.

Grocery chains and companies go to where the rich are and the rich don’t go to the companies. That’s a hidden perk. People naturally gravitate and want to go towards the rich and successful. Even if the rich do not want all the attention.

It Can Still be Expensive Even for High Earners

So what exactly does it take to be poor? Remember that income doesn’t mean anything. You can easily be poor while making $200,000 versus someone making $30,000. Someone making $200,000 could go through everything that I mentioned above.

They could spend $250,000 a year, get a parking ticket, and have that fine balloon even further. Just because someone has a high income, it does not mean that they are poor.

Lifestyle creep is a real thing that I’ve personally seen people indulge in.

During their first job out of college, many of my coworkers would go out on Friday nights. One guy I hung out with spent $85 buying 120 oysters for the table. While he ended up eating 90% of, but I thought about how wasteful it was. Remember that just because you have money, it does not mean you should be spending money.

The lesson from the above reasons on why it’s more expensive to be poor is that you should save most of your income. You want to avoid putting yourself in the situation. Most of the money that you spend today won’t be remembered tomorrow. However, it will certainly be missed.

Strive to be Rich, it’s Expensive to be Poor

It’s not just a little expensive to be poor, it’s significantly and very expensive to be poor. Because of the way the game is designed, there’s little chance that upward mobility can happen either. Therefore, strive to be rich as much as you can.

I’ve been rich and I’ve been poor, and I can honestly say that rich is better. When I was in college, I meticulously planned out my meals every single day. At a $12,000 a year income, I was forced to do such a thing. For six months straight, I only spent $2 a day on food only, even though I worked two jobs. It was very difficult and it wasn’t a fruitful time.

However, because I lived like I was poor, I managed to save $40,000 by the time that I graduated college. Many of my friends graduated with debt while I didn’t. That felt great.

This post is not to disparage the poor, it’s to inspire people to get out of poverty fast. In the land of opportunity such as the United States, everyone has the ability to climb out of the ropes to where they want to be in life. And I don’t mean that to exaggerate. I literally mean everyone has the opportunity to do so.

I thought it was one of those sayings that the government uses to get people to live in the United States. However, I truly believe it to be true. The opportunities are unlimited and you can take purposeful steps to get out of poverty and live as a rich person.

Why it is Expensive To Be Poor List:

  • Buying in bulk
  • Bank charges the poor for being poor
  • Higher proportion of income to living costs
  • Higher borrowing costs
  • Quality purchases are harder for the poor
  • Health
  • The law
  • Can’t buy time
  • No money leftover to invest
  • Food deserts affect the poor

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2 Replies to “It Is More Expensive To Be Poor”

  1. Great post, David! This is something that a lot of people don’t think about. Number 2 really stood out to me. I witnessed it a lot when I worked in banking. It actually does cost most to be poor at a bank. But wealthy people receive many benefits for having money at a bank. Great points overall.

    1. Thanks Graham!

      People say they want to close the wealth inequality gap but by design and by human nature, I think it’ll be close to impossible to do so. The game is designed so the rich get richer and the poor get poorer.

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