Some think that being poor is simple. Just buy less stuff and you're fine, right? Except that's not really how it works. When you're broke, you can't do all the little things that will improve your budget over the long run. It costs more to be poor.
When you're poor, you don't have as many options to improve your finances. You can't buy your food in bulk, splurge on high quality stuff that will last, or buy your own hardware instead of renting. It costs money up front to save money over the long run. Worse yet, being poor often comes with hidden, intangible costs that make digging yourself out of poverty even harder.
The unfortunate part is, not all of this can be fixed. It's nice to think that Lifehacker could post some clever unheard of trick and single-handedly fix poverty, but we can't. However, we do think it's worth talking about the areas that consistently bog down the low earners. If there's something that can be done, we'll try to offer some alternative solutions.
Food Can Be Cheap, But Eating Healthy Is Expensive
As any uni student can tell you, getting food when you're poor isn't that hard. Ramen is under twenty cents a pack. The problem is getting healthy food. Ramen consists of 20 per cent empty calories and 80 per cent salt. If you only ate that for every meal for years, your long term health would be at serious risk (or so my doctor tells me).
This was the exact situation I found myself in when I was broke. Time was more valuable than my health, and fast food was easier than cooking at home. It wasn't much more expensive, either. This lead to an unhealthy hierarchy of meals: on a good week, I could buy hot dogs from my corner store for $2. On a bad week, it was ramen for days. Two litre bottles of store-brand soda cost less than orange juice or milk, so if I wanted something to drink besides water, that was what I got.
Now, a few years of that diet is already going to be pretty bad. The long-term consequences were worse. Even when I started earning more, the habits stuck. Soda is still a staple of my diet. It's taken a long time to build the habit of making proper, home-cooked meals. Even if I had changed my diet immediately, I'm still probably at a higher risk for heart disease and diabetes.
This is a hard trap for anyone to escape. According to research from the Harvard School of Public Health, healthy meals cost an average of $2.08 more per day (or ~$62.33 per month) than unhealthy meals. When you have money, that's not a huge deal. However, if you minimum wage and you work 40 hours per week, that amounts to a much larger percentage of your yearly salary. If you can only get part time hours (which is more common for minimum wage jobs), it's an even larger portion of your yearly take home.
When the difference between buying orange juice or Coke has such a huge impact on your budget, it's no surprise that being poor leads to unhealthy choices. This leads to a slew of long-term health risks. As the Food and Research Action Center highlights, the less a person is able to afford decent food, the more likely they are to become obese. Getting stuck in this loop for too long can cause even worse health problems down the road.
Of course, all of this is on top of the usual costs of being poor. You can't buy food in bulk because you only have enough money this paycheck for the individual pack. Fast food is more efficient than cooking at home because you need to work multiple part time jobs just to make a livable income (according to the Bureau of Labour Statistics, 6.8 million Americans held multiple jobs in 2013).
What You Can Do
This is incredibly hard to fix. If you just try to spend less money, you're probably going to end up doing so at the risk of your own health. Still, there are a few things you can do to keep costs down without eating horribly every day. Speaking from experience, these won't solve everything, but hopefully they can whittle away some of the damage:
- Learn healthy, cheap recipes. Yes, this is harder than it sounds, but it is possible. This free cookbook comes with a selection of meals that will be healthier than junk food and keep you fed for around $US4 per day. It's not perfect, but it's probably better than petrol station hot dogs.
- Apply for government benefits. There may be a stigma attached to government benefits like food stamps, but frankly, there shouldn't be. Find out what benefits are available to you and apply if you can. Ideally, they will be a temporary aid, and will help you build more stability for the future.
- Find local food pantries. Food pantries are run by charitable organisations. They provide food to families that can't afford enough on their own. If your household can't meet its food needs, food pantries can help fill in some of the gaps.
Of all the tips in this article, these are probably the most like putting a band-aid on a bullet hole (which we all know doesn't work). The more you reduce your food costs, the more likely you are to eat less healthy food. This can lead to ballooning medical costs down the road, which does nothing to break the cycle of poverty.
Transportation Can Add On Repair Costs and Take Up Time
Having a job doesn't mean much if you can't get to your job. Transportation always costs money, but when you're poor, the unexpected repair costs can hit a lot harder. Worse yet, routine maintenance that may be trivial for most people can be critical for the poor.
According to the Bureau of Labour Statistics in the US, the working poor tend to spend a higher percentage of their annual income on transportation costs. This isn't terribly surprising, of course. A $500 car repair doesn't care if that accounts for 10 per cent of your monthly take home or 50 per cent. Public transit may be more accommodating to lower income tiers, but it isn't always available in every city.
This disparity results in two major hidden costs. First, lots of expensive repairs are avoidable...if you have money to fix them early on. For example, I often used to ignore changing my brake pads. This basic maintenance can cost an average of $200, depending on your car. If I had to spend $200 to change my brake pads, I'd be eating ramen for a month. On at least one occasion, my brakes got so bad they were grinding down the rotors. Replacing a rotor costs hundreds more than replacing brake pads. Sure, I successfully put off one expense, but when the rotors broke, I was screwed. The longer I waited on basic maintenance, the more expensive the repairs got.
If you use public transit, you could also face another major cost: time. What would be a fifteen minute drive might be an hour long bus ride. Miss a bus and you've lost another 10-15 minutes. Even if you own your own vehicle, the time spent waiting in traffic (or worse, waiting on a repair) makes an even bigger difference to those working multiple jobs. When you only have a couple free hours in the day, that hour stuck in traffic might mean you can't prepare a decent meal or do laundry. And forget about that hour-long oil change.
What You Can Do
How you fix the transportation problem depends largely on how you get around. First, identify which resource you need to save: money or time. From there, you can try a few things to at least make the best of a bad situation.
- Check the maintenance costs of a vehicle before buying. Some cars cost a lot more to repair than others. Some car brands choose expensive, proprietary designs that are harder to repair, inflating both parts and labour costs. If you can avoid this when you first buy a car, you'll save yourself a lot in the long run, especially if you're buying used.
- Learn some basic car repairs. When you go to a mechanic, a large portion of what you pay will be labour. The more you can learn to do yourself, the better. Some things are better left in the hands of professionals, but we have a guide here to some basic car repairs you can seriously do yourself. You may pay for it in time, but if you spend a couple hours in your garage to save $100 on a car repair, it's like getting paid $50 an hour. Not bad.
- If you use public transit, make your time productive. If you have a laptop, tablet, or a phone, it can be super easy to be productive while on the go. Rather than spending that time browsing Facebook, learn a skill, write something, or get homework done. If you don't have a gadget, try bringing a book from a library. Even getting a decent nap in can be an effective use of your time.
Transportation costs are one of the three biggest expenses for most families (alongside housing and food). That means that every additional expense only makes life harder. Unfortunately, transportation isn't exactly optional. If your car breaks down and you don't have money to fix it, you lose out on more wages. Some even lose their jobs. The time costs of public transit can also make it harder to fit in things that help dig yourself out of poverty, like education. Just getting to work can make it harder to work.
It's Almost Impossible to Keep Your Housing Budget Manageable
A common guideline for a balanced budget is to spend no more than 30 per cent of your income on housing. Everyone who's ever been poor has laughed at that number. Renting a two-bedroom apartment while adhering to this rule would require hourly wages ranging from $13-26 per hour. If you're making the minimum wage and working full time, you can't afford a one-bedroom apartment without spending more than 30 per cent of your income on housing.
Getting by when your housing costs are through the roof you can barely pay for is a bit like being in a buddy cop movie. Even if you hate the idea of working with someone else, you quickly realise you don't have much choice. In my case, the only way to deal with high housing costs was roommates. Lots of them, at certain points.
Not too long ago, I shared a one-story three bedroom duplex with three other adults. That might not sound too bad, but the bedrooms didn't have much space for anything beyond a bed. There was a living room, a kitchen, and nothing else. All told, there was maybe 300 square metres of space. We split the rent four ways. That brought our rent to around $250 each. When you're saving that much money, you don't care as much that you have an audience on the other side of the wall every time you have sex.
Of course, this was only possible because we were four adults with four separate incomes and no children. Even then, some of us had to work multiple jobs. We lucked into a situation that made keeping rent low feasible. If any of us had kids, it would have been impossible. There's also the fact that, depending on your state, getting a new roommate or subletting may be hard or even illegal.
For most people, rent is prohibitively costly. Depending on your income, just paying rent can cost anywhere from 50-100 per cent of your paycheck without breaking a sweat. If every dollar from your job is going to rent, you need a second one. If you can barely make rent, everything else starts to fall by the wayside. This is how spirals of poverty begin.
What You Can Do
Finding affordable housing is the biggest pain in the arse. Especially in Sydney. By the same token, you can get the biggest return for the time you spend researching this. Your rent is a fixed expense, so the more you can do to bring it down or share the load, the better.
- Negotiate your rent. You may not have much leverage when you're trying to find a place to live, but asking is always better than not. Some landlords (especially ones who operate in low income neighbourhoods) understand that even a small difference in rent can make it much easier for tenants to pay on time. You may also be able to negotiate a lower monthly rent by agreeing to a longer lease in your apartment.
- Learn the housing laws in your state. There is almost no limit to the ways you can be gouged on fees, hidden costs, or lost opportunities when it comes to renting. Before you sign a lease, check your state's local laws. Find out if you can sublet, how your security deposit is handled, if you can avoid things like application fees, and anything else you can learn. The more you learn, the more you can protect yourself.
- Live with other adults if possible. This is less a tip and more of a fact of life for many low-income households. If you can live with parents, get roommates, or sublet a room, do it. Social pressures can make you feel like you need to make it on your own. Don't let other people's perceptions dictate your rent. There are some areas where perception matters, but housing costs too much to raise it when you don't have to.
Here's the part that sucks. For many people, these tips just won't work. They're grasping at straws hoping to get lucky. Worse yet, if you can't keep rent under that magic 30 per cent number, you run the risk of missing rent every time you have to repair your car or pay for an unexpected medical expense. Missing rent can lead to getting evicted, which leads to being homeless, which makes keeping a job hard (if not impossible) and then the hole starts looking too deep to crawl out of.
You Need to Dress Nicely to Move Up, But New Clothes Aren't a Priority
Despite their necessity, buying new clothes is often seen as one of the most stereotypically frivolous purchases. Why should poor people be shopping for new or nice clothing when they're struggling to make ends meet, right? While there may be ways to save money on your wardrobe, there's a bigger problem with buying clothes when you're poor: the social cost.
Several years ago, I worked for Walmart. As is the case for most retail employees, I had to buy my own uniform. At the time, we were required to wear dark blue shirts and khaki pants. Since I owned exactly none of these, I had to blow through any clothing budget I had just to be ready for work. The problem was, I worked outside as a cart-pusher. Navy blue shirts tend to fade in the harsh Georgia sunlight. Not to mention that my shoes wore through in about three months after walking on harsh pavement all day.
Needless to say, I looked like crap most of the time. My shirts were faded and my shoes were ratty. Any money I could spare for clothing usually had to go towards new uniforms. The problem is, if I wanted to get a job somewhere else, the nicest thing I had to wear was my work uniform. It took a long time before I could afford to update my wardrobe for anything even remotely presentable while still keeping up with my uniform costs. In the end, I only pulled it off by opening a small line of credit with a clothing retailer. No matter how many people advised against borrowing money when you're broke, I simply couldn't afford the clothing I needed to look presentable to an employer until I actually got that better job.
Dressing well is an awkward catch 22. If you're poor and you have a nice wardrobe, people think you're irresponsible with money. However, if you dress poorly, you're more likely to be judged poorly, especially in job interviews. How you dress can be the difference between landing the job and being ruled out as soon as you walk in the door. This type of effect is so strong, that even wearing a recognisable brand name can improve how others perceive you. It's sad, but it's the world we live in.
How you dress also affects how you perceive yourself, because human brains are quirky like that. A study published in the Journal of Experimental Social Psychology demonstrated this by having two groups of people wear the same white coat. One group was told it was doctor's coat, while another was told it was a painter's coat. Those who believed it was a doctor's coat demonstrated a higher sense of attention. The feeling of wearing something you perceive as professional can actually make you act more professional.
Of course, the costs of clothing don't end at social pressures. Merely keep your clothing clean and presentable can cost time and money. If you don't own or have access to a washer and dryer, you need to spend time at a laundromat. Not only does this cost money every single time you clean your clothes, but it takes precious time that could be better spent working, learning a skill, or taking care of your family.
What You Can Do
It's a lot easier to dress to impress if you have money and time to spare. This, unfortunately, means that low income workers will have a harder time with their self-perception, even if they have equal skills. Fortunately, this is also a much more price-flexible area than, say, food or housing.
- Learn the psychology of clothing. As someone with no love of fashion, this seems like the hardest tip, but it will also give you the biggest bang for your buck. Learn what different colours mean, how to find clothes that fit, and how to find your style. You can combine this with actual money-saving tips like making sure your whole wardrobe matches, or combining what you have for new looks. Again, the goal here is to learn how to have the most impact with the least amount of time and money.
- Keep a focus on grooming and hygiene. Proper grooming and hygiene are so important, you'd think we'd talk about it more. Failing to shave, shower, or manage your hair can take an otherwise acceptable wardrobe and make it look worse than it is. If you can't afford to change your clothing, look for ways to groom your body itself to improve your appearance. In some cases, you may find that something as simple as a haircut can change how your existing wardrobe is perceived.
- Keep learning during downtime. We said the same thing for public transit and it bears repeating: If you have to use a laundromat to wash your clothes, make use of that time productively. Bring a book, a laptop, or even read something on your phone. If you can teach yourself a skill, or get some work done while you wait for a dryer to free up, you're at least getting something for your time.
The worst part of all of this is how frivolous it sounds. Frankly, it's demoralising. As someone who's had to wear crap clothes to work and be perceived differently for it, I know the effect is real. Yet it still feels like caring about how you look is vanity, rather than practical. You can't get a better job if you can't look presentable, but you can't afford presentable clothes if you don't have a better job.
The hardest part is getting over this mindset that says you can't treat your appearance as a practical matter. Yes, being broke means you can't pour money into the kind of wardrobe you might like, but the world doesn't know your financial situation. It's still ready to make judgments based on your appearance anyway, so don't be afraid to do what you can to look and feel confident.
Fees For Everything Can Compound to Ruin Your Budget
Avoiding fees is a life or death survival trait for low income households. This gets its own category because when you're poor, fees are everywhere. Fees for having a bank. Fees for not having a bank. Fees for paying late. Fees for paying with a certain type of card. Fees for not being able to pay a fee. A person can drown in the various charges that disproportionately hurt poor families.
While fees may vary from one area to another, they all tend to fall into one of two categories: you either pay for convenience, or you pay as a penalty. Convenience fees are sometimes easier to avoid.
Penalty fees can include anything from making a late utility payment to a council violation. For example (once again, from experience), if you miss your car's registration, you can pay a fee just to get registered. If you can't pay that fee and put it off until you can, you may get pulled over and charged even more. After a while, these things pile up and cost a lot more in the long run.
One key way that hurt me a lot over the years were overdraft fees. If I charged something to my debit card, and then it turned out I didn't have enough money, I was charged for every transaction. This effect was made even worse when my credit union would apply transactions in a highest-to-lowest order, rather than chronologically. The big transaction would put me under, and each subsequent transaction would each incur their own fee.
Sometimes this happened because I genuinely forgot how much money I had (which is my fault), but it also occurred when deposits didn't clear when I expected them to, or bills were charged sooner than their due date. The amount I paid in overdraft fees was ridiculous. However, I learned all too late that I could ask my credit union to disable overdraft protection. This might lead to more occasions where my card was declined, but it significantly reduced how much I paid in unnecessary fees.
What You Can Do
Fees are paradoxically easy and impossible to avoid. On the one hand, you can usually avoid them by following certain rules (pay on time, keep your car registered, etc.). However, once you find yourself charged a fee, you're usually at the mercy of whatever organisation says you owe. They will impose their rules and you usually have to abide by it, or they will come after you with collections, an arrest, or worse. However, fees are also entirely invented. In most cases, there's no tangible good or service you've bought when you're charged a fee. This means fees, more than anything, are often negotiable.
- Ask for fees to be waived. If you don't yet have a history of being charged a ton of fees, you can often call up most companies and get a fee waived just by asking. This often feels like it's not worth it, but it is. Yes, you got charged an overdraft fee, but isn't it easier to just pay it, rather than spend an hour on the phone arguing? Well, for starters, that's the same as getting paid $25/hour for work, so unless you already make that, yes, it's worth your time. More importantly, if it prevents a cycle of being unable to pay bills, you could save a lot more down the road.
- Learn the art of negotiating. Many fees can also be negotiated. Not all fees are tied to the value of a specific service. In some cases, the fee may be entirely made up, or it may be excessively high on purpose as a deterrent for a certain action. Negotiating with a company (or government) to reduce a fee is just as worth your time as getting it waived entirely.
- Read (and negotiate!) every agreement you ever sign. The worst kind of fees are the ones you never see coming. Every time you sign a document or contract, check to see what kinds of fees they say they're allowed to charge. Not every time you sign up for something, mind you. Every time you sign. Even something as simple as getting a phone may have several contracts to sign. Check each one for fees.
Fees are terrible and they're probably not going anywhere, which is one of the worst aspects of being poor. Fees are generally set at arbitrary or punitive levels. This means that if a low income household is charged a fee, it hits harder than it would for a middle class family. A $35 fee might be a mild annoyance for someone making the median income, but for a poor family, that's the food budget for a week. Failing to pay fees only leads to more fees, which means that, like most of the other areas, it costs more to be poor.