5 Ways Being Poor Costs You MORE

Sometimes, people who are well off, especially those born of privilege, tend to think that if someone’s poor, it’s entirely their fault. It’s really easy to judge when you’ve never been there yourself. Aside from the fact that everyone starts off with different opportunities and abilities, once you’re poor, life is often more expensive than it is for others. This isn’t an obvious statement, but here are a few examples to back it up:

 

  • Limited Cash Flow Results in Higher Costs – If you contrast someone with very little money week to week with someone who has unlimited money to spend on day to day items, the person with more money will pay less for their wares. Why? Because they can buy in bulk at lower costs and just let their excess purchases sit around until they need them. Someone who’s living paycheque to paycheque may not have an opportunity to build up enough cash flow to buy in bulk.

 

  • Tough Choices Have Tough Consequences – Someone with limited cash available to them often has to make tough choices that end up costing them more in the long run. This might be anything from skipping a payment to skipping out on insurance. This can result in more expenses down the road if something happens like late fees or an accident. It’s often best to make critical payments even if it means sacrificing something else that month or relying on a short term personal loan to remain in compliance with policies and payment terms.

 

  • Limited Choices Reduces the Ability to Save Money – Here’s another example. Poor people often don’t have access to the same stores and transportation as wealthier people. That limits the number and types of stores available to them. Limited choice always equals higher prices. If someone of means can travel an extra mile for a better priced store, they will. If you have to walk and don’t have all the time in the world, you end up shopping at the closest store to your flat.

 

  • Lack of Technology Edge – The internet and smartphones have created all sorts of new ways to save money and comparison shop. Poor people often don’t have access to either, or at least not in their possession at all times. This means they end up paying the local price as opposed to a lower internet price.

 

  • Inability to Invest – It’s tough to reverse this cycle if you never save enough to invest and earn a return on your savings. It’s much easier to set money aside, invest it and earn interest or a return when you have more money at your disposal. When you’re only making enough to just get by, this is not a reality, so it’s hard to get out of the cycle.

About 

Darwin is an engineer and MBA who takes an "evolutionary" approach to finance, writing about adapting to evolving financial management, tax, investing, and savings opportunities. Making more money and saving more money is an adaptive process - join the evolution! He blogs at Darwin's Money and ETF Base.
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