5 Reasons the Poor Stay Poor

Written by Conception Johnson Tuesday, 17 November 2009 19:21

poor So many people have their speculations of why “Poor” people are poor: drugs, run a single-parent household, abuse of the welfare system, don’t want to work hard, or just don’t have the educational background. The reality is, a lot of people who sit on their high-horse, are ONE paycheck away from losing their apartments or homes, struggle to put nutritional food on the table, are behind on medical bills, or paying utility bills by “cut-off” due dates. Those people just described are the working poor.

Did you know that the poverty threshold for a single-parent home with one child under the age of 18, in 2008, was $14,840 (pre-tax). Yes, that meant for you to be eligible for a lot of government financial, housing and food assistance programs you had to make less than that threshold before taxes! (Visit www.census.gov for more information)

Think about that, a gross income of $14,840 a year which is a monthly income of $1236 a month (pre-tax), biweekly $618 (pre-tax), and roughly $7 per hour. Basic household maintenance, (rent/mortgage, utilities) can be around $1000 a month … hopefully you see the point.

Now since we’ve gotten that out of the way, let’s look beyond the stereotypes and myths of why the poor just keep overall staying poor. Bottom-line, poor people often stay poor because they don’t make use of low-cost or free services and money-saving opportunities.

5 reasons poor people stay poor:

1. Don’t enroll in 401k work programs.
Poor person’s mentality: I don’t have the money to do it. I need every penny of my paycheck
Reality: Contributing money to a work sponsored program has 3 major benefits. First, the 401k contributions taken out of your paycheck are PRE-TAX deductions. By making contributions, your taxable income is smaller, thus reducing your tax liability. Secondly, you make free money. Almost all companies match some portion of your 401k paycheck contributions. Some companies actually match dollar for dollar … now do the math! In essence free money! Lastly, you can borrow low interest loans against your 401k fund to purchase your 1st home and make other large purchases.

2. Don’t have a savings account, worse yet, don’t even have a bank account.
Poor person’s mentality: I don’t have any money to save. These pennies aren’t nothing to save, so I’m not going to even bother. The bank just steals my money through fees and overdrafts. No need for it.
Reality: There are plenty of banks that offer free checking accounts with automatic deposits. As far as the fees, pay attention to what you buy. Check cards are not credit cards. The benefits of having a bank account outweigh not having one. You end up paying more in fees to cash your check, purchase money orders, or to mail bills. That lil ol’ $10 a month you have been saving since January, that has accumulated a little bit of interest, could be the money that you could potentially use in June when you are short for your rent by $50. Instead of paying your rent late, you could actually borrow from your savings to pay your rent on time.

3. Play the lottery.
Poor person’s mentality: I need to take my chances of winning millions of dollars.
Reality: The odds are way against you winning big. You may win small but the money you spend could be used for small investing and savings. A good site that allows you to invest small is www.sharebuilder.com, buy a share at a time. There are a lot of shares that are $1.00 … at the end of the year, you will be surprised with your portfolio.

4. Waste money on items with NO monetary return.
Poor person’s mentality: Fake it until I make it.
Reality: You won’t make it if you use money that you don’t have to spare or credit to purchase high-cost, name-brand clothing or high interest rate car loans.

5. Don’t sign up for company insurance.
Poor person’s mentality: I don’t have the money for insurance. I need every penny of my check.
Reality: Not saving money at all. End up paying more for emergency room visits, doctor visits and prescriptions.

As you can see, being poor is a mentality, a way of thinking. You have to start educating yourself to get out of poverty. No, not just higher education but livelihood-commonsense education.

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