5 Reasons Why Being Poor Is Actually Incredibly Expensive
There are quite a few people in the United States who think being poor is a breeze.
An astonishing poll by the Pew Research Center found in January that a majority of the most well-off people in the country are convinced poor people have it easy. The reason? They believe the poor enjoy access to government benefits "without doing anything in return."
There are all kinds of ways to poke holes in that idea. There's an observable physical and mental toll that accompanies living paycheck to paycheck. Welfare in United States has a work requirement. And there's little evidence that assisting the poor has a corrupting influence or makes them less inclined to find a job. In the meantime, the rich enjoy a host of unique government benefits — all without doing anything in return.
But that kind of myth-busting doesn't fully capture the wrong-headedness of saying the poor have it easy. In the United States, the poor must not only deal with the conventional hurdles posed by financial hardship, but also traps — countless pitfalls that make life distinctly more costly if you're poor than if you're a typical middle class person. By some measures, life is more expensive if you're poor.
1. Eating healthy when you're poor is a luxury.
Eating when you don't have a lot of money means you don't have a lot of options, and the reasons why aren't all related to money. Between more irregular hours, second jobs, caring for children and so on, convenience is the main factor in choosing a meal. That often means eating hyper-processed fast food while on the go. While a meal at a place like McDonald's is relatively inexpensive, it's still considerably more expensive than buying ingredients for a cooked meal.
As Mark Bittman reported in the New York Times in 2011, a meal at McDonald's for a family of four cost about $23 to $28. By contrast, a home-cooked healthy meal with chicken and vegetables cost as little as $9. But buying those ingredients and cooking them requires time, attention, energy and easy access to food that the poor often don't have.
In food deserts — neighborhoods where there's an absence or scarcity of full-service grocery stores — people can end up buying overpriced food at convenience stores. Nobody, not the rich nor the middle class nor the poor, buy what they need to eat purely based on price; factors like geography and available time factor heavily into decision-making.
When someone does make it to a grocery store, a tighter budget also means usually buying smaller, and thus less financially efficient, amounts of food and food products. When you buy a big bottle of ketchup, you're getting more for your money than for a smaller bottle. But the bigger bottle isn't an option when you have a long list of groceries and every dollar counts. Membership at stores that offer the best deals through wholesale options usually have annual fees that can be prohibitively expensive.
There's also the long-term cost of quick and easy eating — expensive long-term health problems.
2. Bank accounts can be expensive, but the alternative is worse.
While banks are considered a place of safekeeping for people with ordinary levels of assets, they're often a source of stress and financial difficulty for the destitute. So much so that some 8% of U.S. households are without a bank account.
Much of that is due to fees. Many banks charge people to maintain a checking account and have harsh overdraft penalties. Sometimes banks reorder transactions and charge someone an overdraft fee multiple times when they were expecting only one. That's the difference between a bit of extra hardship or not having enough money to eat in a small bank account.
While checking account fees and the specter of an overdraft disaster can turn low-income people away from bank accounts, life without one can be considerably more expensive. As the Federal Reserve pointed out in 2010, banking alternatives like check-cashing services and money orders eat up huge chunks of money. "A household with a net income of $20,000 may pay as much as $1,200 annually for alternative service fees — substantially more than the expense of a monthly checking account fee," the Fed reported.
3. Payday lenders charge more than any normal bank ever could.
Borrowing money is especially expensive when you're poor.
In low-income neighborhoods, residents often rely on payday loans to get by until they receive their next paycheck or payment. While the loans are usually for small sums, the service fees are astronomical. Finance charges can be the equivalent of a 300% annual percentage rate. The extra fees accumulate so quickly they become quicksand for borrowers, who sink deeper into debt as they desperately take out more loans just to keep up with payments.
4. Ignoring small expenses leads to big problems.
Maintaining a car, if you can afford one, requires constant minor repairs and adjustments. Sometimes those repairs can be ignored, but postponing them can eventually end up costing more than attending to the problem when it was small.
Eric Ravenscraft wrote for Lifehacker about living in poverty for years. Once, he continually postponed attending to his car's ailing brake pads, which he estimated would have cost less than $150 to repair. But because he delayed for too long, the rotors broke, and replacing them cost hundreds of dollars more.
"The longer I waited on basic maintenance, the more expensive the repairs got," Ravenscraft wrote. "Waiting was often my only option, though. Unlike buying healthy food, there were times I literally didn't have the money."
5. Being poor can land you in jail.
The intersection of poverty and mass incarceration in the United States is troubling. For a person who makes a middle-class living, a traffic fine is a minor annoyance. But for somebody who has to decide between buying a winter coat and paying the fine, the decision is one that can lead to a serious legal complications and sometimes jail.
In Ferguson, Missouri, the city where the killing of an unarmed black man in the summer of 2014 helped spark a national debate over police practices, the city is being sued for overzealously pursuing charges over minor traffic fines that have landed many residents in courts and in jail. Ferguson is by no means unique for effectively jailing people for being poor.
The costs of entering the criminal justice system — removal from the work force, a criminal record — can often severely damage someone's ability to do everything from securing a lease for an apartment to getting a new job.