Dear Rich People: Please Stop Telling Poor Folks What to Do With Their Money

Photo by The New York Public Library on Unsplash

Few people doubt that social media is a minefield, but for those of us low on the socioeconomic scale, it’s often also another kick in the old self-esteem. Don’t you dare click “like” on any article related to personal finance.

If you do, expect your feed to flood with a million articles telling you that you and only you are the reason that you’re poor. All your problems occur because you think negative thoughts or are overly afraid of failure, not because decades of wage stagnation mean one wrong money move could land you in a cardboard box.

Now, scientific evidence shows that poor people perform better than their more privileged peers when it comes to responsible decision-making. That’s good news — and it has hefty public policy implications. In the meantime, though, it would help if rich people took heed and stopped trying to tell those struggling what to do with their limited money.

Poor People Aren’t Poor Because of Bad Decisions

According to a 2013 study published in Science, working through difficult financial problems causes poor people a cognitive strain equivalent to losing 13 IQ points. However, researchers also observed that the mental deficit dissipated with improved economic conditions, and they investigated further — for which, people like me bless them.

Researchers from Harvard, Princeton, and Chicago Booth designed experiments that stripped away money but put other resources in demand. In an Angry Birds-style game, “rich” players had more chances to aim a slingshot at targets, whereas “poor” contestants had limited opportunities.

Guess what happened? The poor folks took more time aiming their shots and scored many more points with each on average than the rich players did. This experiment reinforces what those of us living by our wits have long-known — when you can’t afford to lose, you do everything you can to ensure you don’t screw up.

In a related survey, the researchers asked people of various socioeconomic strata whether they’d travel an extra 30 minutes to save $50 on a $300 tablet or a $1,000 one. Again, the poor people came home with the prize. They were more likely to say that they would travel — maybe not the best answer in terms of carbon emissions, but the one financial advisors would recommend. Rich folks, on the other hand, would do it for the $300 device but not the $1,000.

What’s the difference? $50 is $50 — but to a poor person, that’s groceries for the week. Rich folks are more likely to take the lazy route, decide that saving $50 on a $1,000 device isn’t worth the money, and stay on the couch eating cheesy poofs.

The researchers did concede that poor people were most likely to make unwise financial decisions when it comes to borrowing. They argue that showing people concrete numbers instead of percentages might dissuade some from taking out payday loans and visiting pawn shops.

Here’s where I beg to differ, but then, I understand these scientists have never had to step foot in an auto title loan joint. Poor people don’t resort to borrowing at exorbitant interest rates because they can’t figure out percentages — they know exactly how much it’ll cost them. However, when your only choices are eviction today or one more week under a warm roof in January, you start striking bargains with devils.

If you struggle to make ends meet, chances are, you are not the root cause of your problems. You’re not bad or lazy — you started the Monopoly game with $5 when your opponent had $50,000.

You Can’t Argue With Numbers

That doesn’t stop the so-called “experts” from trying to make you feel dumb — although thanks to a slowly growing awakening, they’re often the ones left eating crow in the end. Not that they care if you laugh at them while they roll up to the bank.

You can hop on Spaceship Google right now and type in “how to spend your $600 stimulus” and find pages and pages of articles full of advice — if you don’t need that money to, you know, eat your first meal in months. From investing advice to the best big-screen TV, you’ll find no shortage of experts penning lists of everything you could do, if you didn’t have to first deal with pesky inconveniences like keeping a roof over your children’s heads.

Honestly, when it comes to stimulus advice, you’re better off laughing at memes to relieve stress. Then, decide what to do with that money yourself — you probably don’t need a single pointer.

To get some idea of the inanity that rich people spew when telling poor folks what to do with their money, look no further than the sample budgets multi-billion dollar corporations give their employees on public assistance. Housing payment $600? Maybe if you and your spouse bought a condo from your parents and split the mortgage. Oh — and it better be located in Florida because heat didn’t fit into your financial plan.

If you don’t have parents with a second home they’re willing to carry back, guess what? There isn’t a single state in the union where you can afford an apartment working 40 hours a week at minimum wage. Plus, while housing is necessary and a human right, it isn’t the only thing you need to keep you and your family alive.

Even if the United States immediately raised the minimum wage to $15 an hour, that comes out to $600 a week — before taxes — or $2,600 a month. That hourly rate assumes you never spend Thanksgiving day gathered around the table with loved ones or leave early to go to the doctor or pick up a sick child from school. You can’t afford to take a single day off without making it up or coming up short on rent.

The average rent in America was $1,463 as of February 2020, according to Statista. Financial experts recommend spending no more than 28% of your take-home pay on housing, but right there, you’re paying more than half of your gross, not net, wages.

Once you factor in things like taxes, electricity, internet access — a new prerequisite for many job-hunters today — gas, car insurance, food, and water, you’re at or over your budget already. Oh, but wait! The U.S. doesn’t guarantee healthcare the way every other industrialized nation does through their tax dollars. That means you have to buy coverage, and if you have a family of four, that’s another $1,437.

I recently wrote in a Facebook post that you could give up your morning latte every single day for a year and still only have enough to pay for one month of insurance. No one is more depressed than I am to discover I wasn’t spewing hyperbole after all.

Instead of Telling People How to Spend Their Money, Treat Them as the Valuable Community Contributors They Are

Here’s an idea, dear financial advisors of the world. I know you won’t like it because it won’t make your clients happy to hear, and I know you need to eat, too. However, you would do millions of people a significant kindness if you prefaced your next how-to-make-the-most-of-your-money article with a blurb explaining that first, you have to have enough of the green stuff, or your advice does not apply.

Science now shows us that people aren’t poor because they don’t know how to make sound financial decisions. They’re broke because they don’t have enough money. Give them the resources that they need, and they do just fine.

Better yet, the next time your business gets into financial trouble, don’t talk to the CFO. Ask the mailroom clerk what they would do in your situation — and compensate them the same way you would one of your big-wigs for their advice. They deserve every penny.

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Jennifer Stanley

Jennifer Stanley is a freelance writer, teacher, and progressive social activist with a focus on disability rights. You can follow her blog at LivingWithHM.com.