This is a spawn of the "The other kind of preparedness" thread, which touched on financial preparedness. We're doing very well over in that thread on a knife edge of political, without anyone getting cut.

Here's something I'd like to add to the discussion about the paths to poverty and out again in America, and it's based on some observations and the fact that I've been working at an ad agency that has a credit card company as a client for almost four years, so I have a lot of data about how/when/why people get into debt.

We touched on payday loans and we touched on "irresponsible buying" in the other thread, but I think there's this deep-set conviction for many people that being poor is a choice, and with simple persistence and determination, anyone can overcome poverty, or at least be poor with some level of dignity.

However, I think that in the last 25 years, there have been some massive changes in America - changes that have made it much harder to simply fight your way out of a hole, and changes that have made it much harder to stop sliding down if you do fall.

Here are some examples of what I mean.

You need internet access if you want to find a job.
Newspapers are an ever-smaller source of job listings. You need to get access to the internet (and you pay with time or with money) to find most job listings these days. Not only that, but dialup access isn't really practical for most job listing sites, so you need broadband (if you can get it).

You have increased telecommunications costs if you want to work.
While a prepaid mobile phone is the cheapest way to get telephone service in the USA, it is still an expensive way to communicate. In the USA we have a double-cost system for mobile calls - the caller pays AND the recipient pays. This adds up.

There are limited housing options.
All around the USA, the cost of housing is very, very high compared to the cost of housing in 1980. In urban situations - where the jobs are - it's even worse. The eradication of the SRO - single room occupancy - was a huge factor in displacing people with low incomes from places where the jobs are.

Salaries have not kept up with inflation.
The value of a minimum wage dollar is less now than ever. Minimum wage work used to be for a minimal standard of living where you could afford simple food, simple housing and you could afford to get to work and back, and not much else. It does not - and can not - do that anymore.

We moved a couple years out of an older neighborhood where a lot of the houses were rented out under the section 8 program (gov rent assistance). So we were right in the middle of "poor" people. The majority of those "poor" had cell phones, had cars (usually with nice stereos), had big screen tv's (rent a center), kids had health care (nurse would drive to their house) so its no wonder they remained "poor". I'm sure there are those who really couldn't do any better but I'd say that even estimating conservatively still more than half were "poor" by choice.
Some of it is the housing issue. Section 8 looks at the income and says you can pay x amount so the .gov will pay the rest. So then you get to rent a place and as soon as you get a better job section 8 says now you can pay more so they adjust the rent and you can't get ahead. The couple that with the fact that costs as much if not more to rent than buy. Even in the nicer place we moved to there is an apartment complex near buy and a co-worker pays $900 a month for his small apartment and I pay $1200 a month for my 1600sq ft house. He had to move up here when they closed the branch office in TX but he plans to move back when he can. I told him for what he's paying in rent he couple get one of the smaller houses and then sell it when he moves back.

You need internet access if you want to find a job.
Or you could walk around looking for "Help Wanted" signs, stand with the other day laborers at Home Depot, ask friends to tell you of any job openings they know of... been there, done that. The internet isn't the only place to find a job.

You have increased telecommunications costs if you want to work.
I don't know why an employee at the bottom rung of McDonald's would need a phone. Or the bottom rung of any other place, either. BT,DT

There are limited housing options.
It's been shown that rent controls kills affordable housing because it removes any incentive to build more homes/apartments/condos. Sometimes you just need to move in with someone else or multiple someones even if you don't like them. Been there, done that.

Salaries have not kept up with inflation.
The value of a minimum wage dollar is less now than ever. Minimum wage work used to be for a minimal standard of living where you could afford simple food, simple housing and you could afford to get to work and back, and not much else. It does not - and can not - do that anymore.
Minimum wage has never been considered a "living wage" or meant to be. It was ment to be the base pay for an unskilled laborer. Think of it this way, a bagboy makes minimum wage when he first starts out. No one expects the bagboy to earn enough to support a family. I'm really curious to know why you think it was.

Just as big of a problem is the feeling that you must have lots of "goodies" in your life. Every weekend I'm down in the 5th Ward of Houston (poorest section of the city) working among the dilapidated shacks...and each one of these shacks has a satellite tv dish mounted on the roof, the kids are wearing gold chains, and the cars have fancy wheels. Single motherhood is the norm. No wonder they can't escape poverty.


-Blast

I actually think minimum wage is a problem rather than a solution in some cases. I live in WA state where the minimum wage is set at $8.55 per hour, with a slight decrease for 14 and 15 year old kids. I have friends who own a couple of feed stores and they just aren’t hiring kids anymore-- as most kids just aren’t worth that kind of money as they don’t know how to work in the first place. How are kids going to learn the value of hard work and how to be productive if they can’t get a job?

I'm w/rebwa. It sucks, but I think minimum wage is the problem.

Also - I posted something about living out of your car in around the campfire in the last couple weeks, check it out, it tackles the cost of housing and internet access head on.

Re phones and communication - Google Voice. If you had two hundreds bucks to spend on an Ipod Touch or you already own a laptop you could have a phone with unlimited calls and text messages to any number in the united states for free WHEREVER THERE IS WIFI. That stuff in caps is the catch. So yeah, you have to park your car outside a macdonals, library, or other place to use your free phone, but it is free.

If you don't have the money to invest in a laptop, post an add on craiglist, I bet you get get a free old one quickly. Put Ubuntu on it, it has everything you need in terms of software to get google voice up and running. Set it all up from a free computer at a library.

I'm at a library using free internet as I type by the way! Being poor is definitely hard, but one might leverage the free time of having limited employment to overcome some of the difficulties.

I wrote a huge rant, but instead I decided to address the actual content of the OP.

Martin, I think that those massive changes in America actually make it easier!

Con: You need internet access if you want to find a job.
Pro: You can find a job using the internet! No buying newspapers every day. You can look everywhere. You don't have to get your resume printed on expensive paper and mail it. You can fill out an application without going anywhere. If you have a junk laptop you can use a free hotspot. My rinky-dink little library has a bunch of computers and even fee wifi.

You have increased telecommunications costs if you want to work.
Huh?

Salaries have not kept up with inflation.
I can't understand the notion that simply having a job - just any job - should guarantee you are able to support a family. Instead of asking "How can anyone raise a family on minimum wage?", ask "Why would anyone try to raise a family on minimum wage?" You need a better plan than that.

If anything, minimum wage laws help to keep people at the bottom.

Dang! Got sidetracked and forgot the most important thing I was going to say:

Today you can start a business with practically nothing. You have to start small, work hard and grow slowly, but it can be done - and no one can stop you.

Also!

I feel a little strange, because I'm about so say something I don't think I've ever said before in my entire life:
"It's not all black and white." Yuck, what a bad taste in my mouth.

We know that all poor people are not lazy. We also know that all poor people are not incapable of bettering themselves.

And with practically nothing, how do cover your living costs, whilst the business actually brings in an income, which not only provides a profit but covers the simple basic business operating costs such as transportation, communications, banking costs etc. Most businesses will have credit and payment terms for their customers. There are issues called cash flow, break even analysis and taxation. The only businesses which cost practically nothing to startup generally are on the wrong side of the law or will very soon be. Do you go for a Limited Liability Company (greater taxation benefits and loop holes) or just a self employed trader (pays a higher rate of personal taxation, with less opportunity to grow). Even preparing a business plan successfully takes time, research and expertise (all of which have a real cost even if it is your own time). There is also always the risk of failure (cash flow, failure to pay tax etc), which would have many more times the consequences of NOT escaping the poverty trap. There are many hard working individuals running small businesses out there right now, wishing that the Government was partly paying the mortgage or the rent, many of them living in real poverty.

If you think that all it takes is a ladder, a wash bucket and some cloths to even start a simple window cleaning business then you had better invest in a baseball bat as well.

I seriously believe that the worst part about being poor it that it rips away the mental dedication required to break out of the poverty well. Being able to support yourself and your family is the key to self respect. Take away the job and very few of us will keep the self respect - and the dedication to improve your situation erodes very quickly.


Have I been there, done that? Only partial, I have just scratched a tiny speckle of the surface of these effects. I moved to a different part of the country on a whim, thinking I was cool enough to whip up a cool job within a few months. I had to cave in and find that job in another town after about 9 months. I will never forget how degrading and mentally challenging it was to motivate myself to keep looking, making phone calls and all the other stuff required to find the job you want.


Mind you, we had zero financial troubles living on my wife's income during that period. We have a very supportive and resourceful family and friends. I had no trouble what so ever finding and doing alternative jobs (manual factory work, part-time teacher and such). It was just that my cool university-degree work that would be my path to self realization never seemed to materialize in the town I very much wanted to live in. After 9 months I finally came to my senses and found the job I wanted elsewhere... I will never forget how I felt at the last part of that time period.


I can't really imagine what it is like to being trapped in poverty, except that it must be A LOT tougher mentally than my little misadventure.


If you manage the mental bit you can manage anything. Lots of suggestion above - keep the mental part and you will find a way. It is all about accepting your situation, realizing you can't have a high material standard of living right now and being creative of exploiting the options available to you. There's always something. Something's better than nothing. Exploit that and you're a bit better off tomorrow than yesterday.

Here's a book about how you could deal with it. It is all about improving self esteem and life situation with very small incremental steps at a time.
Change your life in 7 steps


EDIT: About people in poverty always finding money for fancy phones and bling for their car... I think that is their little escape from reality, having a bit of fun in an otherwise harsh world. Probably not the wisest choice of investment, but who am I to blame them?