When You're Poor, Money Is Expensive

[Scuba]

http://m.theatlantic.com/business/archive/2014/07/its-expensive-to-be-poor-money/374361/

But by other important measures, it's awfully expensive to be poor. As Barbara Ehrenreich wrote in her book Nickel and Dimed, many entry-level jobs pay next to nothing with unpredictable schedules. This makes savings, second jobs, affordable loans, and child care all but impossible to arrange. Inescapable poverty changes the way we think about money and time, as short-term concerns glare so blindly that it's almost impossible to make long-term plans. It's expensive to be poor, Ehrenreich says. It's true. In fact, when you don't have enough money, money itself is expensive.

...

Instead of direct deposit, many rely on physical pay stubs. Instead of checking accounts, they have to drive to check-cashing services, like Pay-O-Matic. Instead of automatic payments, they drive again across the suburbs to pay utility bills in person. In lieu of a credit history that qualifies them for bank loans, they have a history of cash that is disqualifying. Instead of low-interest loans, they rely on payday lenders whose services can ultimately cost three- or four-times the original loan. And so, replacing the services of a bank on your own becomes a second part-time job, an odyssey of stripmalls, check-cashing storefronts, money orders, prepaid cards, and miles and miles on the road. Ron Brownstein has called it the "archipelago of alternative finance."

...

This is Melissa and Alex's story, and it's one of many stories of underbanked Americans told with impressive authority and tenderness in Spent: Looking For Change, a digital documentary produced by American Express that aired at the Aspen Ideas Festival in June. "Turning to pawn shops, check cashing services, and using payday loans to meet basic financial needs can be costly for many of us, with $89 billion a year going to fees and interest for using these types of alternative financial services," they write. Unbanked families spend 10 percent of their money replacing traditional banking services. That's as much as most families spend on food.

...

But it's also a opportunity for technology. It doesn't have to be so terrible to spend the money we earn. There are many ways that mobile apps can begin to replace the infrastructure of banks, allowing us to send money to friends, family, and businesses, and manage the sum that's left over. Digital prepaid accounts that allow online payment can turn paychecks into bill payments without aggressive fees or hours of traveling the archipelago of alt-finance. To spare individuals from the clutches of payday lenders, banks can find ways to measure trustworthiness in ways that go beyond official credit reports.

Emphasis mine.

[Erich Bloodaxe BSN]

1. It drives me up the wall that financial institutions of any sort

hit you with all sorts of over-the-top fees on accessing your own money. They already are making 'bank' on lending your money out at far higher interest rates than they'll ever pay you in interest, if they even offer interest. The fees are merely corporate greed to pay off shareholder demand for 'profit'.

And speaking of spending 10% of your money on replacing traditional banking, apparently those 'coinstar' machines charge you 10% merely to take your change and give you bills. Boom, there it goes.

[yeoman6987]

3. I understand what you are saying about the coinstar

However, I must say that I took a bunch of coins to the coinstar that were just in jars and stuffed them in the machine and 42 dollars was given to me. I honestly say it was well worth whatever cost it was instead of me sitting their trying to get those coins in the paper coin holders and ensuring that the correct number of coins are in each.....my time is way to valuable for that.

[Erich Bloodaxe BSN]

6. I bet you could pay a younger relative or neighbour kid

5% to roll them for you, rather than paying the coinstar people 10%

However, even going past that, my local credit union is actually now charging people 10% simply to ACCEPT rolled coin and give you the bills.

I'm not collecting change anymore, I just always make sure I spend it as soon as I can, so it doesn't accumulate.

[yeoman6987]

12. Wow. Your bank is basically stealing

I mean I sorta understand the coinstar thing but a bank especially after you do all the work? No way!

[Erich Bloodaxe BSN]

15. That was my thought too.

And it especially ticks me off because it's a credit union rather than a bank.

[strategery blunder]

37. For quarters, dimes, nickels, that's a good idea.

For pennies..well let's just say that the last time I did it by hand, it took longer to roll the pennies than minimum wage (in my state, where it's 9.32/hr instead of federal minimum) was worth.

The next time I needed to count my change and convert it to bills I rolled everything except the pennies and left the pennies to the coinstar machine. Doing it that way held its fee down to eighty-some-odd cents to save me around 45 minutes of time so yes, my time was worth that.

Granted, now I'm a cashier so I could probably count and roll much faster than I could when last I counted bulk change for personal use. If you're in the "gotta find a friend to save the coinstar fee" category of folks, try to find a willing cashier

[IronLionZion]

10. Many community banks will do it for free

if they have the machine, they can collect all your coins and deposit it in your account or give it to you in cash completely free of any fees.

And if they don't and change is a constant issue for you, there are small coin sorting machines to be bought for the home for not too much. Some are not even powered and are quite cheap.

[yeoman6987]

14. Thanks! I really should not pay to have the coins separated....I chalk it up to lazinessq

but I believe I have had a wakeup call.

[packman]

24. Join a credit union

Mine has a coin redemption machine which the members use for free. Another service , another reason to join a credit union.

[grahamhgreen]

38. Banks will do that for free

[el_bryanto]

2. One of my favorite quotes on this phenomenon

From Terry Pratchett's Men at Arms.

The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.

Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.

But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.

This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.

It's pretty accurate.

Bryant

[hobbit709]

4. +1000

[pipi_k]

7. Absolutely true

I've been poor in the past.

Now I'm unpoor.


Being unpoor is definitely better, and cheaper.

[daleanime]

31. Amen....

[Erich Bloodaxe BSN]

9. I've quoted that same passage on another blog in the past.

And I now try to live by it. I save up for big purchases, buy the best quality I can, and then never have to replace, or at least replace far less often.

The latest purchase was an office chair. We kept buying computer chairs at staples, and even trying to buy the best they offered, within a year, the cheap 'bonded leather' would be shredding and scratching us. So we saved up, and paid 3.5 times as much as any given chair we'd been buying, and we're waiting now for our new handmade Amish office chair that will no doubt last longer than either of us, as well as being far more aesthetic and comfortable than any of the cheaper ones we've had until now. So yeah, it cost 3.5 years as much as what we'd been spending on office chairs, but now we'll never buy another.

Oh, and another thing I've noticed - those far higher quality and expensive items? They tend to be made in the USA. Whereas the cheap crap that falls apart far more quickly usually comes with a 'made in China' sticker, or some other country that is simply churning out product as fast as possible to sell in Walmarts.

[LisaLynne]

16. And that's great, but ...

a lot of people can't save up for big purchases. If your kids need shoes now or they won't be allowed to go to school and then CPS will be called ... you go and get what you can pay for right then.

[Erich Bloodaxe BSN]

18. If you need something 'right now'...

then the time to save up was a couple of years ago, so it does take a lot of planning ahead.

But I do know where you're coming from. Plus, saving up ANYTHING requires that you actually can get ahead on what you have to spend simply to stay alive. There's another post up right now that says over 35% of Americans have debt collectors after them, which shows that AT LEAST a third of the country can't even break even, much less be able to save up.

Much of the money I've spent on these long term purchases was from IRAs, since I realized that I'm not sure I'll even make it to 'retirement' age, but that if I do, I might be better off simply to have minimized all of my recurring expenses as much as possible before I get there.

[LisaLynne]

19. You can't save up for two years for a lot of things, because ...

things don't always happen on a schedule.

[Erich Bloodaxe BSN]

21. True again, sadly. nt

[IronLionZion]

23. +1000, to my shame as a kid I thought people must be stupid

for wasting their money on cheap crap that breaks quickly. It took a lot of growing up to realize that I was so fortunate that my parents could pay for quality things and education and teach me important life skills.

It was a matter of privilege, not intelligence.



Moving every few months for contract work has taught me the enormous expense of moving. Ikea furniture is designed to go together only once, and then the screws are too loose or it breaks. Whereas expensive furniture would last a good deal longer, especially if you can hire professional movers with the right skills and packing materials. I keep my original boxes for TV/computer/electronics.

[daleanime]

32. Terry Pratchett is on the mark about many things.....

if you can take your social commentary with a fantasy bend I recommend all of his 'Disc World' series.

[randys1]

5. When dumb rightwing poor folk realize why they are so dumb and poor

things will change, but will that ever happen?

[xchrom]

8. du rec.

[IronLionZion]

11. Poorer folks move more often

than the wealthier folks who have stable incomes and living situations. Moving costs a ton of money and you lose stuff all along the way like your cheap stuff breaks or you have lease breakage fees or all sorts of fees. And they piss away their money on rent or motels or whatever while richer folks would have property that they own with the potential to appreciate in value.

[Erich Bloodaxe BSN]

17. Plus it's yet another opportunity to be ripped off.

I've seen a lot of horror stories of people using moving companies getting hit up for 'additional fees' after the company has already picked up their stuff but not yet delivered it, and essentially holding all of their property hostage until they pay.

[Proud Public Servant]

13. This is why Elizabeth Warren's proposal

To have basic banking services available through the post office is so vital, and probably the most important idea she's floated so far.

[Scuba]

20. +1

[ColesCountyDem]

22. +1! n/t

[daleanime]

33. +1

"But she's not running..."








yet.

[Kali]

34. yes!

[flamingdem]

25. Amex has products for this market

Bluebird, Serve. Thus the documentary.

[DesertDiamond]

26. I've been out of that category for a while, but will never forget how brutal and heartless it is

I don't think payday loans existed back then. But what did exist was that being late on my utilities cost me late fees that were so high they were sometimes almost equal to the bill. So, the next month I was still behind and got another late fee on top of that. And so on, until my utilities would be turned off. Back when I got out of college - 1981 - the job market was horrible and all I could get was minimum wage jobs, of which I often worked two or three. Yet I still couldn't pay my basic bills. Being fined for being broke was a cruel experience.

[CrispyQ]

29. I remember that well.

Also, the bill collectors. You'd finally scrap together a payment & the very next day they would start calling you. Not even a single day's reprieve.

For all the "Christian nation" bullshit, being poor is the worst thing you can be in America. We love to kick poor folk when they're down & then blame them for their situation. It's a hard, hard place to dig yourself out of & people who haven't been there don't have a clue.

[CrispyQ]

27. A digital communication package should be provided to all citizens.

Seriously, if you're going to automate so many services - they are closing SS offices & taking a lot of those processes online - then you have an obligation to make sure citizens have the tools they need to access the services they are paying for through their taxes.

[Kali]

35. yes, again!

[madamesilverspurs]

30. Got a phone call yesterday

from one of those rent-to-own stores. My name was given as a personal reference by someone looking to acquire a computer for the work at home job she hopes to get. Ironic that they called me, given that I likely don't have income sufficient to do business with them (if I would, which I wouldn't).

Suffice it to say that rent-to-own businesses, like payday lenders, didn't spring into existence to cater to a wealthy customer base.

[Kali]

36. you always have to buy things in small packages

which cost more. you can't make bulk purchases of food/cleaning supplies/paper/whatever because you have to pay MORE for the smaller packages in order to get through the pay period.