Sunday, November 4, 2012

Money Doesn't Fix Poverty

Has anyone else out there read John Cheese’s article on “The 5 Stupidest Habits You Develop Growing Up Poor?”  I highly recommend it, particularly for those of us who grew up never knowing when the electricity was going to get shut off (hopefully not when a friend was visiting) and/or were taught how to dodge collection calls from the time we first learned how to use a telephone.   

Cheese’s theory is that those of us who grew up poor developed a certain mindset that stays with us, even after we land good jobs and have the ability to stay on top of our bills.  I have always wondered whether poverty is hereditary, and I have come to believe that it is.  Not because money eludes us, even after we grow up, but because money does not fix poverty.  I’ll give you some examples from my own family’s experience.

When I was growing up, my family was constantly in a state of financial crisis.  It always seemed to surprise my father when the electric bill came in the mail, or when my mom had to spend money at the grocery store in order to feed us. 
They never planned out a monthly budget, and paying bills seemed to be a luxury that we could only rarely afford (every three months or so, once utilities were on the verge of being cut off and substantial late fees had already been incurred).  And yet, almost every summer we went on vacations, and my dad would always buy my mom something expensive whenever he received a windfall of any kind.  I never enjoyed going on vacation because I knew we couldn’t really afford it (how could we when just weeks earlier, we all had to take cold showers because the gas had been turned off?).  Growing up, I never dreamed about owning a yacht or being a world traveler someday.  I dreamed about having my own apartment and paying my utilities on time.  

When I was in high school, my dad declared bankruptcy for the first time.  The months leading up to it were some of the scariest of my life.  He had been sued by a number of creditors and had default judgments against him.  He never filled out any of the financial disclosures that are routinely ordered when a judgment is entered, so when he finally had to go to court for contempt hearings, he would warn us that he might not be coming home that night since the judge had the power to put him in jail for ignoring court orders.  By that time, my mom had left so it was just me and my sisters.  I remember my stomach was constantly in knots at that time, since in addition to being sued, the landlord had threatened eviction because my dad was months behind on the rent.  I lost a lot of weight and people became concerned that I had an eating disorder.  In reality, my body just couldn't digest food.  After he filed bankruptcy, things seemed to improve.  The collection calls stopped, but the money problems didn't.  I wasn't surprised when, years later, my dad filed another bankruptcy, once he was statutorily permitted to discharge his debts through a Chapter 7 once again.

These days, we are all grown up, but poverty has remained with me and my sisters in many ways.  For example, one of my older sisters makes $70K at her job, and my brother-in-law makes about the same.  Together, with their combined six-figure income, they should easily be able to handle their two thousand dollar mortgage and other monthly bills.  And yet, because they both come from families that mismanaged money and were always a couple of missed paychecks from bankruptcy, my sister and my brother-in-law are constantly on the verge of foreclosure and they never seem to have enough money to pay their phone bill or other utilities.  But they do seem to have money for expensive trips and new clothes.  I feel sorry for my niece because I know she is going through the same things I went through as a child – she has a few nice material possessions, but absolutely no sense of security.  She’s got a tough road ahead of her.  The reality is, money has not fixed poverty for my sister and brother-in-law.  

Another one of my older sisters just declared bankruptcy with her husband.  They live a bizarre lifestyle.  They own a nice boat, but they live in a trailer.  My sister wears Chanel sunglasses, but regularly asks to borrow a few hundred dollars here and there whenever she and my brother-in-law get into a “cash crunch.”  She inherited my dad’s approach to finances, which was to spend as much as possible on luxury items before the debt collectors came calling.  Money has not fixed poverty for them, either.  If it had, the money that purchased the boat and the Chanel sunglasses would be sitting in an emergency fund or an IRA.  

My younger sister has never worked a steady job, and she lives on the floor of my sister’s house.  Literally, she sleeps on the floor in the living room, with no plan of getting a job and moving out.  Did I mention she is now over thirty years old?  She seemed to inherit my dad’s approach to work, which was to perform odd jobs while trying to get his business off the ground (she’s got the odd jobs part down, but doesn’t actually have any entrepreneurial aspirations).  When she does receive income of some sort, do you think she uses it to pay rent to my sister or save it for a security deposit on her own place?  No.  She uses it for cigarettes, alcohol, and clothes.  Money never fixes poverty for her. 

And then there’s me.  I have never been able to escape my insecurities surrounding money.  I have always paid my bills on time (except for some medical bills I incurred in my late teens and early twenties), but I am always waiting for the other shoe to drop.  When my sister (the one with the Chanel sunglasses) asks for a loan, I oblige.  My husband sometimes balks, but I tell him it’s good karma.  What if that’s us someday?  I’d want someone to help us out of a jam.  He insists that wouldn’t happen because we budget every month.  But what if something happens?  I argue.  

I suppose that’s why money has not fixed poverty for me.  Because I grew up never knowing when utilities would be shut off or why exactly my parents could afford Disneyland but not hot water, the root of my family’s financial troubles remained a mystery.  So it seems entirely possible to me that something equally mysterious could come out of the woodwork and trap us in a financial corner someday, rendering us helpless and asking family members for spare change.  Even once all of our debt is paid off and we have our emergency fund tucked away, I wonder if I’ll ever really achieve that sense of security I craved so much as a child.  It’s funny, my husband thinks I have always just been very responsible with money, but the truth is, I have simply been acting out of fear.  And fear can be a great motivator, but it can also lead to loneliness.  I often feel different from people who had seemingly “normal” childhoods, and I envy those who can enjoy family holidays without having to worry about getting cornered in the pantry by a brother-in-law looking for a short-term loan. 
As someone who grew up poor, John Cheese’s list makes sense to me, but do you agree that poverty is a mindset?  Can you think of any other stupid habits that should be added to his list?


  1. John Cheese is an alky and is nothing like the Mad Magazine clone it was in the 1980s.

    You didn't grow up poor, you just had spendthrift's all just money management. Real poverty means no hot water and no Disneyland.

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  3. Thanks for reading. I'm not sure I can speak to John Cheese's alcohol habits or what was like years ago, since I don't know much about either one. I could relate to the article, and I enjoyed it.

    I agree my parents were sometimes spendthrifts, but that does not mean we were not poor. When I say "poor," I mean it in a sense of not having basic needs met. And to clarify, Disneyland was not a regular occurrence, and the vacations had stopped by the time I was thirteen and my parents' marriage hit the skids. By that time, the money problems had escalated and we went through a couple of evictions. I got my first job when I was fourteen, and I paid my own expenses after that (personal care items, entertainment, and school expenses like enrollment fees, pictures, and yearbooks). It certainly felt like I was poor, although I do think that poverty is relative, particularly in this country. I know there are kids who had it way worse, and even those kids are not nearly as destitute as kids in some other countries. Again, thanks for reading!

  4. I forgot to ask you, Strelnikov, did you grow up poor?

    1. No, I grew up middle class but in an area that became expensive for a period of time. We had basic needs, but no vacations.

    2. Sounds like your parents were sensible with money. You lucked out, since you probably don't have a lot of money management issues like a lot of "nouveau middle class" people do!

  5. Just a thought, a gold bracelet or necklace or ring continues to hold value, is portable and is easily pawned. If collections are at your door, perhaps good planning is realizing the need to carry the most valuable possessions? Maybe that explains the interest in luxury goods ... maybe not sunglasses, but other types.

    1. Good point. It seems like that goes along with the mindset of poverty, though. The assumption is that collections will someday be at your door, so it's a good idea to stash some luxury goods aside just in case. If that money were saved or invested in something that would return an actual dollar value rather than just a commodity value, one might avoid having cash crunch issues to begin with?

  6. hi I enjoy reading your blog, especially your journey to be debt free. I was wondering what your thoughts are on ibr? It seems even those with a decent income can reduce their payments significantly and free up money for investing in housing and retirement. I personally am putting everything into paying them off asap and getting my life back. psychologically it makes sense, but maybe not financiaaly. What are your thoughts?

    1. Thanks so much for reading!! I definitely do not think IBR is the way to go unless you need short-term relief because you cannot afford the payment. With IBR, the interest continues to accrue, which means the balance continues to grow. And then, in the end, once the remaining loan balance is "forgiven," the amount forgiven counts as taxable income. Which means the borrower will most likely end up in debt to the IRS. To me, that's scarier than being in student loan debt, since federal student loan lenders will at least work with borrowers in a reasonable manner. The IRS doesn't really have a reputation for being patient and understanding. :) I am going to do a post on IBR, since I think it is a really important subject, and I am sure other people have thoughts on it. I might be missing some huge advantage, but from what I've read, I would not do it unless I was in dire financial straits.

  7. John Cheese is a pseudonym or a real name?

    According to Wikipedia: One theory goes:

    "H.L. Mencken explained the derogatory term John Cheese was often applied to the early Dutch colonists, who were famous for their cheeses. An example would be a British soldier commenting on a Dutch man "Here comes a John Cheese". The Dutch translation of John Cheese is Jan Kaas; the two words thus would sound somewhat like Yahn-kees and could have given birth to the present term. Added to that, the common black-and-white dairy cow had been bred in the Dutch provinces of North Holland and Friesland, then introduced to the North American colony of New Amsterdam (in the mid-1600s) further strengthening the association of cheese with the Dutch."

  8. I grew up upper middle class to emotionally insecure parents. The US had won WW2, but they thought aggressive antisemitism could happen any time. Not until the 1970's, when my dad had already worked for the state of CT for over 25 years did my folks stop talking of a possible overnight purge of all Jews in the civil service -- federal, state, and local.

    My folds were both born in New Haven in the 1920's; I'm third generation. I am in my late 50's and have all sorts of thrifty habits, especially with food. I buy chicken legs on sale. I render the skin with onions, I save the bones to make chicken stock, I make chicken salad from the leg meat, and shredded chicken with barbecue sauce from the thighs. I carry coupons on me for fast food. I order discounts from I will sometimes compete with another fat man as to how little we can spend for a midnight snack. He went for the $1 pizza slice at 41st & 9th. I went for the half-price asiago cheese bagels at Au Bon Pain in the Port Authority Bus Station between 11 PM and midnight on weeknights -- that's a $1.19 and they'll toast the bagels for free, no butter though.

    All this leads to my perhaps being a stereotype of "cheap Jew", though I am generous with presents and charity. I do not spend much on myself though.

    I eat in full service white table cloth restaurants only about once every every six months. Including events where I get a free lunch or dinner just for showing up to hear someone sell me some investment, about once a month. My peers who went to Ivy League schools and are stockbrokers eat out in fancy restaurants a half-dozen times a week; the married brokers even more often. I know dual career couples with combined incomes over $500,000 who do not think of themselves as rich, but that's partly because they are eating every other day in the type of place that people in the rest of the USA go to ONCE a year for their anniversary.

    In metro NYC, every January there are sales on PB & J. That's not for youngsters. That's for their parents who have resolved to save money for their kids by eating cheap lunches for a month or two or three. Where it happens the most is in Jamaica and Hollis where there are a lot of dual civil servant households. Usually, mom's a teacher or nurse and dad's a cop or a transit worker. Eating PB & J for lunch from the first of the year through March saves up enough money to get the kids new clothes for Easter.

    Few things are as painful to parents as to be an inadequate provider. They feel ashamed of their poverty. Avoiding that shame is why those dual career households in Hollis save up and how their kids turn out alright.