Q about wealth/poverty

[justamouse]

Am I the only one who feels that some are pretty much saying that if a poor person with the deck stacked against him can't get rich, what's the point of trying to save money? Maybe they should just aim for lower middle class, with the hope their kids can be solidly middle class.

 

Really, nobody expects someone to "save" their way to becoming a millionaire. That requires investing, too. Talking about the impossibility of saving a million dollars already shows the different in financial mindset because really only the top few % could ever save their way to a million. A self-employed business owner earning $150,000 per year has to pay about $40-50,000 in taxes (depending on the state), which means even someone earning that much won't save into being a millionaire unless they are super, super frugal. Even then, it would take most of their life. Investing might get them there faster.

 

:iagree: 

 

Kahn Academy started a financial course. I wonder if they have information like that available? Hopefully it will help people. 

[justamouse]

I'm not bitter, cat, I'm just not worried about the feelings rich people have around their wealth? So I make little jokey jokes and smile and get on with it.

 

I really do have to go haha!

It's not just bitterness, though, it's misinformation and assumptions, so it's not just that you're 'not worried about the rich feelings people have about their wealth'. 

[Sdel]

So while not everyone can become rich, if so many people with so many disadvantages can improve their kids financial future, I have a hard time understanding how multiple generations of a family can get trapped in poverty, despite knowing the language and getting a free education, unless there are addiction or family culture issues (or the economy has been destroyed). What am I missing? It's hard to believe that all of these people are permantently unemployed in areas with terrible schools and ridiculously expensive unsafe housing with ten other severe problems and no way to buy a bus ticket to another city to start over. Sure, some people have situations this hard, but do we really have tens of millions of people that can't improve their lot even slightly over the long hall in the richest country in the richest period in world history?

 

 

The barriers ARE real and they are not small.  The things we are discussing: personal ambition, hard work, good habits, etc are only a small part of the equation. It is widely acknowledged that can take a family generations to break out of unhealthy lifestyles and habits.  It is also well known that wealth rarely survives more than 3 generations.

 

Stefanie

[justamouse]

The barriers ARE real and they are not small.  The things we are discussing: personal ambition, hard work, good habits, etc are only a small part of the equation. It is widely acknowledged that can take a family generations to break out of unhealthy lifestyles and habits.  It is also well known that wealth rarely survives more than 3 generations.

 

Stefanie

 

If breaking out of unhealthy lifestyles and habits is only a small part of the equation, why does it take generations to accomplish? 

 

 

[happypamama]

Re: new cars -

 

I grew up LMC and thrifty-poor. Paying cash for a used car was gospel truth.

 

Truth is - banks and other actual lenders will not give you a car loan for less than around 8k, and only for a newer car. Also, I get Medicaid and WIC for my kids, and one of the stipulations is that we're not allowed to have over 2k in liquid assets.

 

So how does someone in this situation get a car? They get a new or newer one with a huge loan.

 

Or be lucky enough to have a mechanic friend who will do a low-cost trade-and-fix-up. Which we did. But otherwise we'd be sunk in a hole with a car more expensive than we could afford. :banghead:

 

 

Are you absolutely sure that there's an asset limit for Medicaid and WIC and that they include the value of all cars? In my state, asset limits do NOT apply to Medicaid or WIC, just for food stamps and cash assistance, but they also don't count the value of one vehicle, and for all other vehicles, they only count value over a few thousand dollars. So you could have a couple of clunkers and be okay.

 

Ugh, clunker vehicles. I had one of those. It was great, a cheap buy, no problems for about 18 months, even though it was old. And then everything started dieing, but a car payment wasn't feasible for us. The coup de grace was when the transmission died, but thankfully by that time we were able to handle a car payment. So now we have a nice older but not as old as the clunker, and a car payment, but that car payment is worth every penny when I am not worried about whether I'll get stranded somewhere, or if my DH will need to perform some emergency repair miracle on the side of the road.

 

We have some really nice thrift stores around here, and shopping there is chic among my homeschooling crowd. The adult stuff is usually a good deal. It's not generally worth buying kid clothes there, because even nice stuff is only a dollar or so less than WalMart's new shirts and pants at $3.50 each.

[Sdel]

If breaking out of unhealthy lifestyles and habits is only a small part of the equation, why does it take generations to accomplish? 

 

 

 

I said it was a small part, not an insignificant part, and I wasn't limiting the statement to wealth.  There are plenty of reasons why an otherwise determined person may not break out of an unhealthy cycle.

 

Stefanie

[idnib]

A lot of wealthy people get that way because they're raised in an upper middle class home, receive a stellar education, have parents who can afford to send them to an Ivy or Ivy-equivalent college, and then make the connections at that college that allow them to find a job that pays enough to make them wealthy.  They KEEP their wealth by making wise financial decisions.

 

I feel as if you're conflating one direction with the other.

 

If you are upper middle class, receive a stellar education, have parents who send you to an Ivy-league or Ivy-equivalent college, and make important connections, you are quite likely to become wealthy. But if you actually survey real people who are wealthy, most of them did not take this path. TMND is about this very topic.

 

So it's true in one direction, but not really the other. It's like an easy, visible trail up the mountain, but when they arrive at the top, they find it crowded with others who weren't on that trail at all. The other trails are more varied and individualized, though, so they don't receive as much emphasis because it's not as easy to derive a pattern from them. As primates we like patterns and find them reassuring so we over-emphasize this one very visible and easy to understand pattern, while failing to discern the other, lighter trails.

[Lilaclady]

No matter how financially literate you are, how little you spend on clothing or how many coupons you clip, if you received a horrible education, are barely literate, and can't afford college, you're not going to end up wealthy unless you win the lottery, period.

Even winning the lottery isn't any guarantee. So many people win it and lose it all within 10 years or less.

[justamouse]

I said it was a small part, not an insignificant part, and I wasn't limiting the statement to wealth.  There are plenty of reasons why an otherwise determined person may not break out of an unhealthy cycle.

 

Stefanie

That is precisely what I was saying before. That it's a lifestyle pattern of thinking that includes many things, not just wealth.  Matter of fact, IME, it's the largest factor. 

[LucyStoner]

If you keep thinking that being rich is only for those who went to fancy private schools and ivy leagues, you're talking yourself out of the possibility before you even can start making the changes that would enable you to succeed.

 

 

Success shouldn't be conflated with financial affluence.

[IsabelC]

Thanks for this thread, I found this topic fascinating.

I often wondered the same thing, as I am on the tightwad side of the fence (the only thing I sometimes blow money on is new books - mostly for the kids, although I'd say 90% of our books were acquired free or cheaply secondhand) and I know several people who always seem to be buying new furniture, new electronics good, new clothes, etc. but complain of straitened finances.

Now I have lots to ponder :)

 

[Amy in NH]

One ring for over 2 grand, some decent rods and reels, maybe some art. A new macbook... 

 

It's really easy to spend that much. 

 

And, actually, we don't spend that much on Christmas because ... we just don't. But don't think that even if we did, that we wouldn't be saving for our children, though not in a 529. Saving for the future isn't a once a year thing, it's a lifestyle choice. 

 

Not if you don't have enough to meet the basic needs of your family and you are constantly juggling the bills. 

That "lifestyle choice" is a privilege. 

[idnib]

Not if you don't have enough to meet the basic needs of your family and you are constantly juggling the bills. 

That "lifestyle choice" is a privilege. 

 

Well sure, but all she's saying is that people who have access to that privilege still have to make the choice, and she does. Plenty of people don't avail themselves of saving money when they could. That's different from someone who doesn't have the privilege at all. Can it not be simultaneously true that it's a privilege and that people who have that privilege handle it in different ways?

[justamouse]

Well sure, but all she's saying is that people who have access to that privilege still have to make the choice, and she does. Plenty of people don't avail themselves of saving money when they could. That's different from someone who doesn't have the privilege at all. Can it not be simultaneously true that it's a privilege and that people who have that privilege handle it in different ways?

 

Precisely. 

[Reefgazer]

I can count over a dozen people in my extended family who are extremely well off because they are flat-out tightwads.  The majority of this group includes people who have less than a bachelor's degree; one didn't even graduate from high school.  For sure, the degreed people are doing well, but the tightwads without a degree are doing as well or better.  If you are a super-saver and have taken advantage of compounding interest for decades, you will build wealth.  If you were given a modest amount of shares of GE or railroad stock as a small bonus in your (blue-collar) paycheck in 1965 and sat on it without cashing it in for half a century, you'd be well-off, too.  This is where good decision-making and tightwad-ish-ness matter in wealth-building.

A lot of wealthy people get that way because they're raised in an upper middle class home, receive a stellar education, have parents who can afford to send them to an Ivy or Ivy-equivalent college, and then make the connections at that college that allow them to find a job that pays enough to make them wealthy.  They KEEP their wealth by making wise financial decisions.  But they don't make it that way.  No matter how financially literate you are, how little you spend on clothing or how many coupons you clip, if you received a horrible education, are barely literate, and can't afford college, you're not going to end up wealthy unless you win the lottery, period.

 

[SKL]

I don't understand it either.  I was born into a poor but upwardly mobile family.  I continued the upwardly mobile trend.  Even in my own family, I am the most frugal despite being the most educated / most financially well off.  Part of this is direct cause / effect - being frugal and fed up with debt, I didn't spend money most people would have spent, so eventually that became wealth.  I also don't get much pleasure out of having "things."  I don't know whether this latter trait is correlated with wealth or not.

[justamouse]

I don't understand it either.  I was born into a poor but upwardly mobile family.  I continued the upwardly mobile trend.  Even in my own family, I am the most frugal despite being the most educated / most financially well off.  Part of this is direct cause / effect - being frugal and fed up with debt, I didn't spend money most people would have spent, so eventually that became wealth.  I also don't get much pleasure out of having "things."  I don't know whether this latter trait is correlated with wealth or not.

Delayed gratification has a lot to do with wealth. 

[idnib]

Shoot, I think I'll take the life of petty crime Cat suggested earlier :)

 

I just need to say this - I am so tired of the capitalist kool-aid.

 

There, I feel better now. Off to nick a book!

 

With the possibility of a few statistics that run contrary to popular belief, from what I know about you the book is not going to make you feel better about capitalism.  :grouphug:

 

Paradoxically, it may make you feel better about millionaires though.  :D

[Catwoman]

Shoot, I think I'll take the life of petty crime Cat suggested earlier :)

 

I just need to say this - I am so tired of the capitalist kool-aid.

 

There, I feel better now. Off to nick a book!

Always glad to help, even if I am a confirmed capitalist from way back! ;)

 

But remember, don't limit yourself. Once you get good at the whole petty crime thing, make your move into grand larceny. If you look good in black and are acrobatically-inclined, one day you might advance all the way to being a millionaire cat burglar, stealing priceless jewels from the rich and famous.

 

It's good to have goals, and when the word "cat" is involved, I'm even more excited about it. :D

[Laura Corin]

Social mobility statistics might be useful in this discussion.  The US has quite poor ones, in comparison to other Western countries; they are similar to the UK, which people tend to think of as a country that does not offer great opportunities.

 

I haven't read the whole of this article, but figure 2 shows a clear comparison.

 

L

[Ausmumof3]

One stat that was interesting from Aus was that immigrant mums spend around 3 hours per week more engaged in activities with their kids than Aussie mums in the same socioeconomic groups. This tends to drop off after around 10 years in the country. The study didn't draw conclusions about why, but suggested it may explain why immigrants kids often have better outcomes than other kids in the same income bracket.

[creekland]

My world is small for stats, but I know we can usually predict who will succeed well in life and who has major obstacles to doing so while they are still in high school - and it has no bearing on their family's financial status.  It has to do with their personal ethics and style.

 

I've seen kids with great family potential run their family business into bankruptcy in just a few years (predicted by us teachers in high school).  I've seen kids with multiple family "issues" do exceedingly well.  We get some of these each year.

 

Then, of course, we get plenty who just follow along in their family footsteps whether higher SEC or lower.

 

What's extra nice is when I meet one a few years after high school who updates me on his situation - nicely telling MY kid to straighten up sooner to have better ways of doing things.  This young lad used community college to apply himself toward getting a better life after he was on his dead end job barely making ends meet and came to the realization that there HAD to be something better out there.  Then he went off to get advice from career counseling at that college.  Then he applied himself to doing well (using federal loans to pay for it).  Now he has a much better job AND more time with his young family (though he told my guy it was tough doing it with a family - hence - the reason to straighten up earlier).

 

Will he become a millionaire?  Who knows?  But he's certainly gone from dead-end and barely making ends meet to making a decent living with vacations, etc.

 

It can be done, but people have to believe it can AND apply themselves.  Most don't.

 

It's not capitalist kool-aid.  How many survived that kool-aid bit after drinking it?  There are MANY successful stories with what is actually out there.  No one is making these up.  But it doesn't come from sitting around wishing things could be better.  It comes from finding a real solution whether it's something one identifies themselves and can make work or whether it comes from career counseling at a cc (or anywhere else) and a few years of changing life.  Chances are, buying lottery tickets won't work.  They are likely the kool-aid.

 

The awesome guy who works with our at-risk kids at school tells me this is the absolute hardest lesson he tries to teach.  Sometimes he is successful.  Many times he tries, but, well, he can give these kids tons of opportunities to see how things can be different, but he can't actually do it for them.

[Indian summer]

A lot of wealthy people get that way because they're raised in an upper middle class home, receive a stellar education, have parents who can afford to send them to an Ivy or Ivy-equivalent college, and then make the connections at that college that allow them to find a job that pays enough to make them wealthy. They KEEP their wealth by making wise financial decisions. But they don't make it that way. No matter how financially literate you are, how little you spend on clothing or how many coupons you clip, if you received a horrible education, are barely literate, and can't afford college, you're not going to end up wealthy unless you win the lottery, period.

I agree with you that a lot of wealthy people begin with such advantages that they keep that wealth. However, I have to disagree with your last sentence. My dh and I both grew up with poverty and parents that made poor financial choices with the little they had. Dh dropped out of high school, eventually got a GED and went off to trade school. I graduated from ps and dropped out after one year of college. Dh and I both read books about personal finances and set a course and followed it. We started a small business with loans we could secure because of having good credit (we had no capital to speak of) and paid those loans off within one year. Within another year, we were living comfortably UMC. But before that, we lived within our means from his job in retail /trade and mine waiting tables. It can most certainly be done, even though our parents gave us bad financial advice(we didn't take it) and couldn't put us through college or help us start a business.

 

This isn't an isolated case. Most of our siblings are also now living UMC and many of the kids I grew up with who were raised in poverty are at least middle class, if not better.

[Indian summer]

But you have to have the capability to make enough money to save enough to accumulate wealth in the first place. If someone is making $18,000 a year by working at a low wage job, if they manage to live absolutely for free and literally save every penny, after fifty years they'll only have saved $900,000.

Not true. If they make themselves financially literate they would invest that $18 000 annually and make a ton of interest. They should have way more than $900, 000. And even if they didn't, what's wrong with $900, 000? That's an awesome amount!

[Mergath]

Not true. If they make themselves financially literate they would invest that $18 000 annually and make a ton of interest. They should have way more than $900, 000. And even if they didn't, what's wrong with $900, 000? That's an awesome amount!

 

Not after half a century of hard work and deprivation.

[Laura Corin]

NM

[creekland]

Not true. If they make themselves financially literate they would invest that $18 000 annually and make a ton of interest. They should have way more than $900, 000. And even if they didn't, what's wrong with $900, 000? That's an awesome amount!

 

Or, like the young man I mentioned above, he saw that he wasn't making anywhere near what he wanted for oodles of work and decided his better option was to acquire skills for a better paying job.  Then he made it happen with a bit of study at a local community college and some federal loans.  He didn't have much (if any) free time during that process, but the ends justified the means in his opinion (and mine).

 

I don't think he was making 18K before that decision (maybe he was), but he was working 7 days a week at different part time dead end jobs and getting nowhere.  Two years later he could have been in the same spot had he not decided to change.  The rest of his life will be considerably better financially.

[Reefgazer]

No one is suggesting that all thrifty people are going to bootstrap themselves out of poverty; sometimes circumstances really don't allow for that.  But it happens often enough that it is not an improbable occurrence, as you can see from this thread.

 

I have a friend who is a fairly recent immigrant from China (within the last 15 years); he had very little when he came here.  A few years ago, he said to me that life here was very hard because he was completely responsible for his family's support and he felt no safety catch under him.  He said life in China was easier because if you couldn't take care of your family the government would take care of all of you, with the understanding that you were owned by the government (would work for them, would go into the profession they chose for you, would abide by the housing rules they gave you, etc...).  But he also said that life here was of higher quality and that you could rise above your current station in life, whereas in China, rising above your current station as a poor person would be unlikely.   So perhaps your social/economic structure is different enough in Australia (I have no idea about Australia) that it is really impossible to change your SES.  But here it is not and the capitalist system seems to really work, even if the really wealthy do have so much more than just the middle class.   

 

ETA:  My immigrant friend from China is now very well off (by my standards).  He's also an extreme tightwad, even to this day.

Shoot, I think I'll take the life of petty crime Cat suggested earlier :)

 

I just need to say this - I am so tired of the capitalist kool-aid.

 

There, I feel better now. Off to nick a book!

 

[Reefgazer]

There is an excellent book out that touches on this, "How Children Succeed".  It's a book about inequality of education in poor communities in the United States, but devotes several chapters to how kids break through poverty and life disadvantages to become successful.  It's a very good book!  The chapters on poverty note that the kids who bust out of poverty have very distinct characteristics, and they devote a good part of the book to discussing how to instill those qualities in every kid that comes through the doors of their schools.

My world is small for stats, but I know we can usually predict who will succeed well in life and who has major obstacles to doing so while they are still in high school - and it has no bearing on their family's financial status.  It has to do with their personal ethics and style.

 

I've seen kids with great family potential run their family business into bankruptcy in just a few years (predicted by us teachers in high school).  I've seen kids with multiple family "issues" do exceedingly well.  We get some of these each year.

 

Then, of course, we get plenty who just follow along in their family footsteps whether higher SEC or lower.

 

What's extra nice is when I meet one a few years after high school who updates me on his situation - nicely telling MY kid to straighten up sooner to have better ways of doing things.  This young lad used community college to apply himself toward getting a better life after he was on his dead end job barely making ends meet and came to the realization that there HAD to be something better out there.  Then he went off to get advice from career counseling at that college.  Then he applied himself to doing well (using federal loans to pay for it).  Now he has a much better job AND more time with his young family (though he told my guy it was tough doing it with a family - hence - the reason to straighten up earlier).

 

Will he become a millionaire?  Who knows?  But he's certainly gone from dead-end and barely making ends meet to making a decent living with vacations, etc.

 

It can be done, but people have to believe it can AND apply themselves.  Most don't.

 

It's not capitalist kool-aid.  How many survived that kool-aid bit after drinking it?  There are MANY successful stories with what is actually out there.  No one is making these up.  But it doesn't come from sitting around wishing things could be better.  It comes from finding a real solution whether it's something one identifies themselves and can make work or whether it comes from career counseling at a cc (or anywhere else) and a few years of changing life.  Chances are, buying lottery tickets won't work.  They are likely the kool-aid.

 

The awesome guy who works with our at-risk kids at school tells me this is the absolute hardest lesson he tries to teach.  Sometimes he is successful.  Many times he tries, but, well, he can give these kids tons of opportunities to see how things can be different, but he can't actually do it for them.

 

[Mergath]

Deprivation?  

 

As a grandchild of farmers, deprivation to me means the inability to do more than meet basic needs.  The person who is accumulating savings and investing it is beyond deprivation.

 

My grandmother lived in an a pine shack and worked her homestead.  My children's grandmother lives in a McMansion.  The former was able to pay her needs and her wants without benefitting from taxing her neighbors, the other cannot. Downsizing from a 3000 sq foot home, with useable acreage sitting idle,  is considered to be deprivation, when viewed thru her lenses.

 

What does deprivation mean to you?

 

Did you even read my post?

 

My point was how little a minimum wage worker would save after fifty years if they literally didn't spend a penny.  I'm pretty sure not paying for shelter, food, or medical care counts as deprivation.

[Indian summer]

I'm happy for your success, but statistically it's far outside the norm. A lot of business owners work hard and do everything right, and end up losing everything.

If they really are doing everything right,as you say, I doubt they'll lose everything, with a few very unfortunate exceptions. First off, setting up your business as a limited liability, should prevent one from losing everything, even if the business fails.

 

Many businesses fail because of poor planning, poor management and failure to seek wise counsel. I knew one business owner who has lost more businesses than I can count because he never really understood some very basic ideas, like buy low and sell high or location, location, location. I kid you not, this man would buy high and be forced to liquidate when no one would pay his crazy prices, over and over again. Sigh.

 

Look, I'm not saying there's absolutely no risk, but there are ways to cut that risk so you are far less likely to end up on the losing end of the statistics. This involves education and it doesn't have to be of the formal variety. I took a small business course in night school put on by a successful local business owner for around $200 and some more similar classes, for free, put on by the unemployment office.

 

And I'm not denying that the cycle of poverty is challenging to break, but if dh and I can do it with learning disabilities, little formal education and throw in a devastating chronic illness to boot, then listening to people make excuses for why they can't improve their situation is difficult to swallow. Humans have the ability to learn. If you want to accomplish something but don't know how, learn.

[Mergath]

If they really are doing everything right,as you say, I doubt they'll lose everything, with a few very unfortunate exceptions. First off, setting up your business as a limited liability, should prevent one from losing everything, even if the business fails.

 

Many businesses fail because of poor planning, poor management and failure to seek wise counsel. I knew one business owner who has lost more businesses than I can count because he never really understood some very basic ideas, like buy low and sell high or location, location, location. I kid you not, this man would buy high and be forced to liquidate when no one would pay his crazy prices, over and over again. Sigh.

 

Look, I'm not saying there's absolutely no risk, but there are ways to cut that risk so you are far less likely to end up on the losing end of the statistics. This involves education and it doesn't have to be of the formal variety. I took a small business course in night school put on by a successful local business owner for around $200 and some more similar classes, for free, put on by the unemployment office.

 

And I'm not denying that the cycle of poverty is challenging to break, but if dh and I can do it with learning disabilities, little formal education and throw in a devastating chronic illness to boot, then listening to people make excuses for why they can't improve their situation is difficult to swallow. Humans have the ability to learn. If you want to accomplish something but don't know how, learn.

 

I never said people can't break the cycle of poverty.  I said that poor people with little education statistically aren't going to end up wealthy.  

[Reefgazer]

Sounds like my 80s and 90s era Chevys.  Snerk...snerk...

You may be seeing the effect of tech evolving.

We spent the 90s with fil's car in our garage for things that wear or design issues..transmission, window motors, etc. The 00s had the same vehicle , again bought used,with similar troubles. In 2005 they bought another one, for just 2000 less than a new one., and about 50, 000 miles on her. Same issues. In 2010 they bought new...finally trouble free. I will bet that part of it is newer tech under the hood, and part of it is that they arent skimping on the maintenance now.

 

[Indian summer]

I never said people can't break the cycle of poverty. I said that poor people with little education statistically aren't going to end up wealthy.

That's true, statistically, most don't. My point is that those who sincerely want to can usually find a way and that dh and I are living proof, among so many others. I know lots of people that are content with extremely simple lives and don't feel the need to rise any higher from a financial standpoint. If they're happy with their lives, as many are, then I'm sincerley glad for their contentedness.

 

It's the ones who complain about their lot and never do anything about it that drive me crazy.

[ScoutTN]

It takes time and money to shop around at thrift stores. If I need a decent pair of shoes and I have a very limited time to get them I will not be visiting 5 thrift stores all over town. Partly because they may not have what I need. I will hit the nearest store and pay what they ask. I will walk in knowing they will most likely have what I need. I do not have to dig through piles of shoes. I do not have to wonder.

I find this to be true. While I get some good deals at a thrift store close to my home, they do tend to be a bit random.

I work for and shop at a large consignment sale twice a year. Very good quality used items and one stop shopping. Saves time and money. I detest spending time shopping! Unless it is for books. ;)

[Amy in NH]

Not true. If they make themselves financially literate they would invest that $18 000 annually and make a ton of interest. They should have way more than $900, 000. And even if they didn't, what's wrong with $900, 000? That's an awesome amount!

 

If you are suggesting they gamble the small amount they have in stocks, I would suggest that is foolish. 

You shouldn't gamble what you can't afford to lose. 

[Reefgazer]

I can't imagine $4K in gifts either. But then again, we're the couple that calls the power company for a refund of money when our power is out for 1/2 a day or so (Yes, they credit our account!).  I do know some people who do this, though.  We are just way too cheap to spend this kind of green on gifts for one day.  Expensive electronics wind up as a family gift spread across all of us (i.e., no one has their own laptop).

I wonder how many people here actually spend 4 digits on Christmas gifts in the first place? I know I sure don't. Most people get homemade candy or cookies from me.

 

[Indian summer]

If you are suggesting they gamble the small amount they have in stocks, I would suggest that is foolish.

You shouldn't gamble what you can't afford to lose.

Nope, that's not what I'm suggesting at all. I'm suggesting they diversify their investments in the tried and true. I don't think investing $18,000 annually is a small amount, certainly it's big enough to diversify a lot - again, here's another place where they'll have to invest some effort in educating themselves to make the wisest choices.

[Guest]

I never said people can't break the cycle of poverty. I said that poor people with little education statistically aren't going to end up wealthy.

Mergath, you seem like you are defending hopelessness. I don't get it. Is there anybody working fifty years, perpetually at minimum wage, who thinks they will be wealthy some day? I don't know anybody that dense.

[MBM]

There is an excellent book out that touches on this, "How Children Succeed".  It's a book about inequality of education in poor communities in the United States, but devotes several chapters to how kids break through poverty and life disadvantages to become successful.  It's a very good book!  The chapters on poverty note that the kids who bust out of poverty have very distinct characteristics, and they devote a good part of the book to discussing how to instill those qualities in every kid that comes through the doors of their schools.

 

I agree. Paul Tough's book is interesting and worth reading. It isn't simply poverty that causes problems. Kids who've experienced a lot of early trauma and who do not have secure attachment to at least one parent/caregiver will develop a different neurological setup that, if not dealt with properly, will cause significant lifelong problems. They are more impulsive, more likely to engage in early drinking/drugs/sex, more violent, more suicidal. Their life spans are much shorter even if they manage to not do those things because the unhealed trauma manifests itself in autoimmune diseases, especially heart disease. Trauma and insecure attachment cause tremendous problems and that is what must be addressed first. People like Alicia Lieberman and James Heckman have been working on these problems for years, and they are getting some decent results.

 

 

If you want to read more about early trauma and its effects, check out the Adverse Childhood Experiences study.

 

http://www.acestudy.org

 

[JumpyTheFrog]

It sounds as if poverty of mindset is just a important as poverty of income. The wrong mindset can leave a person trapped for life.

[JumpyTheFrog]

The break-outs who DO, have things going for them besides financial acumen, I garuntee you. They'd have had people who invested in them, they'd have an acceptably dignified plan b, a soft place to land, as it were. They'd have had a tremendous amount of experience in life before they hit their hard times (which, again, is different than just flat out full stop BEING poor.). They'd have had something.

Does this account for all the immigrant success stories, with people who didn't know anyone or the language?

 

And why is there so much focus on whether a person can reach upper middle class? Moving up to lower middle class would be an improvement, then maybe their kids could reach middle middle class.

[Ravin]

I can count over a dozen people in my extended family who are extremely well off because they are flat-out tightwads. The majority of this group includes people who have less than a bachelor's degree; one didn't even graduate from high school. For sure, the degreed people are doing well, but the tightwads without a degree are doing as well or better. If you are a super-saver and have taken advantage of compounding interest for decades, you will build wealth. If you were given a modest amount of shares of GE or railroad stock as a small bonus in your (blue-collar) paycheck in 1965 and sat on it without cashing it in for half a century, you'd be well-off, too. This is where good decision-making and tightwad-ish-ness matter in wealth-building.

But to what end? My dad for example has no problem being a tightwad and maintains a comfortable middle class life. His grandchildren all only eat because of food stamps.

[justamouse]

 

And I'm not denying that the cycle of poverty is challenging to break, but if dh and I can do it with learning disabilities, little formal education and throw in a devastating chronic illness to boot, then listening to people make excuses for why they can't improve their situation is difficult to swallow. Humans have the ability to learn. If you want to accomplish something but don't know how, learn.

You are so inspiring. Thank you for posting. 

[Tanaqui]

Listen, the US has virtually no social or economic mobility.

 

http://www.msnbc.com/msnbc/us-social-mobility-problem

 

Individuals can be exceptions to the rule, but the game is still rigged.

[Tanaqui]

Nope, that's not what I'm suggesting at all. I'm suggesting they diversify their investments in the tried and true. I don't think investing $18,000 annually is a small amount, certainly it's big enough to diversify a lot - again, here's another place where they'll have to invest some effort in educating themselves to make the wisest choices.

 

Investing 18,000 a year? I know people who make only slightly more than that. They can't invest that. They can't invest anything, because all spare cash goes to putting food on the table.

 

[creekland]

The break-outs who DO, have things going for them besides financial acumen, I garuntee you. They'd have had people who invested in them, they'd have an acceptably dignified plan b, a soft place to land, as it were. They'd have had a tremendous amount of experience in life before they hit their hard times (which, again, is different than just flat out full stop BEING poor.). They'd have had something.

 

I'm sure there are some, but this hasn't been my experience really.  I've seen plentiful kids/adults get tons of support through school, through our gov't, through family, or through the kindness of strangers (sometimes a mix).  They still don't succeed or change their ways.  Thousands of dollars can be spent on their behalf.  Tons of advice can be given.  But people can't actually make them do or change anything when it comes to reality.

 

Then I've seen some in pretty much the same boat get very similar support (or less) and do exceedingly well in spite of it all.  

I've seen kids from the same family get on completely different paths - but they had similar parental support.

 

I've seen kids from foster care do really well (or not) from the same family.

 

It really seems, to me, to be more of a mindset (and willingness to see things differently and take action to accomplish those differences) akin to that mentioned in the book/article linked not that far back.

 

I absolutely can not say all will make it to UMC or millionaire status, but I've seen many succeed and fail and there are traits to each.

[Indian summer]

But to what end? My dad for example has no problem being a tightwad and maintains a comfortable middle class life. His grandchildren all only eat because of food stamps.

To what end? I think you answered this with the next sentence - his comfortable middle class life. Does your dad have minor children he should be responsible for, but isn't? If yes, then shame on him. If no, then I don't see a problem with his choosing to spend or save his money however he sees fit - it is his. Are you implying he should be held responsible for his grandchildren? He didn't choose to have grandchildren, why should he be responsible for them? Sometimes it's better for parents to let their adult children fend for themselves so as not to set up an inappropriate, codependent habit.

[Indian summer]

Investing 18,000 a year? I know people who make only slightly more than that. They can't invest that. They can't invest anything, because all spare cash goes to putting food on the table.

 

I took that number from the example in Mergath's post - I agree it's not even close to realistic for most people, especially those working for minimum wage.

[justamouse]

If you are suggesting they gamble the small amount they have in stocks, I would suggest that is foolish. 

You shouldn't gamble what you can't afford to lose. 

 

When you invest, unless you are playing the stocks, you just let it sit. It's not a short term investment, it's a long term. It's not a gamble. Even with the last few years, we've consistently earned. However, My Dh and I do not sit and watch the market and play them. 

 

Delayed gratification. We have no retirement, we have no pension. All we have is us, so we have a portfolio and we just keep at it. 

 

 

Nope, that's not what I'm suggesting at all. I'm suggesting they diversify their investments in the tried and true. I don't think investing $18,000 annually is a small amount, certainly it's big enough to diversify a lot - again, here's another place where they'll have to invest some effort in educating themselves to make the wisest choices.

Most people I know start out by investing very small amounts. 

 

I remember when Ford hovered at a little over a dollar a share, and now they are paying dividends.