The Cost Of Being Poor

Some of you may have heard of Captain Vimes’ boots theory of social-economic unfairness. This originally came from a novel, but what it said made so much sense that it became popular. In essence, it is saying that the rich could buy better quality products and use it for a longer time while the poor can only buy cheap products that do not last long. Taking it over the long term, the poor has to spend more money on the same thing simply because they can only afford to repeatedly buy poor quality products.

Some of us may think that it is not applicable in today’s world. Seldom do people use a particular product for many years. We change phones once every 2 years. We change laptops once every 3 years (my longest was 7 years though). Our shoes change every year. All these constant changing and upgrading of the things we use, even if they are not spoilt. Our phones and laptops can last way longer than when we change them, and we throw away our clothes and shoes despite wearing them for only a while, sometimes only once. In this day and age, it seems that the idea of durability is no longer a valid concept, simply because things get outdated or out of fashion too quickly.

Yet, such situation merely adapts to the modern day’s context. While durability may no longer be a concern, other unnecessary and wasteful spending in today’s context are widely seen. Let us go through a few examples.

Example 1
A person is too poor to make a downpayment for the purchase of a house. It may be because he is just out and independent from his parents at the age of 18. It may be because he does not have a job that pays well. Either way, he cannot afford a $50,000 downpayment for a $300,000 house, which will work out to be a monthly mortgage of $833 (not factoring in interests) for a 25 year loan. He is now forced to take out $800 every month to rent a room every month. 10 years down the road, he would have spent $800 x 12 x 10 = $96,000 on rent, assuming rent is consistent throughout the years which we know is impossible. Yet for all the rent he paid, the house is not his at all. He is still the same as 10 years ago. But if he has that initial $50,000 for downpayment, making the same monthly payment of approximately $800 will mean that he is slowly paying the loan for his own house which he will own in the end. The cost of being poor and not having the $50,000 is all the rental money which he paid until the day he is able to afford the downpayment for his house.

Example 2
This is a very common example, especially for people in poorer countries, cities or villages. Due to the family’s financial issues, a particular kid has to give up on his or her education despite having the academic inclination or the capacity to do so. He or she will have to give up studying in a university and go on to take a blue collar job, all for the sake of saving money for the family and to get out to the society earlier, where they could earn money and contribute back to the family, where the younger siblings are waiting for food to be put on the table. Personally, I think the fault lies solely on the parents, giving birth to more than one kid when they do not have the financial capability to raise a child well. But that is another topic for another day. The cost of sacrificing education is huge. Granted, in certain European countries, education is free, but it is not so for many other parts of the world. Granted, in certain Western countries, blue collar workers earn decent, but that is also not so for many parts of the world, especially in Asia. In these places, as a blue collar worker, you generally get paid little. The opportunity cost of missing out the education is huge, and a lifetime opportunity of taking on higher level white collar jobs are shut off to you. Some people may say that he or she could study again after things are settled down, but practically speaking, few would be able to do that. For one, the momentum to continue studying is lost. The inertia to get back to school after coming out to work is huge. Secondly, by the time things are settled down, they may already have married and gotten some kids, having another set of things to spend their energy, time and money on.

There are many other daily examples, such as buying more things in bulk during a sale at a cheaper price, or wasting time walking for a longer distance when a $100 can get you a functional bicycle, saving you much more time. Being poor is expensive in the long run. You got to spend more than the average man in your daily life, even though it may look like you spend lesser in the very short term.

Hence, if you are poor, do not stay that way. If you have a healthy body, work hard and save hard for it. Many may say that all the salary they have goes into basic necessities – rent, food expenses, children etc. But the harsh truth is this: If you want to get out of your current situation, you have to do something different. You have to sacrifice something. Reflect on your life and see what expenses you can cut. Chances are you may be buying something you do not need. Are you able to work overtime for more money? When I was poor I worked 2 jobs. There was also a time where I only had 1 meal a day, provided free from the noodle shop I worked in. I camped for ‘expired’ meat in the supermarket which went for cheaper prices (they still can be eaten). Even now, I am still using the cheapest $10 a month mobile plan because there is always wifi indoors. Getting out of poverty is no easy walk in the park. It requires consistent, persistent hard work and sacrifice. Nobody will pity you. Nobody will care about you. But if you stay that way, you will lose out even more in the long run.

Every little bit of money earned, every little bit of money saved, all adds up to the snowball of wealth which will grow bigger and bigger. It will take years of effort. Remember the delayed gratification experiment we see on videos about kids being given a snack and asked to wait until the adult comes back? If the kid ate the snack on the spot, that is all that he had. If he or she waited till the adult came back, the kid will received another portion of the snack. Some children could not wait and ate it soon after, some waited till the adult came back for a double reward. As adults we looked at them and wondered why they could not wait for a bit longer. Amplify it to the adult level of delayed gratification, we have our situation now. Work hard, save hard, invest wisely and you will get your rewards few years down the road. Delayed gratification for children is a few minutes, but for adults it can easily be a few years or even a few decades.

Do nothing and suffer for the rest of your life, or suffer more for a few years and see your life gets better and better as you progress. Choose your poison.

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- Resources Price
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