In the United States, the poverty line is $11,770 per person. While this may seem like a lot of money in other countries, this is below the baseline of what most people need in order to live a comfortable existence as an American. At the moment, 46.7 million people are living at or below the poverty line. And unfortunately, many of them are never going to get themselves out of it unless they completely change their lifestyle.
These bullet points are not meant to make you feel bad about yourself, but rather help you recognize when your financial habits are holding you back from making more money. Personally, I spent the majority of my life living under the poverty line. My father was injured in an accident at work when I was just 4 years old. He was lucky to be alive, but he was in a wheelchair for over a year. My dad had to learn to walk again, and he still struggles with chronic pain to this day. We were on welfare and foodstamps for most of my life, and I grew up in a low-income area.
Throughout this article, I may give some personal anecdotes about how I managed to break through the poverty line and into the middle-class.
30. Living in an Area With Few Opportunities
Sometimes, the problem with poverty isn’t necessarily you as an individual, but rather the place you live. Some places have lower wages across the board because working opportunities are too few and far between. The process of relocating can be very expensive. You need to pay for a new down payment, moving vans, transportation costs, and much more. Many people don’t have the option to leave the area that they were born into, or it might be a struggle to get out.
Living in a low-income area also puts you in the mindset of poverty being normal. Trying to better yourself might also make you an outcast. When one person tries to go against the herd, they are often attacked by people who are jealous of their ambitions. This can cause some people to put their heads down and try to continue with the status quo. Just remember that you become the average of the people around you. So if you continue to stay in an area where everyone else is poor, the odds of you becoming rich are going to be smaller.
29. Stuck in a Debt Trap
When you aren’t making a lot of money, it is easy to get yourself stuck in a debt trap. These are settlement scams, payday loans, and even pyramid schemes that require you to buy inventory up-front. Once you’re in one of these traps, the interest becomes so high you can almost never get out. Desperation forces people to make rash decisions. Some people feel too embarrassed to reach out to their friends and family when they are going through a hard time.
If you have been in this situation before or you might anticipate it happening to you in the future, try to prepare yourself for emergencies. Ask friends and family for help, sell your belongings on Craigslist, or try to set up a payment plan with your creditors. Do anything you possibly can before you resort to a payday loan.
28. Ignoring Big Debts
Sometimes, our problems are so overwhelming, that we feel like we can’t do anything about it. Some people deal with stress by ignoring their problems. This is why so many people are summoned to court over missing payments to a creditor and yet never show up for their court date. When this happens, their wages are garnished because they have lost the case by default. Once someone is in the situation, the decision cannot be reversed until the debt is repaid. In these cases, the situation that they got themselves into is far worse than it would have been if they had actually worked with their creditor.
Instead of ignoring your debt, call credit card companies as soon as you know you are going to be late on a payment. If it’s your first time, they will often give you a two week grace period without any penalties. And if you are struggling with your student loans, ask if they can place you into an income-based repayment plan or debt consolidation.
27. Not Having an Emergency Fund
When you’re very poor, it’s difficult to save money for an emergency. And even when you start to save up a couple hundred dollars, you may be driving a secondhand car that suddenly needs repairs. Or an expense might come up that was completely unexpected. In the worst-case scenario, you could lose your job and have nothing to fall back on. If you want to be fully prepared for any emergency, you need to have at least three months of expenses saved.
This is a lot easier said than done. But the first step in getting started is to make a budget. Write down exactly what you spend on bills, food, utilities, rent, and other absolute essentials. Once you have that number figured out, it becomes easier to have a goal in mind of what you need to save.
26. Saving Isn’t A Priority
Most people realize they need to save for their emergency fund, but just don’t make it a priority. They would rather go out to dinner with friends, buy new clothes, or indulge in vices like smoking and drinking. After all, they work hard for your money and you have the right to enjoy it. However, not being prepared with savings will only contribute to your anxiety.
Remember that saving for the future is still helping yourself out. It’s just the future you. And if you have a very specific number in mind, you can hit your goal and go back to living your less frugal lifestyle.
25. Only Making Minimum Credit Card Payments
Unfortunately, making the minimum payment on a credit card is not going to do very much for paying off debt. In most cases, the minimum payment gets eaten up almost entirely by the interest. Depending on the interest rate of the card, you may be paying up to 25% on interest alone. If you continue to purchase things on those cards, you are putting yourself in a situation where that debt will never get paid off.
When I was 18 years old, I got my first credit card. The credit limit was only $500, and I used that to pay for college textbooks. Every month, I would send them the minimum required payment and would have to occasionally make purchases. For the next four years as a college student, I would do my best to pay down the debt, but sure enough, I needed to use the card again. Fast forward 10 years later, and I was still making payments on that same credit card. I sent them $25 per month over 10 years, which is $3,000 on what was originally a $500 debt. Thankfully, I was able to pay off the card in full once I started to make more money. But in retrospect, it wasn’t worth it, and I should have made more of an effort to pay it off sooner.
24. Not Course-Correcting Finances
No matter who you are, there could be times in your life where you feel like your finances are in order but suddenly everything starts to go downhill. Setbacks do not have to last forever. Whenever there is a setback, try to cheer yourself up and remind yourself that the problem is only temporary. If you’re struggling, try to make a game plan on how you were going to fix it. Maybe you could get another side gig, or sell an expensive item collecting dust in your closet that you don’t really need.
By course-correcting, you can steer your life back on track. This can feel empowering, which gives you the confidence to know that no matter what happens, you know how to pivot and survive any situation. If you end up in a bad situation, start watching some personal finance or motivational videos on YouTube to help you get back into the right mindset.
23. Feeling Powerless
When you’re poor, it can make you feel totally powerless to change your situation. Once you have hit rock bottom, it feels impossible to climb your way back out. But the great thing about rock bottom is that you can only go up from there. There was a time in my life when I had my bachelor’s degree, tons of debt, and absolutely no job. I was always the type of person that worked multiple part-time jobs since the time I was 14. That time in my life when I was unemployed, broke, and in debt living in my parents’ house was one of the most powerless feelings that I’ve ever experienced in my life. I hit absolute rock bottom, but at least I wasn’t homeless. If I gave into those negative emotions, I would not be where I am today.
No one can give you true self-confidence. When you have low self-esteem, it doesn’t matter if people are complimenting you left and right. That power comes from inside of you. When you hit rock bottom, remind yourself of the times in your life when things were much better. You are still the same person who was happy once upon a time, and you have the ability to recover. Believe in yourself and get your power back.
22. No Degrees or Training
The world is changing, and more people have college degrees than ever. Jobs that used to require a high school diploma now require a minimum of an associate’s or bachelor’s degree. Even some of the jobs that were once considered blue collar are now transitioning over to requiring certification training or a degree. If you haven’t gone to school, this is basically guaranteeing that you will always be poor if you live in America.
If you love your current job and it doesn’t require a degree, more power to you. That’s amazing, and you are lucky to be in that position. However, if you know that you could make more money by getting a degree or certification, look into how much it would cost. Some certifications only cost a few hundred dollars, and community college courses are not as expensive as you might imagine. Many of these schools have financial aid that might help you pay for the degree if you are under the poverty line.
21. You Don’t Have a Money Plan
Sometimes, the only thing holding you back from getting out of poverty is making a game plan. If you were trying to build a house, would you do it without blueprints? You would need to have a list of all the building materials that you need to buy, contractors needed, and more. Building your financial future is very much the same way.
There are going to be a lot of steps in the process in order for you to get out of poverty. The steps on your list might be going back to school, paying off credit cards, cutting back on your spending, or getting a second job. Once you know the steps that are necessary to get out of poverty, you will begin to feel a lot more helpful about your future. Make sure you write this down on a piece of paper. This makes the plan seemed a lot more tangible. If you’re only thinking about it in your mind, thoughts can sometimes jumble, and you can potentially forget what your plans were. Consider buying a planner to help you make daily goals as well as long-term goals.
20. You Don’t Put Yourself First
Sometimes, we stay in poverty because we are putting other people before ourselves. This happens a lot when people become parents. They want to take care of their children and give them the best life possible, even if that means going into debt and spending every spare penny they have on their kids. This is admirable, but if you don’t put yourself first, you may never get out of the poverty cycle.
Before you willingly give away everything you have, try to sit down and make a budget. How much can you actually afford to give away? It’s still possible to give gifts to your family and friends, but do it within reason. At the end of the day, most people are going to act in their own self-interest. So if you don’t do the same, you might end up falling behind.
19. Living Paycheck-to-Paycheck
No matter how much money you make, you can still be in a situation where you are living paycheck to paycheck. If your living expenses are so high that you have nothing left after you get paid, this is a problem. You’re going to end up being cash-poor,even if you make a lot of money at your job.
The only way to get out of this situation is to begin living below your means. This could mean downsizing to a smaller living space or giving up your expensive car. On the flip side, you might want to look into finding a job that pays more money. Just make sure that if you get a pay increase, you continue to live the lifestyle that you were already living at a lower income.
18. Never Learning About Finance
Unfortunately, financial education is not required in every state. So many children grow up never learning about the basics of opening a checking account or making a budget. Schools leave this up to the parents to teach their kids. But if the parents were never taught themselves, it can become an endless cycle of debt and poverty. Without proper financial education, there is little chance you can improve your financial situation.
The good news is that the more educated you are on personal finance, the more likely you will get yourself out of debt. The internet is full of free content that will help you learn about personal finance and get out of poverty. There are also plenty of YouTube channels out there where you can learn how to save and make more money efficiently.
17. Buying Depreciating Assets
Far too many people don’t know the difference between a liability and an asset. For example, they might think that their car is an asset because they can sell it one day. However, a car will depreciate over time. The same goes for computers and cell phones. If you are judging your personal wealth and the value of what you have based on these depreciating assets, there is no chance for that money to grow.
Rich people know how to buy an asset that will actually increase in value over time. They might be an expert in any number of assets that can earn a profit by holding on to it for a long time. These people took the time to educate themselves on how to buy assets that are actually a wise investment. You can do the same. Everyone was a beginner at some point in their life and it’s never too late to start investing.
16. Housing Costs Are Too High
Depending on where you live, the cost of living might be so outrageously high that you can’t possibly get out of poverty. This is true in both the East and West coasts of the United States, some of the most expensive places to live in the world. For example, New Jersey has some of the highest property taxes in the country, and it is also the second most densely-populated state. Rent is so high that anyone living on or near the poverty line cannot afford housing. This is why there are a record number of people moving out of the state.
If you are struggling with the cost of housing, it’s time to step back and ask yourself what the root of the issue is. Is the location where you live holding you back? Or did you rent a house or apartment that was bigger than what you need? In most cases, people have the option to downsize, or even possibly move back in with their parents until times get better.
15. Not Separating Wants From Needs
Everyone has experienced seeing something in a store and thinking, “I need that!” In reality, we don’t actually need it. The only things we need as human beings are food, water, clothing, and shelter. Everything else is things we want but don’t necessarily need. Once you are able to truly distinguish between those two things, it becomes a lot easier to stop yourself from making impulse purchases.
Someone living in poverty needs to be able to distinguish between those things more than anyone else because they have far less excess money to spend. If you can identify certain things in your life that is a “want” and not a need, it becomes easier to save money and improve your financial situation.
14. Prioritizing Today’s Fun Over Your Future
Earlier today, I went to Target, and I overheard a young girl in her 20s tell her friend, “I never check my bank account. I just buy things with my debit card until a transaction is declined. That’s when I know I can’t spend anymore.”
When I used to work as a customer service representative at a bank, this sort of thing happened all the time. People would be hundreds of dollars in the negative with their overdraft before they realized what was going on. Even though banking apps exist, most young people never care about saving for the future because their mind is only living in the now.
In life, there needs to be a balance between living for the moment and planning for the future. If you live too much in the future, you might be filled with anxiety about making sure you have saved and planned to the tee. But if you only think about today, you’ll be left with absolutely nothing. In the future, you might look back and wonder how you could have been so careless.
13. Not Tracking Spending
Do you have an idea how you spend your money every given week? Not many people do. Before they know it, the money they had in their bank account balance is gone. And while they might be able to give you a list of the things they purchased, they have no idea what percentages is going towards spending or saving. As long as someone keeps living in ignorant bliss, they will never get out of poverty.
If you are having trouble tracking your spending, you should consider downloading the Mint app. This connects with your bank account and gives you a breakdown of what you are spending your money on. It can also help you make a budget, create savings goals, and check your credit score.
12. Commuting Too Far to Work
Earlier on this list, we talked about how living in a low-income neighborhood can drag you down. If you want to find better opportunities, you might have to commute a long distance to get to work. However, people who have “super commutes” typically have lower incomes. Spending more than an hour of driving or taking public transportation to work each way can take a toll on your mental and physical health.
Not only is commuting exhausting, but it disproportionately affects the poor far more than it does the middle and upper classes. According to a survey conducted by Citi, the average American spends $2,600 per year commuting to work. But if you are trying to get into a major city like New York or Los Angeles, it can take much longer and cost well over $3,000.
11. Trying to Have It All
In today’s world, people are put under pressure to achieve ‘The American Dream.’ We want a big wedding, a house, kids, two cars, and a dog. Our society has more working mothers than ever before even though the cost of childcare is extremely high. Unfortunately, for most people living near or below the poverty line, it’s simply not possible to have it all. And if you try to push yourself to do it, you will end up in debt.
Instead of trying to have it all, remind yourself of the things you feel grateful for. And if there are certain goals that you want to achieve, like buying a house, make a game plan instead of jumping in before you’re ready. Often the “fear of missing out” pushes us to make irrational decisions with our money.
10. Emotional and Psychological Factors
A lot of people don’t like to talk about their emotions and mental health, but it really is an important factor when we are talking about poverty. Successful people have problems just like everyone else, but they know how to manage it. This might come from help given through talk therapy or medication. The poor, on the other hand, struggle to get help when they need it. This only makes the issue worse.
According to the Substance Abuse and Mental Health Service Administration, people who live below the poverty line have a significantly higher chance of suffering from addiction or mental illness. Struggling with finances can lead to depression and drinking. But if you were born with mental health issues, it can also make it harder to hold down a job.
9. Spending More Than You Make
Overspending is one of the quickest ways to become poor. Even if you make money, you can be cash-poor by spending more than you make. There’s a famous Oprah episode called “The Mom Who Shopped Her Family Broke” where a stay-at-home mother spent well over $600 per day on frivolous shopping sprees to Starbucks and the mall. Her husband earned $100,000 per year, but even a six-figure salary wasn’t enough to keep up with his wife’s shopping.
Most people are not this extreme, but they do the same things on a smaller scale. They go out shopping to buy the things they want without actually stopping to ask themselves if they are over-spending. Charging everyday purchases to credit cards can get you into trouble quickly.
8. Staying One Step Behind in Your Bank Account
According to a survey from Lexington Law, only 36% of Americans check their bank account on a daily basis. Most people only check once a week or once a month. Common sense should tell you that if you are making purchases on a daily basis, you should check your balance on a daily basis too. We live in a time where it’s easier than ever to just click on your banking app and check your balance.
People who don’t check their account balance often enough are more likely to accidentally overdraft their accounts. They might also forget about recurring payments that they forgot to cancel or pending transactions yet to go through. By staying on top of your accounts, you’re far less likely to make a mistake that could be costly.
7. Investing in Things Instead of Yourself
There’s a lot of talk about “self-care”. While it can be beneficial to some people prone to burnout, it can also become a dangerous mindset when they use this as an excuse to spend a lot of money. Suddenly, buying new shoes becomes “self-care.” By justifying every little purchase as a moment to treat yourself, it can quickly devolve into buying yourself broke.
In reality, you should be investing in yourself. You’re probably wondering, “what’s the difference?” Investing in yourself is spending money becoming a better person. This might come in the form of buying more fruit and vegetables because it will help keep you healthy. The healthier you are, the less likely you are to pay for expensive healthcare bills later. Going back to school for degrees and certifications is also investing in yourself. Do new shoes make you a better person?
6. Renting Instead of Owning
Poor people tend to rent their apartments rather than buying a house. They might also lease their cars or even rent their furniture. Most people believe they can’t afford to own something up-front. Or, they don’t have a good enough credit score to help them qualify for a mortgage or car loan.
However, most rental arrangements mean that you are paying far more to the owner to borrow these goods than what the items are actually worth. And in the end, you don’t actually own anything at all. Renting is literally giving your money away. If at all possible, always try to own your products. This way, you can sell them if you have to.
5. Spending Too Much on a Car
Unfortunately, most car dealerships are predatory when it comes to peddling vehicles on their customers. Salesmen are more concerned with earning a commission than they are making sure their customer gets a good deal. Many people fall into the trap of buying or leasing a car they can’t actually afford and it ends up getting repossessed. According to Motor 1, the average American spends close to $800 a month on their car for payment, insurance, and repairs. For a lot of people, that’s nearly the cost of renting an apartment.
In America, even poor people have a car because it’s necessary for them get to work. But many of those people can’t seem to save or get ahead because they spend too much money on their car. If this sounds like you, compare the monthly cost of owning a car to a monthly bus or train pass. If you have more than one car in your household, consider reducing it to one.
4. Never Buying Products in Bulk or With Coupons
Many middle-class families save money by buying household items in bulk from stores like Costco and Sam’s Club. Or they might get a subscription to a newspaper and clip coupons. Then they pay attention when a product goes on sale. Once they find a good sale, they’re able to stock up on that product to help prevent themselves from spending more money later. Poor people, on the other hand, usually have very little cash up-front and buy whatever they can afford. These items tend to run out faster and ultimately cost more in the long run.
If you’re able to buy in bulk or use coupons, it can truly help you in the long run. Even if it’s difficult at first, it seriously helps with paying for essentials. Keep in mind that not all bulk products are necessarily cheaper. Don’t assume that just because you are buying the “value” size, you are getting a better deal. Always do the math with the ounces on a food product to make sure you are getting a cheaper deal. In some cases, like frozen fruit at Walmart, it would actually be cheaper to buy multiple small bags than it would to buy a larger one.
3. Trying to Get Rich Quick
There are far too many scams out there that target the poor with “get rich quick” schemes. This might come in the form of a multi-level-marketing company or pyramid scheme that encourages you to buy and sell products on behalf of a company. Or, someone might claim that you can make an investment that will double your money.
As a rule of thumb, if something sounds too good to be true, it probably is. No one would run a business purely to make other people rich. There is always some kind of ulterior motive behind these offers. Far too many people have lost everything they own because of scams like these. True success comes from hard work and dedication over a long period of time. If someone promises you overnight success, they are likely trying to take everything you have. So please be careful.
2. Not Willing to Make Sacrifices
Most people who started out poor and became successful later on in life were able to break out of poverty because they were willing to sacrifice something. It might be sacrificing the time you spend watching your favorite TV show, going out with friends, dating, new clothes, and more. Working hard will be the only thing that gets you out of a bad situation. And in many cases, giving up your free time to start a side-hustle might be the only thing you can do.
Sacrifices could also come in the form of giving up something in your life that is too expensive. For example, if you have an expensive car payment, you may need to sell the car and swap it out for an older model. Ask yourself if a life on the poverty line is something you want forever. Could you give up more of your time or possessions in exchange for something better?
1. Spending Too Much on a Cellphone
Last but not least, far too many Americans spend too much money on their cell phone bills. According to Fox Business, the average person spends $80 per month on their phone plan. Some people actually spend over $100. For someone on the poverty line only earning $1,000 a month, that’s 10% of their income. And yet almost everyone owns a cellphone, no matter how poor they may be.
It is possible to save a ton of money if you buy an older model of cellphone, and you can own your phone outright. For example, you can find a fully unlocked iPhone XR on Amazon Renewed for $469. Then, get a sim card for a company like Tracfone, and only pay $10 per month to use your calls, texts, and data for bare essentials. This will save hundreds of dollars in the first year alone, and if you hold on to that phone for a few years after, you’ll save a couple of thousand dollars.