No, it means that if you're poor, you're spending a larger percentage of your income and saving less of it. Poor people have to spend a higher percentage of their money on basic necessities such as rent, food, clothing, transportation, etc.
I mean, the old adage that it's expensive to be poor applies to government spending too. If you're missing 30% of what you need in the moment, you're probably going to end up spending way more over time.
There's some fascinating class-based spending behavior I was taught in school decades ago. I have no idea how valid it still is, but I presume nothing much has changed.
What I remember finding the most curious on first glance is that people in the lower-upper income group are the most likely to be bankrupt within five years of hitting that income band. Bu the explanation made sense to me: at that income level, you begin to compare your lifestyle to those who are much wealthier than you are, so you feel poor by comparison. Therefore you're more likely to start spending at rates that the income level can't actually sustain, in an attempt to live like the wealthier people you have begun to compare yourself to.
It is interesting that people spend their money more or less on the same things proportionally, regardless of their wealth and income. Two exceptions: Richer people spend more on education and long-term assets that generate further wealth.
There is a threshold where you have enough so to speak and can start investing in the future. I would say this is typical for the middle class. There is potential to spend in a smarter way here. You get more opportunities, social currency etc.
But being poor is expensive. You have to spend money on subpar quality products because you need them. You pay interest on different forms of debt, which keeps you down. You are constantly worried about the next large bill and are being pestered by bureaucracies and owners (banks, state, landlord etc.).
So below the threshold you get pushed down, above the threshold you get lifted up. It takes incredible effort and discipline to pass the threshold from below.
> 2. How to deal with chronically indebted people who can't or won't save money?
1) There's two aspects to this. One I described above and I'm pretty sure this represents the vast majority of cases. Cover the basics with free education, cheap housing and good infrastructure and allow debt forgiveness or just give them money or interest free loans. Basically make sure that the lowest points in the graph (OP) is livable and dignified. This way everyone gets more opportunities to do really good stuff and everyone benefits from that across all layers. Plain and simple.
2) There are also people who are just wired to fuck this up for whatever reason, they need more support and care than anyone else. If they are uncooperative you have to let bang their head into the wall and hope they learn from the pain. You can't help everyone though. It has to be a two way street.
It's pretty well studied that people who grew up poor have a harder time saving and are actually more reckless about spending, because they a) didn't have modeling or financial education from their parents and b) had to spend money when they got it before some random fee or cost gobbled it up
I was reasonably poor once (even did a stint homeless living out of a motel).
The basic assertion: you make less and end up being charged more is in a sense "correct".
For example: if you're poor, you'll probably shop at a discount retailer and buy discount or knockoff clothes, which will fall apart and need replacing faster than if you had just bought more expensive clothes. Over time, the replacement costs will add up and you'll "pay more" for clothes.
Another example: if you buy in bulk, you can get some items cheaper, but poor people tend to buy in small quantities (e.g. cigarette and alcohol "singles" are a phenomenon that only exist in poor areas for example)
This all sounds kind of stupid, but there's a rationale for it that makes sense from the inside, here's a scenario:
I just paid rent, I have $100 left in my bank account and payday isn't for 2 weeks. I work a physical labor job and my work boots need replacement. Do I?
a) Buy the $29.99 on sale boots at Walmart and hope they last for a couple months?
b) Buy the $259.99 boots at the high-end boot store and they'll last for a couple years?
c) Buy the $84.99 boots at the discount shoe store and they'll probably last for 6 months to a year?
Of course the answer is a). This leaves me with $50 to eat on for two weeks. I can't afford b) no matter what so it may as well not exist and c) leaves me starving before payday.
You count pennies when you're poor, you know exactly how much small amounts of things cost because you spend all your time buying small amounts of things and balancing out the bottom few rungs of Maslow's Hierarchy of Needs against your daily purchases.
Getting out of this cycle is very hard. It's not like you can save up enough to be worthwhile. Even with $5/mo left over at the end of every month, it takes 52 months to save up to buy the b) boots.
This means also that you live in a constant state of emergency. Literally everything is an emergency -- and this short circuits your ability to prioritize and make what seems like rational decisions. It also means that whatever spare money/time you have you may as well spend on stupid bullshit because you've convinced yourself it won't make any difference anyway.
Have you ever been poor? That's exactly what I saw more often than not when I was poor. Many times what makes people poor is exactly this "irrational" behavior of spending money they shouldn't.
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