Why is it so Expensive to be Poor?
By Caitlin in Money
In Canada, the statistics on poverty aren’t quite clear and there isn’t any real measurement for how many Canadians are, what we might call “poor”. The only way that the government measures poverty is by categorizing people, who make less than half the median income, as “low income”, in Canada 14.9% fall into this category. That being said having a statistically low income is not in fact the only way to measure poverty within our country, whether or not an individual or family has access to the basic resources needed to maintain physical well-being is another way to measure poverty.
The one thing we can probably all agree on is that it is extremely expensive to be poor or low income. People who make less than half the median income rarely have the same financial and economic opportunities as people who make the median income. Let’s take a look at why is it so expensive to be poor.
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Financial Resources
Probably the most overwhelming effect of being poor is not having access to the same level of financial assistance as a median income earner. Typically the poor do not have steady incomes, this makes it nearly impossible to stay on top of bills, which can and will lead to poor credit, which in return makes it harder and harder to gain access to affordable loans and credit.
Payday Loans
The payday loan industry preys upon the poor. A payday loan is specifically set up to take advantage of those who have no other options; it’s readily available to everyone and anyone. No credit check is performed; all you need is a job. Once you enter the payday loan cycle it becomes next to impossible to get out, it forces you to continue to take out more and more payday loans to pay back the previous ones.
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High Interest Rates
The high interest rates associated with payday loans and other similar predatory financial products create even more financial issues for the low income. These types of loans become too expensive to actually maintain and therefore missed or late payments are extremely common. Late fees, interest rate increases and other penalties all negatively affect a person’s credit score. And a low credit score can make credit even more expensive and sometimes impossible to get approved for.
Expensive Credit
Credit is a cycle, you need good credit to get more, but you can’t get more until you have good credit. This very idea is why it’s so expensive to be poor. Credit is your financial backbone, therefore having no access to proper affordable credit means a low income earner is more likely to turn to expensive forms of credit like the payday loan. They will typically become trapped in the payday loan cycle thus ruining their credit, often incurring penalties and increasing their interest rates. These are all things that even a median income earner may have trouble financially dealing with, let alone a low income earner. Unfortunately poor credit makes almost all other financial issues or events harder to deal with and all the more expensive.
Household Resources
Obviously not having access to affordable financial resources is one of the larger contributing factors to poverty, but it also contributes to all the other reasons why it’s so expensive to be poor. Being poor is not as simple as, refraining from buying things because you don’t have the money to buy them. It’s much more complicated than that. When you don’t have any form of disposable income or affordable credit you can’t do anything that will help improve your budget and save you money in the long run.
Transportation
While investing in a car to drive to work is expensive it is often an investment in both your time and your future. A low income earner often cannot afford to make this investment and therefore must take public transportation. Public transportation is often unreliable which can lead to being late to work too many times which can then lead to job loss. Loss of income will then create a need to rely even more heavily on expensive loans and credit.
Food
Food is the same viscous cycle. Low income earners who don’t have cars have to buy food at convenient location where prices may be more expensive and quality not as good. They also typically can’t afford to purchase in bulk to save in the long run.
The Bottom Line
The bottom line is that being poor is expensive for countless reasons, reasons that the average median income earner takes for granted. While it’s reasonable to say that some of these reasons can be overcome, the majority of them simply cannot be.