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Comment by retrac98 | Hacker News Reader

There's a huge difference between being first world poor, and third world poor.

Just my experience, but my first world poor friends, without exception are all bad with money. They have little understanding of how money actually works, have terrible spending habits, are incredibly risk averse, and carry a "money is evil" mindset.

If it's possible for you to live within your means (edit: putting aside illness, addictions, felonies etc), you can build wealth at a good rate in the first world. You may never be a multi-millionaire, but you can be financially secure and stable.

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>my first world poor friends...are all bad with money

This is a well documented phenomenon.[0][1] The state of being in poverty has a significant effect on your cognitive processes evaluating risk and reward and future planning. For people who grew up in poverty, those programmed biases can be extremely challenging to overcome and limit their upward mobility. There's also the aphorism that it's "expensive to be poor." The boots metaphor and all that.

As to building wealth at a good rate, doing that from a state of relative stability vs a state of relative poverty are two entirely different scopes. "Escaping poverty requires almost 20 years with nothing going wrong." When 5 years of savings can be wiped out by a car repair that means you can't get to your job, you can lose 5 years of progress in one bad event.[2] The problem with that statement is whether it "is possible to live within your means." It can be exceptionally challenging and complicated to live within your means while impoverished but still move upwards and respond to emergencies and disasters. And it's doubly much to ask that kind of complex planning from someone affected by the deleterious cognitive effects of poverty documented above.

[0]http://behavioralscientist.org/can-neuroscientists-help-us-u... [1]https://blogs.scientificamerican.com/sa-visual/this-is-your-... [1]https://www.theatlantic.com/business/archive/2017/04/economi...

That's interesting because its also well documented that "Poverty decreases IQ" studies are contentious and not well replicated.

> Mani et al. (Research Articles, 30 August, p. 976) presented laboratory experiments that aimed to show that poverty-related worries impede cognitive functioning. A reanalysis without dichotomization of income fails to corroborate their findings and highlights spurious interactions between income and experimental manipulation due to ceiling effects caused by short and easy tests. This suggests that effects of financial worries are not limited to the poor.

Comment on "Poverty Impedes Cognitive Function" (PDF Download Available). Available from: https://www.researchgate.net/publication/259207757_Comment_o...

One big problem is that we in general do not teach good money management in schools. Impoverished kids could at least be exposed to the principles of sound financial practices from K-12. What they actually get is maybe a few weeks of "personal finance" as a unit in a High School social studies or economics class. Too little, and too late.

All kinds of ways to do this. Younger kids could be shown how regular investment compounds over time using games that pay out the reward at the end of the school year. Older kids can do mock investments in mutual funds, etc.

I feel like I fall in that camp. I received no formal money training, and frankly saved terribly when I was younger. However, I don't believe education was the problem, I believe maturity was.

I still don't know what I'm doing, but I've got a nice nest egg, I seek knowledge on how best to handle my excess money, and my wife and I are executing her higher interest school loans.

I really don't feel I have that much more knowledge than I did. I simply have the will to plan for my future life. In my early 20s I just didn't care (for various reasons).

Kids learn all sorts of things that they ignore. As a race, we seem to be really good at shooting ourselves in the foot.

Related to education though, I feel that these patterns of ignoring what is good for you is what is really at fault here. This has wide reaching implications in my mind, and is the cause of anti-intellectualism in America that is quite concerning. We just don't.. care, as a society. Until we do, I don't foresee education on finances drastically improving quality of life.

Note that I of course will always back education, I'm definitely not advocating against it. I just see this as part of a really large problem, and I've got no idea how to solve it.

I've said this a lot, and I've heard others say it too. I've recently been talking to my sister (a 1st grade teacher) about it and the conclusion we've come to is that even if there was a class it would do little good because of how little high school education sinks in. Most students just don't care enough to learn a boring life skill like money management.

I think your idea of having younger kids start learning this early (before its "uncool") is key. My sister says 1st grade is probably a little too early. I think maybe 3rd-6th might be right to start introducing the concepts.

Anything would be better than what we're doing now.

> If it's possible for you to live within your means, you can build wealth at a good rate in the first world.

There are a significant number of exceptions to this idea. If you dig a deep enough hole (drug problems, felonies, etc) it's hard to just keep a roof over your head.

And sure, "it's their fault", but for a lot of people the die was cast when they were very young.

(Update: I should clarify that this may be a U.S. problem vs a first world problem. The safety net here is abysmal, speaking as someone who has spent way too much time and money helping a friend manage.)

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Are you sure you mean upper six figures, and not five? With high six figures your one month's salary would dwarf your savings, which sounds quite implausible.

I think the GP probably meant upper end of the [100k, 200k) range. If they truly meant upper end of the [100k, 1M) range and they're still in the same state of having a mere combined 11k saved...they're doing something horribly wrong with their finances and should take a step back and reevaluate their personal finances.

I'm in the [100k, 200k) range, and I've had to reevaluate my finances. I used to live pretty comfortably on less than half my income. I had no credit card debt, my $50k car was paid off. Student loans were paid off a decade ago. Then, I got married and now have 2 step children. Between moving into a larger place to accommodate the new family and all the costs associated with getting married, moving & furnishing a larger place, I'm just now about to start to get our heads above water. I had to take money out of savings before we could get outflow to be less than inflow.

Replying here, because I had no time to reply here earlier due to meetings. Anyway yes between 150 - 200k range.

My prior comment before removed was 5k savings, 11k 401k. I had more, but life events. For me, it's a variety of things. Largely summed up as I bought a house at 25. Had health issues that were in remission, then came back. And have been trying to get above water since.

I know a number of software engineers, who are in it just to pay the bills. As the pay increases so do the responiblities you hold.

Apologies, I wasn't clear. The "If it's possible for you to live within your means" qualifier was for these sorts of things.

Depending on their severity, addictions, felonies, learning difficulties and health problems (and many other things) could all be legitimate limiters on wealth building.

Sorry, I interpreted that as "if you're disciplined enough". Carry on.

>> If it's possible for you to live within your means, you can build wealth at a good rate in the first world.

That's true if you're well insured, never become disabled, can find & maintain regular employment that pays a living wage, have access to a reasonable cost of living, and are savvy enough to figure all that out.

Aren't about half of US personal bankruptcies (or were, before Obamacare) because of medical debt? It might be just me, but I was under the impression that having negative net worth in the US has a lot to do with which cards you're dealt in life.

And there are plenty of slackers who never accumulate any money but don't have catastrophic medical conditions. They will never declare bankruptcy.

OP is referring to those.

But even then, labeling them as slackers strikes me as callous to some degree.

Where I'm from, and in the various countries I've lived in (including the US), I've met plenty of people who for one reason or another couldn't - bar sheer luck - get a job that pays anything decent. Be it lack of connections, no idea how to build those connections, lack of ambition, lack of education, whatever. There were good reasons, and probably not so great ones, but in practice I seldom got the feel it was about good spending habits or slacking.

If anything, and anecdotally, I probably met more people with terrible saving habits when interacting with segments of the population that were rather well off to begin with - that is, they had excess cash or the potential for it. The "worst" example I can think of was a patent attorney who charged $500/hour, worked a single client per month to make ends meet, and enjoyed life the rest of the time. $10/hour or $2/hour people just don't do that insofar as I've interacted with them - and I did quite a bit while traveling. The "worst" I've encountered on their end were people deciding to work less hours after they got a raise because, you know, they only need so much to make ends meet and were happy with earning just that; and no assets/low income folks getting subprime loans just before the housing crisis.

Admittedly it's only a small unrepresentative sample at the end of the day, but I honestly never got the impression the low wage earners I interacted with were slackers or spending like there was no tomorrow. Mostly (if only potentially) mid- to high wage earners were, and they oftentimes had some savings or could earn money in a heartbeat if they really needed to. They're far from the majority of the population.

No, actually. That used a batshit crazy definition of "because of medical debt."

The correct stat is "50% of all bankruptcies include medical debt". That doesn't mean the medical debt caused the bankruptcy. It could be a $10 co-pay they didn't pay, but the $50,000 in credit card debt that sank them.

Keep in mind, health problems are actually a major cause of bankruptcy in countries with universal coverage like Canada as well. It's nice when your healthcare is paid for, but if you can't work, bankruptcy is a major problem as well.

Health problems also correlate with poverty.

I agree... assuming no health/personal catastrophes for you or your family, stable employment, and good training in financial planning. Those are some big assumptions.

> Those are some big assumptions.

Not really, the vast majority of those living in first world nations don't have catastrophic events that ruin them financially.

Also, you don't need 'good training in financial planning', you just need the same amount of common sense my grandparents had - spend less than you earn, and set something aside for a rainy day.

I was laid off in 2008, couldn't get work, had to move to a different state, cashed out my 401k and sold my house 80 grand under what i paid for it and couldn't buy a new house for several years because of law.

Then my hands started hurting and I found out i had vikings disease... i type for a living. first process cost about a grand, insurance doesn't cover much of it.

Now both my hands are worse off and i'm looking at another surgery which will cost more that insurance won't cover.

My wife got into a car accident and we need two cars since i work and she home schools.

My parents are assholes and don't give a shit about myself or my family and my wifes immediate family is all dead. We inherited nothing. Raised 2 kids by ourselves, no grandma/no grandpa, no aunts, no uncles.

The world is trying hard to really fuck people over, and i've managed to stay on top of it.

Now my kids need jaw surgery and another needs teeth work - dental coverage is a joke. The jaw surgery is going to cost 5 grand and the others dental is 1700.

My property taxes are going up year over year. Maintenance costs are going up year over year, salaries have gone up but not as quickly and the tax relief was a joke.

spend less than you earn sounds esier on paper than reality of living.

we downsized our homes, we don't have cable tv, i use a company phone for cell phone, i'm always having to reduce my 401k contributions and even when i try and rollover my prior 401ks that shit is perpetually frozen and no matter where i turn or what I do it seems something is trying to stop me or block me.

it's not as easy as people make life out to be

A pretty large part of this story is titled "why the US healthcare system sucks".

I find it so strange that <100% of Americans are not for everyone having healthcare in a system that doesn't potentially bankrupt a person. It just seems so strange.

America can't afford universal health care - doctors get paid too much. The average doctor's salary here is over 300k USD. The average doctors salary in Europe is almost one-third of that..

Here implying I don’t live here. I really don’t think doctor salaries is the problem with outrageous health car cost. I could be wrong but seems like admin overhead and over prescribing treatment is a big problem from my small point of view.

Edit: also people wanting it and the financials of it being practical are entirely coupled together. My point was I don’t see how someone can not be for the idea of health care for all.

Doctor salary accounts for only 8.5% of healthcare costs in the US, lower than most other Western countries. https://jacksonhealthcare.com/media-room/news/md-salaries-as...

Germany: 15%

Australia: 11.6%

France 11%

UK: 9.7%

US: 8.5%

we have a collective paranoia based on several totalitarian governments aroundnthe worls throughout history. this fear influences our attitude toward putting government in charge of many things.

we also have strangely intimate relationships to our doctors. we stick with them even when were not sure theyre doing their best for us. we fear an "anonymous" doctor who doesnt know us personally.

these fears are exploited with imagery like "death panels," where faceless government bureacuracies let people with uneconically feasible conditions die untreated.

to reverse this requires stories of success from Europe told without smugness. many memes are tonedeaf humblebragging about euro healthcare that instantly turn off americans.

> "death panels," where faceless government bureacuracies let people with uneconically feasible conditions die untreated.

We prefer the private "Free Market" death panels. (Health Insurance), which effectively do the same thing. But you get a choice in who will deny you cover if you ever go over a limit or could not afford you cover.

> we also have strangely intimate relationships to our doctors. we stick with them even when were not sure theyre doing their best for us. we fear an "anonymous" doctor who doesnt know us personally.

What does that have to do with the issue? Germany has mandatory healthcare insurance, and I'm still free to choose my GP and specialists.

> without smugness, many memes are tonedeaf humblebragging about euro healthcare that instantly turn off americans.

Lol, that's honestly pathetic - I hope it's not true.

A good idea is a good idea. You are talking about public policy here.

Have you ever watched someone try to persuade others to their opinion? Are people perfect evaluators of facts and reason completely impervious to the negative affect of the persuader?

Or is it more common people go along with a emotionally-resonant personality and dismiss their reliance on facts and figures based on intuition?

You can be sure when I buy computer parts, numbers are the bottom line, but what if an ad for, say, an SSD offered a great price and excellent performance. Would you still buy it if next to the price tag, it said that if you did so, you're pathetic?

I understand your difficulties and sincerely hope you'll manage to get out of them. Also Im really happy to be in west Europe where we have a real social security. Say what you want, you don't build incentives with health. You just stop and heal people (of your country). Case in point : whoever you are, where I am you will have the expensive surgery / medicine / scanner. For free. Prioritized with your health and benefits, not how much you earn (well that's true to a good approximation)

Well it sounds like you got really unlucky.

It is not your fault, and it sucks. But the fact of the matter is that ~MOST people don't end up in as unlucky of a situation as you ended up with.

Your unluckyness is the exception, and not the rule, and the vast majority of people don't end up in horrible, life-changing medical situations.

I don't think it matters how exceptional or unlucky the specific situation is. A system that "punishes" bad luck like that is at some level fundamentally broken.

The system does not punish bad luck. Bad luck itself punishes. The system might or might not do something to alleviate that.

The lack of meaningful systemic mitigation for "bad luck" is what I'm talking about with "punishment". It's why I quoted the word. You're drawing a stricter meaning than I think is apparent in my position, and making a semantic dodge around it.

At the end of the day, someone's life is still wrecked through no fault of their own, and "the system" — which is us — just stands there, all, "Sucks to be you."

Fwiw, I'm all for systems that mitigate bad luck. It's just that... these systems are large, have been in place for a long time, and have immense amounts of inertia. Which is not to say we shouldn't try to change them!

I think we've been agreeing right past one another, then. I'm reminded of the Joe Rogan quote to the effect that "the sooner we can all realize we've been taught how to live life from people operating on the momentum of an ignorant past" (or however it's phrased), the better off we'll all be.

All of us have those kinds of problems. I've been laid off, paid a tremendous amount of cash for dental work (growing up with poor dental health sucks), and have no meaningful help from relatives (quite the opposite, they're a regular financial drain because they need constant help.)

I remember being so poor growing up that I used my first paycheck to buy a loaf of bread and a tube of cheap sausage and it was the first time having anything approaching a real meal in a few days.

Costs happen. Kids get sick/injured, cars get damaged or break down, taxes only ever increase.

I save aggressively, consistently live below my means (not miserly, but frugally), do all of the home maintenance and car work I can do safely and legally, and cook almost all of my meals at home from relatively basic ingredients.

And you know what? I have a pretty damned good life. I had to move across the US to a place with a lower cost of living and better job opportunities. My wife had to switch careers. I had to work several years at crappy jobs.

When you buy a thing, evaluate it's lifetime cost. When something breaks, fix it quickly and correctly. Avoid unnecessary costs. Prefer mending to replacing. Save for the unexpected, and then save some more. When dealing in dangerous waters (legal troubles, real estate, complex investments or financials), hire a skilled expert, even if it means lowering your quality of life. Keep enough insurance, and do the work to get multiple quotes or bids for any kind of job.

I don't claim to be poor, but the struggle is real. And like the post above me, my life would be exponentially better if health insurance wasn't terrible.

Our system is designed for people to fail. Even our own president has bragged that another depression would be a good thing since he could buy things up at a discount. (yeah, there is a tweet for everything)

I feel your pain. However...

My wife got into a car accident and we need two cars since i work and she home schools.

Why does homeschooling require a car?

Field trips?

"Homeschooling" doesn't mean "never leave the house".

Likewise, "not having a car" doesn't mean "never leave the house" (source: I don't have a car, leave the house occasionally).

I can appreciate having a car can be useful, but I'd not call it a necessity. Perhaps things are different in the US of A. The perceived poverty threshold is a lot higher. In many countries, if you have clothes, a roof over your head, and can eat regularly, you're good.

>I can appreciate having a car can be useful, but I'd not call it a necessity. Perhaps things are different in the US of A.

American urban planning is heavily car-centric. They talk about "walkable communities", because the opposite is the norm. A large proportion of American towns and suburbs are sprawling, low-density and strictly segregated between residential and commercial developments. Public transport is often meagre or nonexistent. Parts of America are practically uninhabitable without a car. It's probably true to say that Americans are unreasonably attached to driving and averse to walking, but at this stage it's a self-perpetuating cycle.

So if wife needs a car during the day she drives husband to work in the morning and picks him up in the evening, that's what my husband and I do if only one of us works one day, we only have one car. I can't begin imagine owning two cars if only one of us worked! We'd have to have pretty wealthy to even consider that.

Homeschool is rather involved, we do hands-on learning so lots of field trips, lots of "Coop classes" with other families, we also do art/music and tutoring and there are park-days for kids to play and so much more.

I live in Austin Texas, you need a second car to survive. Getting wife and 2 kids around town for everything in uber/lyft isn't economical and my wife also runs a not for profit and volunteers with charity and runs events and I have after work activities such as volunteering for first robotics, girl scouts and such.

If things are that tight, why not send your kids to a public school so your wife can find employment? Even a part-time job would add tens of thousands of dollars to your total annual income and go a long ways towards easing those squeezes you're feeling.

You have had good financial planning habits in your family for two generations. That is in some sense "training" that many first-world poor people don't get.

I think people are using different definitions of poor here. The article references NET WORTH not INCOME e.g. a doctor earning $200k a year but with $200k of medical debt is "poor."

over 50% of households make >$50k a year in the U.S. but many of them have very little net worth...some of them are unlucky, but many of them make decisions that keep them with very little money in their pocket...

Honestly we should be looking at consumption rather than income. Of the ten poorest communities in the US by income half are college towns. Most college students have low incomes but I don't think it's right to consider them poor either given that this is generally a temporary state and they're frequently living better than their age-mates who aren't are working full time instead of attending college and thus have higher incomes.

What about people who earn lots but choose not to consume much? Are they poor?

They're not poor but I think there are few enough people voluntarily consuming less than $12,140 a year when they could live better that I'm comfortable ignoring them in the relevant statistics.

“Of all the preposterous assumptions of humanity over humanity, nothing exceeds most of the criticisms made on the habits of the poor by the well-housed, well-warmed, and well-fed.”

― Herman Melville

> risk averse

I'm confused what you mean here - isn't a degree of risk aversion good? I feel like "most people" are incredibly not risk averse, in that they recognize that they have little savings to no savings, emergency funds and etc but still behave like they are not at risk.

I however, keep a 4-6mo fully liquid because I'm terrified at the thought of only having 1mo in liquid. Tbh, I'd love to have 12mo, but anything beyond 4-6 and it starts feeling obscene not investing the extra.

You are assuming they are poor because of choice and not because of systemic abject poverty. Yeah its easy to save 60000 dollars a year if you make 200000 p/a but the likelihood of someone in a lower-class robo job saving significant amounts of money is very low.

Any advice on how to learn to not be "bad with money"?

research purchases extensively, comparisok shop, buy used, learn to sew and solder, cook plant-based food, exercise outdoors, value down time and low cost entertainment like board games, reading, drawing and making music.

There are plenty of resources available. The personal finance subreddit is a good place to start. If you are looking more for the wealth building side of personal finance I recommend Rich Dad, Poor Dad or Dave Ramsey to start changing your ideas about money.

https://reddit.com/r/personalfinance

A lot of it is self control and that doesn't necessarily mean living with the least amount of money possible. It just means understanding how much you make and how much you can afford to spend.

The first step is to track your incoming / outgoing financials.

Just like programming, in order to fix the problem you need to understand what the problem is and tracking your $ for a few months will show you exactly what's going wrong.

A book that changed my life, Your Money or Your Life, by Vicky Robin and Joe Dominguez, was recently re-published with some updated info. If you're the reading type, you should pick up a copy at your library. It guides you through making peace with your past, figuring out your real income and spending, tracking your savings/spending every month, thinking about expenses in terms of hours of your life, etc.

If you get an older copy, just don't take the investment advise too seriously—it's pretty out-of-date. Everything else is gold.

Another good, well-known book on the subject is the Millionaire Next Door: https://en.wikipedia.org/wiki/The_Millionaire_Next_Door

Most people in America are one medical trip away from financial ruin. That’s a bit different from other developed counties.

"There's a huge difference between being first world poor, and third world poor."

True.

"but my first world poor friends, without exception are all bad with money." ROTFL. What about your third world friend? This may give you an idea.

Read this: https://news.ycombinator.com/item?id=17218250

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