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Meta-Note: I’m sorry it’s been so long between articles; for better or worse writing here is something that I do for fun, and sometimes work and family get in the way. In this case, I was spending a lot of time trying to learn SQL; you will be pleased to note I am now able to pad my resume with “Intermediate Database Language Skills” with the best of them.

A few years back, my wife was at a baby shower hosted by a friend by a mutual acquaintance. In a conversation with the hostess, my wife learned they were in a tough financial position - they were always broke, and no amount of budgeting seemed to help them get ahead; they had cut every cost they could and things were just getting worse and worse. She admitted to my wife that she just felt like she was sinking further and further underwater, and didn’t see any way out for her or her family.

Note: The hostess and her husband were both doctors. They had a combined income somewhere upwards of $200,000 a year, and as the conversation developed my wife learned that their problems started and stopped with the hostess not being able to save quite as much as she’d like once the payments on their very nice house and current-year cars were made. At the time she leaned on my wife for emotional support over finances, our family of four’s income was less than $30,000 a year.

You should know the hostess wasn’t mean-spirited in the least, and we liked her then and continue to do so. But she did have a kind of tunnel vision I’ve since noticed is increasingly common: If you came from a family that did pretty well financially, went to college and then immediately started to do pretty well yourself, it’s hard to get any kind of context for what life is like at lower income levels. This isn’t a matter of the relatively-wealthy being dumb or insensitive; it’s just legitimately difficult to get a handle on what it’s like in a life you’ve never lived, and often being legitimately confused as to why anyone would opt to make less money instead of improving their lot with training and education.

In that spirit, I’d like to offer my services as a sort of has-been-poor guide, to fill you in on what it’s like on the other side of the tracks. In this role, I’m qualified in two ways. The first is common - we’ve never done exceptionally well financially. Things have been better in recent years as I’ve finally clawed towards the upper-end of lower-class, but Covid has reminded us how short-lived that kind of qualified success can be. We’ve had to economize in dozens of interesting ways, make hard choices here and there and sometimes/often do entirely without. It hasn’t been easy.

At the same time, I’m mostly happy. I have a wonderful wife who is very satisfying to be near, two kids who are about as custom-fit to my personality as possible, and dozens of friends online and off who would take a bullet for me, and vice versa. This is important because I want you to know I’m not trying to make you feel bad - I know and understand that everyone has a different set of problems, and that I’m not unique in living in an imperfect world. I’m not trying to exaggerate problems for political points or to try to get legislation passed. Take no guilt from this article - It’s informational, not a call to arms.

Housing

One of the bigger disconnects I run into in talking to people at or above living wage levels of income is that it’s usually assumed that the quality of things has a pretty linear association to the price. This is true at most price points, from “doing OK” all the way up to “Jeff Bezos” - if you pay a little more, you get a little more. If you pay a little less, you get a little less.

Because this relationship is what you’d expect, you get a lot of reasonable-sounding advice that, while not exactly wrong, fails to capture the nuance of poor-people-price-mechanics very well. According to this randomly selected article, I should really make sure not to spend more than 30% of my income on rent:

While everyone’s circumstances are unique, many experts say it’s best to spend no more than 30% of your monthly gross income on housing-related expenses, including rent and utilities. Under that rule, it’s best to make sure that the amount you spend on rent is well below 30% of your household income. In other words, if you’re making $3,000 a month, it’s a good idea to pay no more than $900 for rent and other housing costs.

The general thinking here is that if I spend more than 30%, I’m making myself vulnerable in all other aspects of my budget; why burden yourself with more than you can handle, when I could take a slightly worse place and be that much closer to financial health? From the perspective of the 50k a year and up crowd, this makes sense - $1250, after all, will rent a reasonable house or apartment in a lot of markets. In metropolitan Phoenix, this might look something like this:

And this is perfectly livable - it’s very small (think ~900 sqft), but otherwise it’s a well-kept place. It’s not exactly Versailles, but you wouldn’t necessarily feel like a monster telling someone to live within their means by renting an apartment here. But what happens when you are dealing with someone making $17.50 an hour? What does 840 a month get you?

I’m not 100% sure this is a converted Motel 6, but I’m not 100% sure it’s not. And while the first apartment I showed you was in a relatively nice, livable part of town this one is in a more gun-fire prone area ominously referred to by locals as “the triangle”. Phoenix’s mostly gravel-and-concrete landscaping style cleans up nice (note the still-wet recently hosed concrete), but make no mistake: this isn’t the kind of apartment complex where hypodermic needles are exclusively owned by diabetics.

That’s the drop-off you experience at the lower price levels - there’s nothing between “This is a tiny but acceptable apartment” and “Slum apartments in stab-ville”.

None of this is to discount the budget advice above completely - this is absolutely the kind of apartment I should be living in right now, if I was making perfect budgetary decisions. But consider that this is a choice I have to make - do I spend 50% more on an apartment and stress my budget to death, or make my wife and kids in a place where I have 5 front doors within 15 feet of ours in the murder-iest part of town? Neither choice is great, but the lack of intermediate choices forces you to do one or the other.

Whichever you choose, a person of less-than-intermediate income has to be prepared to stick with the rental long-term, should things not go well. This is because apartments at both of these levels quite accurately assume that you can’t afford a lawyer - while it’s normal to put down a month or two worth of rent as a security deposit, it’s much less normal to get it back; the apartment complex has no reason to give back thousands of dollars they can simply keep. This means every time you move, you pay something like a third to a month’s wages for the privilege. Since breaking a lease often means you lose your privilege to live anywhere non-hellish, this means if you don’t have cash reserves (more on these later*) at the exact right time of year, you might end up in the same place for another full year whether you like it or not.

Note: It’s been pointed out to me that I completely forgot to talk about cash reserves and how they effect this kind of thing. It’s also been pointed out that these numbers only “make sense” in particular markets - i.e. it’s cheaper or more expensive to live other places, so the exact figures here don’t translate well for everyone. I’ll write a follow up post incorporating some of this kind of feedback soon to make up for it.

Transportation

I am always consistently shocked by how little people living at a decent-to-great income level fear their cars; it seems like they hardly lie awake at night thinking about their iffy alternator much, if at all. Scott Alexander does a pretty good job of explaining the obverse experience here:

When I first started working with poor patients, I was shocked how many of the problems in their lives were car-related. For well-off people like me, having a car is background noise; you buy or lease it for a reasonable price, then never worry about it again. Poor people can’t afford to buy and don’t always have good enough credit to lease. They tend to get older, sketchier cars that constantly break down. A constant complaint I heard: “My car broke, I can’t afford repairs, and I’m going to get fired if I can’t make it to my job”. Some of them can’t afford insurance and take their chances without it. Others have had various incidents with the police that cost them their license, but they can’t just not show up to work, so they drive anyway and hope they don’t get arrested.

This is actually pretty close to the experience. It’s telling that Scott thinks the problem with a lease comes only from credit issues - a pretty bottom-barrel ford leases for 300-400 a month. For a person who makes 30,000-40000k a year, that’s something like 10-15% of their income, before we talk about insurance; couple that with the fact that you can’t squeak by on liability-only insurance in most leases, and we are already into a prohibitively expensive range.

But there’s other things - liability insurance, as mentioned above, is often your only option that makes sense - if your car costs $2000, paying an extra $50-100 per month for high-deductible doesn’t add up; you are still $1000 out of pocket to cover the deductible in the event you need to use it. But since you can’t afford it in the first place, you don’t think about that; you just start driving insanely carefully at all times and pray any accidents you get in aren’t your fault. One slip-up and you either can’t get to work at all, or you spend a lot more time doing it. Remember: Uber isn’t an option here; the ~$400 a month it would cost would bankrupt you.

You are also more or less forced to learn to do mechanic work. I’m an administrator by trade - I usually work in the kind of jobs that have “assistant” appended to them. One of my greatest prides is typing speed, and when people ask me my hobby I tell them “Excel”. If you were judging me by my interests and natural skillset, you wouldn’t expect me to be able to change my own tires. But over the years necessity has forced me to get pretty decent at car work - I’ve done clutch rebuilds and head gasket jobs and a bunch of other miserable (for me) work that I would have rather avoided. But this was often the only option I had - it was either figuring out how to replace an alternator or do a full brake job over the weekend or lose my ability to get to the grocery store in under an hour. Keep in mind the money saved here is just the labor - parts still have a cost that’s unavoidable.

The practical upshot of this is whenever I drive, it’s very slowly, very carefully, and listening in terror to any small noise the car makes. It’s a constant stress, and it’s limiting; we don’t go on long road trips often, and when we do my joke with my wife is usually something like “Well, if the car breaks down somewhere else, we’ll just start living there”.

It’s reasonable to ask “If cars are so terrible, why not use public transport?”. I live in a city, and this is in fact an option that would solve many of my problems: I wouldn’t have to worry about repairs, my gasoline and insurance bills would disappear and anything that happened to the bus is the city’s problem, not mine. Especially in an emergency public transit would be a godsend and might be the difference between keeping and losing my job.

But there’s other things to consider on this, as well. My commute isn’t short, and isn’t bus-friendly; it would go from about 30 minutes each way to just under 4 hours roundtrip. And when your commute starts and ends in a bad area, which is typical of a low-income family in a low-paying job, this means those four hours a day are spent surrounded by people who range from normal commuters at best to visibly mentally imbalanced and trying to speak to you the whole ride. I understand from talking to friends in “our mass transit is great!” towns that this isn’t the case everywhere but this is something that on average gets worse the poorer you get. I could make the commute shorter by taking a worse job (Maybe - the job market isn’t great right now), but that comes with career-limiting downsides of it’s own.

Jobs

When I’m trying to explain to my sons how a company decides what to pay someone, it usually goes something like this: A company is looking to pay a person as little as they can and keep them, so a person’s pay is determined by how rare their skills are and how much demand there is for those skills. The value of their work doesn’t factor in as much - An administrative assistant might touch every department in the company every day and facilitate a massive amount of work, but they still don’t get paid much - it’s hard to justify when you could hire and train up someone to do the same thing nearly as well with very little difficulty.

I think this is a fairly accurate way to look at pay, but it applies to other aspects of the job. If you got sick more often than usual this year and used up your legally mandated sick days, would your company fire you for getting sick again, or demand you work sick? If the company decides it needs to cut wages, is your position the cheap-to-hire-for job the company didn’t spend a lot of money and time filling? If you don’t have rare skills, management is aware that they can ask for you to work extra hours, avoid letting you use paid time off and change your list of job duties on a whim - both they and you know that if you won’t do it, they can find somebody who will tomorrow. Not every company is bad in these ways - good people do exist - but every company is aware they could, and that tends to color every aspect of the job whether they intend it to or not.

The worst treatment you tend to get is, perhaps counterintuitively, in jobs that approach living wage despite your low value and replaceability as a worker. These jobs tend towards needing someone who can put in a lot of hours for customer interactions that require a single point of contact; they reward intense focus over long periods of time in unpleasant situations. Another way to say this is that these are high-stress jobs with a lot of mandatory overtime and very fast pacing - they pay a lot because they can’t get people to do them otherwise. Turnover in these jobs is absurd despite the pay - some people can keep up with them but it isn’t typical. In my first (and hopefully last) claims adjuster job, two people had heart attacks in my office in a six month period.

The obvious solution for the worker here would seem to be to train themselves in such a way as to be more valuable, but this is often a bit harder or less plausible than it sounds. Some of this can be personal reasons (if you are barely holding things together, it’s hard to find the time and energy to get a bachelors degree from scratch) or financial (It’s nice to think you could learn a new skill and start a new career, but if you are barely keeping your family fed as it is, you might not actually be able to take the pay cut dropping back to entry level would require.

To give you an example of how this looks, 2020 started with me in my second month at a sustainable job with a salary around 50k, the most I had ever made. When the job was disrupted by Covid, I was the first to go - I had little tenure and no rare specialty absolutely required by the company, so my responsibilities could at least theoretically be divided among the retained employees. I then took one of those high-stress high-intensity jobs in the mortgage industry, made kind of a lot of money (for me, on pace to do about 60k in a year) but eventually had a minor nervous breakdown; the company informed me I couldn’t use my paid time off without a month’s notice to handle it, and that they’d simply let my workload pile up while I was gone, leaving me in a worse place. I managed to switch to another company, but found out once I started that the job duties, pay, and hours were all misrepresented in the interview process - I’m free to leave if I don’t like it, since the job will be easy to fill.

In the meantime, I’ve added a few skills to my resume associated with better jobs and lifestyles, and I’m hopeful things get better. But “just the skill without an associated degree” means this is a slog - I’ve applied for about 100 jobs in the past month, but haven’t had a single response; there’s simply better qualified candidates at the kind of pay I can support my family with, and the kind of extremely junior positions I might have a better shot at would leave us unable to pay bills within a few months.

This isn’t evil on anyone’s part, and you shouldn’t feel bad about it - I’ve made a lot of choices in my life that led to this point and I have a lot of responsibility in terms of where I find myself. But understand that even if you are willing to sacrifice the labor and time it takes to work towards an uncertain goal, there’s still a fair amount of luck involved. And some people are at my level or below it because they simply lack the capability to do better - not everyone can or should learn to code, or would be able to successfully go back to school.

The summary here is that low-paying jobs are often uniquely bad for reasons beyond the pay itself. The people who work them aren’t unwilling to change this, but often they are unable to, either because the means to change their circumstance is outside of their control or because their attempts to do so fail. Some are lazy and unmotivated, but not all.

“Paying the Bills” and Feeling Broke vs. Being Broke

When someone is telling me they are or have been poor and I’m trying to determine how poor exactly they were, there’s one evergreen question I ask that has never failed to give me a good idea of what kind of situation I’m dealing with. That question is: “How many times have they turned off your water?”.

The reason this question works is because it lets me know whether the person I’m talking to has “felt” broke - I.E. been in a situation where they felt resource strapped for some reason or another - or has “been broke”, actually factually unable to pay for basic services they needed to survive at a minimally decent human level.

A person who feels broke might not have a lot of money, or might not have any liquid dollars in their wallet at all. But just being out of money doesn’t make you broke in the sense that they turn off your water - that takes time. Usually you can be over a month late before the water company actually goes to the trouble of sending someone out to turn off your water. Even if someone feels broke and can’t immediately pay their bills (this is rare for people who feel broke, by the way; they usually have a few hundred dollars they can get at somewhere, some space on a credit card, etc.) this only means they need to cut their spending somewhat the next month and catch up; they might not be King Midas after watching their budget for 30 days, but they won’t turn the tap some morning and finds nothing comes out.

Obviously being broke is the opposite; you are legitimately out of funds you need to cover a bill. It’s not a matter of watching your budget closer, either - you’ve cut the fat from every possible place and you still just don’t have enough to make everything work. Sometimes this is because you lost a job and your income dried up (more common these Covid days) and sometimes it’s because a surprise bill caused your budget to get behind in a way you couldn’t recover from. But as opposed to someone who simply overspent, being broke implies you have some structural problem with your income and finances that you can’t fix - all it took was a small bump of some kind to upset your apple cart, and now you’ve moved from “hanging on” to “asking your neighbor to use their hose to fill up a bucket so you can flush your toilet”.

It also implies there’s no place left to cut - you don’t have a car payment, and your insurance is minimal if it hasn’t lapsed already. You don’t have cable. You are eating a lot of rice. There’s simply nothing “extra” left to cut, and now you are choosing between things like power and internet (which you need to work and find work, these days) and water (which you need to survive). Often you’ve already even prioritized those things, because as I’ve said they don’t turn off your water for a while; you’ve been juggling things like power and water, now with late fees, for a while. And one day your wife calls you and tells you the water is off, and there’s nothing you can do; maybe some family member can help you out, or maybe you live without utilities for a week or so until you get paid and start the next pay cycle that much more behind.

The best case scenario is you get helped, and you try to accept that graciously and thankfully, but consider the shame of this - you can’t support your family, and you’ve been forced to go to someone who can, implicitly admit you can’t fulfil your basic purpose as a human, and ask them to take away from their family to do what you can’t. And often they do - family and friends are a wonderful thing. I’m thankful more than I can say for mine; I’m blessed by them. But it’s exhausting; you understand going through it why so many people give up on trying to make things better, because you’ve already reached this point where you and everyone around you understands that you just can’t function to minimum levels as a father and husband; it’s hard to wake up the next day and go “well, I’m sure that’s all in the past - let’s learn Java!”.

Health and Dental Care

If you are broke enough, you get what in some ways is very good health insurance: zero deductible, all prescriptions paid for, and no coverage limits. The reason you get this is because everyone else in the country pays for it for you - it’s government insurance, given to those at income levels so low it’s clear they have no chance at all of covering their own bills. It’s not without downsides (the doctors suck, for the most part, and referrals for anything beyond basic family care are time-consuming to get) but you know that if your children or wife got seriously hurt or sick, there would be some level of care available that wouldn’t instantly bankrupt you.

There’s a point at which you are making too much money to get government insurance, though. As of today this number is $36,156, or ~138% of the federal poverty limit. This creates an interesting situation - if you were making 35k at a job and offered a job at 40k with healthcare benefits, taking the job would actually leave you in a worse place than before in most cases; insurance is expensive, and the government offers exactly zero help if you A. make more than a certain amount of money and B. work for a place with benefits. So where you had insurance and made 35k before, now you have insurance and make 32k; your step forward put you further in the hole.

This is what’s usually referred to as a perverse incentive - it’s a situation that “pays” you for doing the wrong thing. In this case, the wrong thing is rejecting jobs that pay more and offer more advancement out of fear that someone will get sick and you either won’t be able to get them care or will bankrupt yourself doing so. If you are smart, you probably take this risk - after all, you might eventually make 70k and be in a place where insurance is merely expensive rather than a complete budget disaster. But it’s a real risk you have to take as you climb towards financial security, and not everyone chooses to take it.

Dental insurance is worse. There’s an internet meme that says that teeth are “luxury bones” that insurance doesn’t cover, and this is more or less true - even with dental insurance, you are still out of pocket significant amounts of money for even basic dental care. I haven’t been to a dentist since I was 11 years old for reasons related to this. I often consider the fact that I’m in a bit of a race against time with my own teeth - at some point they will go from “merely crooked” to “visibly rotting”, and very few people will hire a person with visibly rotten teeth for work.

Note for other people of limited income: Take the time to check and see if there’s a dental school in your town. The care dental school clinics give isn’t free, but it’s significantly cheaper and in my experience pretty good. One of my children has significant dental care needs, and he regularly goes to the dentist at a clinic of this sort - they treat him well and do good work. I can’t compare it to a “real dentist”, but it’s infinitely better than nothing.

Used Goods and Craigslist

I mentioned this before, but I can work on cars, and I’m able to do anything less complex than a full engine or transmission rebuild. This is an example of what I refer to with friends as “poor people skills”, or capabilities you develop beyond the norm because it’s necessary to survive.

The most fun poor person skill by far is buying things off of Craigslist. It’s by no means rocket science, but having little money means you end up buying all but the very cheapest of durable goods used, and repeated practice at this makes you skilled at finding deals other people might miss.

It’s been decades since I bought new furniture besides IKEA; most of that comes from Craigslist. Cars come from Craigslist - you can buy used cars at dealerships and it’s less risky, but comes with a 25-50% markup for the safety that a lot of people can’t afford. Durable cookware, like pots and pans? Craigslist, if you want anything kind of nice; the stuff you can afford at target starts flaking teflon into your eggs a week in.

Rich person tip: Unless you really, really need everything in your house to clearly be part of a unified set, you are a sucker if you buy furniture new; this is especially true for non-upholstered wooden furniture. Antique furniture is prettier, studier, has more street cred and can be had for a song compared to retail store prices; let other people pay those and look average while you put in a minimum effort, save money, and get cooler older furniture that makes you look like a person of taste rather than an every day jive-turkey retail sucker.

Poor people tip: Stop buying spatulas on Craigslist. Just work some more overtime. Yes, I know it’s a lot of overtime already but spatulas cost $5 new - a $2 spatula is not a deal and the savings don’t pay for even minimum-wage time spent driving to talk to a guy named “Pastor Dave” about used discount cookware in a Circle K parking lot.

That last tip to poor people seems like a joke, but at some point it’s something you have to look out for - you get so used to thinking of money as an extremely finite resource that any amount of absolute savings in purchase price looks necessary to you. But once you conquer that, it’s like a superpower; you can save hundreds or thousands of dollars furnishing a room; you can buy a box of books with the one book you want in it for less than the price of that individual book from a bookstore.

The only downside to your new found x-man discount used goods status is the possibility of getting stabbed; it’s a good idea to look at the approximate area of the guy selling you a hamster cage before you find yourself in the more murder-prone parts of town at night, conspicuously button-down and muggable hoping nobody notices you. Get that one little bit down, though, and it’s like the skies open up and the heavens beam savings down; all the discount archery sets and knock-off kitchen knives of the world are suddenly at your fingertips.

That’s it! We made it through. As I said before, none of this was meant to make you feel guilty and I hope and pray I managed not to sound like I was whining - I really want to emphasize that outside of everything I’ve talked about here, I’m absurdly wealthy in terms of the people who choose to spend their lives in my vicinity. I’m mostly a happy guy, and anymore one who can often pay his bills on time. I can really honestly confirm that money isn’t the operative thing that makes you happy; it really is more about having good people around to talk to, take care of and to be taken care of by.

And if you do better than I do - say, if you are a person who completed college on time and went on to your deserved place in the upper-middle class - I hereby command you not to feel bad about it. It’s OK to do well, and I have an idea of the kind of work you’ve put in to get to where you are; there’s a great chance you deserve to have the things you have. I hope this was instructive for you, and I wish you continued success.

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