How Being Poor Can Be More Expensive

Bill Gates famously said, if you are born poor, it is not your fault, but if you die poor, it is. His famous words are often quoted on motivational forums, but the real question is: is it true? and How being poor can be more expensive?

We all know that if you fall under a certain level of poverty, it becomes more and more difficult to survive. It not only limits your capacity to provide for yourself and your family but having no money can also put barriers between you and the realization of those plans to alleviate you from your situation. Banks become less and less cooperative and once the debt starts building up, it feels like it’s time to say goodbye to your own business, as it may as well take a lifetime to pay off those loans.

In this article, I will discuss the ways that our economic environment has developed to make life harder, and more expensive, for the poor. Knowing this may help you fight these factors and possibly avoid getting trapped.


being poor can be expensive so use transport

Transportation is one of the major three expenses namely, food, rent, and transport. These very fundamental expenses that allow you to survive in the modern-day. We could include clothing as the fourth expense but the main difference is that without shopping for clothes one can survive for at least a few months but without these three, survival for even a few days is practically impossible.

Transport is essential for commuting to and from work, the market, gym and any other activity you may like to indulge yourself with. However, instead of being cheaper for the non-affording, transportation can become more expensive if you are below a certain poverty line.

Let’s start with owning a car. We all know that new cars are expensive and if you do not have enough money to buy one, leasing is a good option. With the banks offering 0% interest rates for some cars, surely you can get a decent ride at no extra cost even if you are leasing. This statement cannot be further from the truth. Even with the 0% interest, the leased cars end up costing more than something you would buy for cash.

The most obvious additional cost is the bank’s processing fees. These are the charges that the banks charge upfront for processing your application, whether you get approved or not. Moreover, you are also not able to avail of the discounts a car dealer would offer on the normal retail price of the car. These discounts can be significant and thus make a leased car much more expensive even on 0% interest.

Another option is to go for a used car. I always advise a slightly used car instead of a brand new one to avoid those highest months of depreciation. However, if you are shopping for cheap, there is a high chance that you will go for the much cheaper priced cars than recommended. With a tight budget, it is easy to fall for that one car that is so cheap that it is practically a steal. But you know what, there is a reason for it being so cheap. There are hidden maintenance costs or defects that you as an inexperienced buyer fail to identify while buying it and later you realize that the frequent visits to the mechanics make these ‘cheaper’ cars actually a more expensive option and in this way being a poor can be more expensive.

Public transport can also be more expensive if you are poor. We all know that it is much cheaper to buy a yearly pass instead of a single ticket. However, if you are struggling to put food on the table, you will occasionally find yourself buying single tickets to go shopping, or to work. This inability to buy longer-term transport passes indeed make your transport much more expensive. In some areas, this can be as much as an extra 25%, or even more.



Do you remember the last time you needed money and the bank refused to lend you some? We all do. Now think for a moment; what if Jeff Bezos went to the bank to get a loan? Would the bank have refused the loan to the world’s richest man? Of course not! It may seem counter-intuitive, but it is well-known, although not very well understood, fact that the banks like to facilitate those who already have money.

The rationale behind this is that it is a safer bet to lend money to those who have lots of it. A millionaire is less likely to default on a loan of $10,000 than a person who is already swimming in debt. Since the likelihood of late payments and chances of default are low, the banks actively try to lend money to richer people by offering them loans even at much lower interest rates. Therefore, the more money you have, the easier it is to get more from the bank and at a cheaper interest rate.

If you fall below a certain level of poverty and your credit history is not good, the only options you have in times of financial crises are the loan sharks and the payday loans. They have huge interest rates, sometimes as high as 800% per year. This not only puts a lot of financial burden on the already struggling person but also hinders their chances of ever climbing out of poverty.

Apart from loans, banking inherently benefits the rich. An example is when you go out to take cash from the ATM, you pay charges for the cash you withdraw if it is not your banking network’s machine. Let’s say you withdraw the last $20 you have in your account and pay a small fee of $1. This amounts to a whopping 5% fee for accessing your own money. However, it becomes only 0.33% if you withdraw $300 in one go.

Moreover, other smaller charges that the banks’ levy, such as the overdraft fees for both planned and unplanned overdraft, the high interests for the negative balance, the huge penalties on late payments all affect the poor more than the rich people, and this is how being poor can be more expensive.



It is a common misconception that we shop smarter when we are poorer. Some parts of it may be true, but there are many other factors related to shopping that can make the goods much more expensive for the poor as compared to someone with at least a decent amount of money at their disposal.

The most obvious way to save money at the supermarket is by buying things in bulk. This is the first thing we do to save money on groceries. However, if you are living from paycheck to paycheck on a weekly basis, this option may not be available to you and you end up buying small quantities of food potentially on a daily basis. This not only makes the stuff you buy more expensive but also greatly increases the number of trips to the store resulting in a surge in the time and other expenses incurred in shopping such as the cost of commuting. Even if you could buy groceries in bulk, but do not have money to afford a car, being unable to transport all that stuff in a tightly packed bus limits your ability to do so.

Another way you can save money is through smarter buying. This means buying stuff when and where it is cheaper. For this, you would traditionally need to shop around to find the cheapest deals. Once again, the inability to afford a car greatly limits your access to your local store. Another thing you can do is to shop for things when they are offered on discount, instead of buying them the last minute when you need it at a potentially higher price. We can apply this to clothes and other stuff we need, but only if we have some cash to spare.

The psychology of poverty

The psychology of poverty

Poverty greatly hinders our ability to be smart with money. Sometimes it is through the factors that we do not have a lot of control over, as discussed above, while other times it is because of the decision fatigue we face by having to make all those difficult decisions all the time. Over time, we get used to making these bad decisions and our mind starts convincing us that there is no better option.

This is where things start getting serious and being poor can be more expensive and how we can cope with it. Once we settle for what we have, we lose the ability to actively make better decisions for ourselves. The severity of the situation is increased when our minds look for ways to reward us for all the tough (although not the best) decisions that we make all the time. The result is that whenever we have a little spare cash, instead of using it to improve our situation, we subconsciously reward ourselves by spending it on dining out, or buying a new gadget or a new dress that we don’t need and quite frankly, cannot afford.

It is important to be aware of this behavior in order to avoid it. The only way to get out of poverty is frugality. There is no need to buy that expensive iPhone if you know you will be struggling with the rent money at the end of the month. There is no point in taking out a loan for an expensive new car if you will be struggling with the gas money. Unsubscribe from the three streaming services that you pay for every month if you do not have time to enjoy even one between that day job and your part-time evening work. Be hard on yourself. Spend time on starting and building a side hustle instead of hanging out at the pub with friends all the time. The only way out is the hard way. Once you realize that and plan for success, only then it is possible to alleviate yourself from poverty, and possibly even retire early.