What makes poor people poor

However, many governments are either unable or unwilling to serve the poor. This might mean failing to provide or cutting social welfare programs, redirecting funds away from those who need it, failing to build good infrastructure, or actively persecuting the population. If a government fails to meet the needs of the poor, the poor will most likely stay that way. People who are poor are more likely to suffer from bad health, and those with bad health are more likely to be poor. This is because healthcare is often too expensive or inaccessible to those who need it.

Without money for medicine and treatment, the poor have to make really tough decisions, and usually essentials like food take priority. If people do seek treatment, the cost often ruins their finances. The last root of poverty is simple: stuff costs too much. Even the basics can be too expensive. Food prices are also very unpredictable in certain areas, so when they rise, the poor have to keep cutting out other essentials. Housing is another essential that is rising.

Global house markets have been climbing, according to the International Monetary Fund. Income growth, however, has not. Take a free course on poverty and economic justice! Emmaline Soken-Huberty is a freelance writer based in Portland, Oregon. Make every shot count Using a video-game scenario to test the influence of scarcity, the researchers find that people with limited chances performed better.

In some ways, scarcity appears to make people better problem solvers. In these game versions of the world, says Shah, the players randomly assigned to be poor focused on what was concrete and in front of them. Because these problems feel bigger and capture our attention, we engage more deeply in solving them.

Unfortunately, one way to solve the problem in the short run is to borrow, which can backfire. In the experiments, when poor participants were allowed to borrow resources, that borrowing undid some of the advantages of scarcity. Poverty led to wise decisions, but it also led to counterproductive ones. Shah, Mullainathan, and Shafir looked further into how poverty affects decision-making, and find that poor people may evaluate trade-offs better than their wealthier counterparts.

Just as the Angry Birds players spent more time lining up a shot, people with actual financial concerns might also make better, more focused decisions, closer to what economists consider ideal. Some said they were. Their answer depended on their income. For poorer participants, however, that list takes on a different texture. The items are all associated with prominent financial concerns, strongly related to the one concept that is not there but is often remembered: Money.

In another experiment, the researchers asked participants from a range of income levels to imagine different scenarios in which they encountered some unexpected activity, such as ending up at a fancier-than-expected restaurant with a group of friends.

What kinds of thoughts were most likely to come to their minds? Poorer participants, more often than wealthier ones, mentioned cost-related thoughts. And the thoughts were intrusive. Thinking about receiving bad medical news, poorer participants worried about impending treatment costs.

Thinking about driving routines, they had trouble suppressing thoughts about transportation costs. Anuj K. But that response was more common among wealthier people. But wealthier participants saw the savings in relative terms, noticing the percentage savings. By contrast, poorer participants thought in absolute terms. The same pattern showed up in experiments that involved smaller and larger amounts of money or other rewards.

But people who were not dieting were more swayed by context. Once again, scarcity prompted the more accurate decision. If people in poverty are making smart decisions considering the situation, how could that be recognized and better encouraged?

Across income levels, financial stress affects decisions. He added that one example of the dangers of debt is that it has compound interest working against you instead of for you as it does with investments.

Paying yourself first means putting a portion of each paycheck into a savings account before divvying the rest out to cover expenses. The No. Poverty is often generational, according to Luke Landes, a speaker and personal finance writer at Consumerism Commentary. You might be poor simply because your family always has been, "which is one of the hardest environments for making progress," Landes said. Jeff Rose, founder of GoodFinancialCents. Being oblivious to what is going on with their credit history.

That's as simple as requesting your free credit report and making sure all your information is correct. It might be time to consider moving to a smaller place. The biggest reason people stay poor, according to Elle Martinez of Couple Money , is "not having a plan for their money. To curb behavior and work against bad spending habits, she suggested automating bills, saving and investing as soon as paychecks come in. Donna Freedman , a personal finance expert and writer, said the biggest thing she sees keeping people in the paycheck-to-paycheck cycle is not having a budget.

Louis DeNicola, a consumer expert and writer for Cheapism. Many people lack access to good-paying jobs and have limited time or opportunity to receive training that would allow them to get one of those jobs, according to DeNicola. Julie Rains, personal finance writer and founder of Investing to Thrive , also said that economic disadvantages play a big part in why some people are poor, but that's not the only thing holding people back.