> Except neither of them make enough to pay rent, so that 'extra' never gets invested.
The only way to properly compare things is on an "all else equals basis" and focus on changing the variable you're discussing.
In my example, Bob "makes do" with the $6/h he gets to keep. Alice can chose to live a lifestyle identical to Bob despite "making" $1.5/h more due to her smart finance management. She can then invest (vs, if she was unsavy like Bob, she would be forced into the $6/h lifestyle anyway and not have the option to invest.)
You can tell yourself whatever you want, but there are lots of poor people who are no longer poor (or at least have some savings) because they DON'T allow themselves to think like you're suggesting.
I like to think what youre saying is true, but my gut tells me -- both end up losing it all anyway. The problem with saving $3,000 or something like that a year, especially with a family, is that there are numerous things that you really need that arent covered, so the $3,000 means the difference between really poor and destitute.
Some examples that come to mind, from my own former life -- medical co-pays, medical co-pays, medical-copays, medical co-pays, emergency dental work, dental co-pays (esp for urgent issues), schools stiffing you on aid you are owed but dont get due to "system says otherwise", bank fees (sometimes unjustified but try fighting it), fines for stupid stuff that you're not connected enough to fight.
The most devious of these are medical-copays and pharma co-pays. Even stupid things like here is a real example: doctor gives you a prescription (at the front desk, not in their office.) You get the prescription and "use generic isnt checked" -- but now the doctor is gone. Front desk wont let you speak to the doctor again. You try and fill the Rx, and the Pharmacist says $300 copay because a generic is available, but Rx doesnt say you can use the generic. Now you need the meds, so you're down $300. Or you go see the doctor again to clarify and you're down $40 on the copay. Welcome to being poor. You get screwed around every corner.
Note, this doesnt happen to me anymore because I have a pretty decent doctor reachable via email and msg, but not one I could afford when I was poor.
TuringNYC, I hear you, but similar to another response - you're talking about the difficulties of being poor while I am talking about the relative difficulty of being poor while savvy vs not.
The fact is that in every single way, it's better to have that extra 3k versus not. Alice is strictly better off than Bob. Even if she spends it on tuition rather than saving it, that's an option that Bob doesn't have at all.
Even in your own example, you're talking about "generics" which is already more savvy than someone else may have. You're describing a problem but can you imagine how much harder your life would be if "generic drugs are as good but cheaper" wasn't a thing that existed in your brain? Now apply that to everything.
Nobody is saying being poor is easy - it's not and it sucks. The point is you can make it even worse by being bad with money on top of it, or you can make the best of it with whatever tools and options are available.
This by the way is true at every level. I know people making 350+ who can't afford to lose their job even for a few months, while others who have never made more than 50, have multi-year runways saved up.
Please tell me, do you actually think $3000 per year is financial freedom? That's what this article is about. I'm saying below a certain threshold that is false because one does not have enough to cover basic living expenses to be able to take advantage of that financial literacy.
Financial freedom is a spectrum. For me, when I was working for minimum wage, the equivalent of $3,000 back then meant 3 or 4 or months to find a new job if I got fired, without getting evicted. And it meant if my car broke down, I could either repair it or buy another one instead of taking a loan at a car lot, or relying on public transportation, which would have severely limited my employment opportunities. And it meant having a wider range of places to live since you could afford first, last and security deposit, which almost no one else working for minimum in that time and place could.
If you can save $30,000 a year, do that, but in my experience $3,000 was orders of magnitude better then $0.
> If she then saves it or invests it, she'll start making some return on it.
I think people react to claim that this will make Alica invest or save meaningful amount of money. That is what original conflict was about. Whether Alica will invest and rise out of poverty.
Alica now can afford one more thing in sea of things she needs is moving goalpost.
@xyzelement, I agree that $3K is amazing to have if you'd otherwise have 0. From personal experience, i'll note that money probably moves you from point ~7 to point ~9 on the Maslow's hierarchy of needs, assuming the hierarchy was 0 to 100. You're right on an absolute level that you're better off -- perhaps at point 9 you can get a chronically painful tooth fixed (and opposed to point 7 where you couldn't).
There are several problems with this discussion though, none to do with your point (which again I agree with, at a micro level.)
The $3000 does very little. You cannot invest it. Heck, having $3000 in your bank account would even invalidate you for Medicaid -- at which point you have no healthcare and you're poor literally the instant you're sick.
Its been a while since I was very poor, but here is a random article I found: https://www.agingcare.com/articles/asset-limits-to-qualify-f... This one suggests that a single person cannot have over $2000 in assets -- and lost benefit qualification if they do. These are usually bright-line tests, you cant reason your way out of them. And once you lose your benefits its really hard getting them back, and you'll be broke from medical bills before you do. The exact limit changes from state to state and year to year and also depends on your depdenents. But you lose benefits really quickly.
Ideas suggesting that another $3000 a year will "break people out of poverty" or somehow allow people to traverse socioeconomic barriers is usually fodder fed to us by hyper-libertarians who like to pretend everyone can become a billionaire. It is nothing but false hope as an opiate causing us to ignore real change.
We can indeed have positive change, but not by saving our way to it. While I agree with the need for financial literacy and while i agree with @xyzelement on a micro level -- the real solutions are getting individuals educated and onto growth jobs where they have an incentive to work hard. Also, means testing needs to become more realistic to 2021 -- how realistic is it to disallow a $3000 emergency fund?
On a side note, so many things I had growing up are not even available to my children in the same location (NYC) (though thankfully we arent poor anymore.) For example, I thank almost all my socioeconomic success to G&T programs, exam-tested schools, and the upward cycle this puts you into. Currently, G&T programs are largely patronage programs (in NYC) for the connected and exam-driven high schools are being replaced with "leadership based applications" for a 12yo which is a euphemism for "how connected are you and how rich are you?"
I disagree. I think having an extra 3k or not is a meaningful outcome to have control over. If Alice is as smart as she seems compromised to Bob, she might just have the power of will to hold on to that extra 3k. Certainly more likely to succeed compared to not even trying.
The only way to properly compare things is on an "all else equals basis" and focus on changing the variable you're discussing.
In my example, Bob "makes do" with the $6/h he gets to keep. Alice can chose to live a lifestyle identical to Bob despite "making" $1.5/h more due to her smart finance management. She can then invest (vs, if she was unsavy like Bob, she would be forced into the $6/h lifestyle anyway and not have the option to invest.)
You can tell yourself whatever you want, but there are lots of poor people who are no longer poor (or at least have some savings) because they DON'T allow themselves to think like you're suggesting.