I’ve been around a lot of people lately who’ve been trying to justify to me their bad financial choices. They tell me the normal excuses. You’ve heard most of those and maybe even used them yourself – excuses like: “I deserve it,” “I work hard,” “I can afford the payments,” etc. I don’t want to beat you up, but as a financial counselor, those excuses to me are a lot like, “the dog ate my homework,” to the experienced school teacher. I just don’t buy it. I may believe you work hard and I may believe the payments for whatever you’re pining after won’t send you into bankruptcy, but I KNOW there is a better way to go about personal finance than the way the average American (read “broke person”) does it.
I want to help you develop long-term thinking and avoid ending up in the poor house. Today I want to do that by showing you some of the real-life places out there that are designed specifically as traps for poor people. Remember, as I wrote previously, poor is a state of mind…and so is rich! Poor doesn’t mean you don’t have money – it means you have given up on succeeding financially (whether consciously or unconsciously). In most cases, I believe people ultimately choose to be poor. …And now that I’ve offended almost everybody, let me make sure not to miss anyone by offering my list of five real-life financial traps that are likely in your town.
Check Cashing/Payday Loan/Title Loan Places
The concept is simple enough – walk into a storefront, write a check or sign a few papers, then walk out with cash. The problem – what did it COST to get that cash? In their simplest form, check cashing agencies cash your check just like a bank would. What’s the catch? Service fees, averaging 1-3% of the amount of your check, are charged for you to get your money. Cashing your $785 disability check? It could cost you roughly $25 in fees on average. Most of these agencies target those who don’t have bank accounts because admittedly, it can be tough to get a check cashed without a bank account.
Payday Loan places are a little different – they allow you to get the funds from your paycheck before payday, and you promise to give them your paycheck when it comes in, along with their fees and interest. This is a highly-regulated industry because there is constant abuse and fraud. Depending on your state, you can end up paying 500% interest or more. How? They don’t explain the math. If you pay $15 for $100 borrowed on a 2-week loan (pretty standard stuff at these joints), that’s 390% APR. And that’s assuming you can afford to pay them back on time. Let’s not even get into what happens if/when you can’t! Title Loan companies are pretty much the same deal, except you get a little lower interest rate simply because you hand them your car title as your collateral. SCARY.
In addition, many of us have, without intent or malice, written a check that bounced. When this happens once or maybe twice over a lifetime, you don’t have much to worry about. However, when someone writes multiple bad checks, or intentionally writes checks knowing he or she has insufficient funds in the account, he or she may find himself/herself facing criminal charges. Penalties for check fraud convictions can include not only restitution, but jail time.
Rent to Own Store
I wrote about RTO places a while back and explained in some detail how they work. To boil it down, they ask you to pay smaller weekly or monthly payments on an item you would generally just go buy (bed, appliance, TV, etc.) and charge a VERY high interest rate for the convenience. If you save up and buy an item vs. getting it RTO, you can save 40% plus – and that’s if you don’t even look for the item used or on sale! Paying way too much for something out of ignorance or desperation is what poor people do.
Convenience Stores
When you finish filling up your tank, please venture inside to enjoy the sights, sounds and smells that all scream, “welcome to the land of beer, cigarettes and lottery tickets!” And if those three don’t tickle your fancy, you can still get a can of overpriced soda, stale (and yet still overpriced) snack foods, or even “personal products” handily dispensed individually in the restroom. I had an Economics Professor once tell us that the lottery is, “a voluntary tax on the poor.” If there are any out there who have played the lottery and won their life’s fortune doing so, simultaneously increasing their life span, personal happiness and spiritual walk by smoking and drinking away their paycheck, please contact me and I’ll have a slice of humble pie and apologize to you directly. For everyone else, please think about it before you walk in and plunk down a hunk of change on what the convenience store is peddling. There is always a price to pay for convenience – be careful the “convenience” is worth the price.
Car Dealership
Before all car salesmen hiss at me for listing this one, keep reading for a moment. Most car dealerships are legitimate businesses that offer a decent service. But some are a place to guard your wallet. The phrase “buy here, pay here” should send shivers down your spine. In the dictionary, that phrase means, “No one else in their right mind will give you a loan, but we’ll do it on an overpriced, sub-standard automobile and charge you 25% interest because our primary goal is to repossess that car, sue you and ensure we sell that same car again to the next person willing to walk in here desperate for transportation.” …or something like that.
The average millionaire doesn’t pay car payments. He doesn’t lease, and he doesn’t buy new…or if he does, he keeps that “new” car for 20 years or so. Don’t let your need for transportation make you believe your wish for a car you can’t afford is anything other than a wish. Act like a millionaire.
The Mall
Last, but not least, let’s look at the lovely hub of commerce known as the shopping mall. Before you call me crazy for claiming this as a trap, consider this brief exercise: list the items you would go to a mall to purchase that you could not find elsewhere at a cheaper price for equal or higher quality. There may be a few items on your list and that’s cool. Now, list for me how many stores pushing overpriced, low-quality merchandise you must pass and say “no” to before you will reach the place that sells the one reasonably-priced, decent-quality item.
Now that there are plenty of free-standing Chick-Fil-A’s in our area, I think I’ll let the mall walkers claim the mall as their exercise domain and I’ll stay away.
In summary, the places I’ve listed offer way too many dangers for people who are ignorant and/or desperate. While I don’t think you need to stay away from every gas station, mall or car dealership (I would say that about the first two), be careful of the traps that lie in wait to steal your wallet if/when you visit any of these places. Don’t be desperate – desperation breeds bad choices.
AMEN! That is about all I can say. I have seen so many people fall into these traps. I should say that I do like going to the mall on occasion but I am always looking for the best deals, even when I am there.
The mall makes me want to cry. LOL LOL
🙂
I totally agree with this entire list! A rent to own store just opened up next to my grocery store, and I was so disappointed! Also, I didn’t get to read all of the comments, but it seems some people are getting a little feisty. 🙂 That means you guys have got a successful and widely read blog. I see it as a sign of success!
Thanks for sharing all this detail to make what I believe to be an excellent point. There are times when things will be hard and even then, we have a choice of whether or not to make bad choices. If I had the choice of feeding my family or getting a cash advance loan, I’d be looking HARD for a third option. Just because the solution isn’t easy doesn’t mean it is impossible.
I figure I might as well be honest. If folks want to disagree, that’s cool. I am always up for a lively discussion, as long as it stays civil and helps both sides of an argument learn some things. 🙂
Ha! That last sentence cracks me up. It is a lot like the one I’ve read and heard several times, “there are some people who work for a living and some who vote for a living.” Even though that isn’t always true, it sure does bear out regularly.
I’ve read “Framework for Poverty” and “Bridges Out of Poverty,” both by Ruby Payne. Good reads – she’s a little off on a few things in my humble opinion, but on most she nails it. She’s done a lot of research and it shows. She agrees and “proves” (or at least gives a pretty darn good argument) that mindset is what makes the difference.
I think some people here are doing a bit too much misinterpreting, making ridiculous statements, and being hypocritical. Tera’s foot is going into her own mouth (sorry Tera): “I’m making an educated guess here is that most of your readers are white and middle class.” So other ethnic groups don’t like reading about whole food and living frugally? So Tera must be a “racist” for making that statement? (I don’t like the term racist. It’s too evolutionary. We all come from Adam & Eve. We are all the same race; the human race)
The fact is, no matter what ethnicity you are, there is NEVER a reason to go to cash advance or payday loan places. There is NEVER a reason to buy expensive things in a mall (if you are low-income). There is NEVER a reason to buy lottery tickets. There is NEVER a reason to buy unnecessary items like beer (if you are low income).
Having a low income sometimes, though not always, is a choice. But spending more than what you’re earning (at least in North America) IS a choice. I stay at home, and my husband works. We make almost $40K a year, and the government takes almost $10K (we live in Canada). Our gas is almost the equivalent of $5 a gallon. So even if you don’t have a vehicle, you still pay for that up here in the price of groceries and pretty much everything. Our milk is almost $6 a gallon. Our cheese is about $6 for about 18 oz ($4.50 if you’re lucky and you find a sale and buy 20 bricks until the next sale). Our eggs are on average $2.50 a dozen, but only at Shoppers Drug Mart (the grocery store is about $3.20). Our bread is about $2-$3 a loaf, but now my husband can’t have wheat, so the gluten free loaves are $6.50 for a tiny one. So I have to bake my own with rice flour (the cheapest) is $7.04 lb (all other flours are double, triple, quadruple, or even more the price). Groceries are ASTRONOMICALLY expensive here!!!
So is housing. We live on the far outskirts of the city, with no busing, and we pay about $850 a month for rent plus utilities. Oh, our utilities are a lot too. 13.790 per kw/h plus 15% sales tax. And oil ranges between $4-$5 /gallon so it’s at least a couple thousand dollars a year to heat the house. And we can’t afford a house around here because housing is on average $230,000. But it’s lower if you live AT LEAST an hour outside the city. But then your gas bill will be more than your mortgage.
My point in saying all this is that if you have to live cheap, then LIVE CHEAP. THERE IS NO EXCUSE FOR LIVING BEYOND YOUR MEANS IN NORTH AMERICA. I found this blog when I was looking up how to make homemade mouthwash. I LOVE many of the tips on here. That is one of the reasons why I am subscribed to this blog.
But what I appreciate most is that this blog is Christ-centred. The reason why countless people go into debt is not because of circumstances that are beyond their control. It is because of poor decisions and sin. We live in an entitlement society. We think we deserve to buy take-out, have a beer (which in Canada a 24 pack is almost $50 because of our socialist government… so we make our own homemade wine and beer is next), or go to the theatre. We think we deserve all that is good. We pump self esteem into our kids, and we train them to disregard delayed gratification. That is something that I really appreciate about Ray Comfort (Way of the Master ministries… how my husband and I were converted). He goes around asking people, “Do you think you’re a good person?” And in our society, pretty near everyone says “yes.” So we think we’re good people. We think we deserve good stuff. We feel entitled. That is a recipe for DISASTER! The bible teaches we’re NOT good, that we’re wicked and we deserve God’s wrath and judgement. So when we learn of God’s goodness and that Jesus took the punishment that his people deserve even while we were yet sinners, then we learn what it means to be truly THANKFUL! So if we operate from this mindset, then we won’t feel so entitled to take out a loan that we don’t need to get something we know we actually do not deserve.
In conclusion, it has absolutely nothing to do with ethnicity. It has to do with who our creator is, and who we are before HIM. We need to change our thinking, or we will keep coveting and outspending our income.
Carole, thank you. The only ethnic group I hate is…oh, wait, I don’t hate any of them!
Poor and low income are not the same thing. Please read my post and other comment about being poor and the difference in poor and poverty. Please don’t misinterpret my sentiment.
Barry, My husband refuses to go to the Mall for the reasons you listed. 🙂 Also, I don’t know if you were including these or not, but some of the Dollar Stores are also very high priced on some of their items, and you can get it cheaper at your local grocery store. I figured you were lumping all those type places in with Convenience Stores or not. Plus, know I factor in the price of gas too when I make trips to even the local store closest to me. Is the items I am wanting or needing worth the price of gas it’s going to take to get me there and back. Enjoyed the eye opening post. Thank you so much!
Good points!
Being poor is a lot more complicated than what is portrayed here. It seems like society is so quick to blame the poor for being poor. Is this the new prejudice that we feel comfortable with? Trust me, it is a lot easier to make good choices and save money if you have money. If you are desperate for food or having a roof over your head, a payday loan might be your only option. Being poor doesn’t necessarily equate being stupid. And to even insinuate so is not very nice or truthful.
Barry, you are Spot On! Thanks for sharing!
I m not one who claps her hands at anything a blog writer might say, but I think Barry was just trying to wake up the reader who is struggling financially to the facts. I don’t think he had any ethnic group in mind.
I’m sure you’re going to catch a lot of heat for this post, but thank you (as always) for this very frank and honest post.
I appreciate this article and I read the one on POOR being a state of mind. I agree with both. I have to say that I believe your commenter Tera is falling into the trap, that is so prevalent these days, with taking something simple and turning it into a racial thing. She’s assuming your readers are “white and middle class”. What the heck does it matter? Information is information and that is what you’ve provided here. Maybe if people would worry less about categorizing things, based on race, and just educate themselves and get up off their butts and work and better themselves, we would be a better people! I’m white and I’ve been very poor and I’ve had more than enough. Both situations included hard work and jobs, but different seasons of life. No where in either situation, did we sit and blame anyone for having more than us or being the “right” color. We just kept working, kept trying to make the most of what we had and lived our life. THAT is a choice! Some people just choose to sit and complain and expect and covet what others have – all the while sitting on their porch and watching all the workers go to work.
Thanks for the good information.
Barry, I would just like to start out by saying that a. I want to send this to you in an email directly, but couldn’t hunt one down, and b. I have been reading your blog for almost 2 years and have been very appreciative of the good information both you and your wife give regarding finances and cooking real food. However, I think you went a bit too far in this post. What I think you are missing — I’m making an educated guess here is that most of your readers are white and middle class — was that you reinstated the racist ideal that most people choose to be poor. And if I’ve read all the research correctly, most middle class, white people in America (a group to which I belong as well) do believe that those that are truly in poverty have made some sort of choice that has put them there, which in an overwhelming majority is not the case. Structural racism is a real thing that puts many ethical minorities in this country in poverty for reasons they cannot change. As you can see from this paper here http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2232954 most payday borrowers are uneducated and non-white, which many middle class, white people know and further perpetuates the idea that people who go to payday lenders have a choice. Many don’t think they do. Many aren’t educated enough to realize and their are know governmental policies that support them. Okay, I’m guessing that absolutely was not your intention, but as a credible source, someone who many people believe in, you have to be very careful about the things you say and what they could really mean to your readers. Yes, you said you were okay with offending people, and maybe you really did mean that most people who have enough money to live a good life choose to be poor, but your choice of words did not exactly make that clear. I am going to continue reading and supporting your blog, because I truly do believe this was unintentional, but I very much wanted to take the opportunity to point out this fact and hope that you will do the right thing by responding or clarifying your point or even better choosing different terms. Poverty is not a choice! Thank you, Tera
Thanks for your comment, Tera. Poverty is often NOT a choice and I know you’re right on with that statement. I regularly work with housing authorities and other low-income programs that help those in poverty and I’ve studied extensively on what poverty is, why it exists and what the mindset is of those in poverty. That is not at all what I’m claiming. Please read the post I linked in there about Poor being a state of mind. Poor is not poverty – poor is the state of mind where one has given up on being successful financially. I have a very good friend who lives quite successfully on a $674/month disability check because he has made the right choices of how to live within that income. I also counsel people regularly who make $100,000+ who are POOR. I hope that explains the difference.
I completely agree that poverty is a state of mind. I took a course on my journey to becoming a teacher called, “Framework For Poverty.” The class was about the difference in middle class and poverty and how they were more about your state of mind than how much money you have. One example I remember was tennis shoes. This is not the mindset of all in poverty, but some, let me make that clear. Some in poverty would buy there child a hundred dollar pair of tennis shoes before they pay their rent and when rent comes due, they have to borrow money. Whereas most middle class would pay there bills first, save for those shoes, try to get them on sale, or simply opt for cheaper and brag about how cheap they got something and not that they bought the most expensive option. We may not want to acknowledge that there is a mindset, but there is.