By Jeeni Criscenzo
While trainloads of Americans, who never expected to make the journey from the complacency of middle class to the downward spiral of poverty are trying to figure out how this could have happened to them, those fortunate enough to still be holding on to the American Dream seem oblivious to their own vulnerability. Smug in their financial security, they watch the repo man haul off their neighbor’s car as everything they own is unceremoniously carted to the curb under the oversight of the sheriff.
And they think the fate of their neighbor was their own doing, the result of poor choices. It will never happen to them, they believe, because they have worked hard and managed their finances and played by the rules. No doubt their unfortunate neighbors believed that myth once too—not long ago.
As long as the system is working in your favor, it’s hard to consider that the transition from comfortable to impoverishment could happen as swiftly as a firestorm or flood. Or sometimes the good life unravels excruciatingly slowly, like a horror movie played out in slow motion as medical bills pile up at the same time you can no longer work, or what you thought would be a temporary job search, turns into months or years of unemployment.
However they got there, it’s often a shock to the nouveau-poor how much more expensive it is to be poor. Facing the daily financial quagmire of managing to get by with insufficient finances is not for the faint-hearted. Even after the dust has settled, and you’ve taken a minimum wage job or applied for government assistance to tide you over until somehow you can claw your way out of poverty (and never lose hope that will happen), you will find yourself spending most of your time thinking about the one thing you don’t ever have enough of—money—where to get it and how to stretch it.
Whatever you do, don’t lose your checking account! You don’t want to become one of the 17 million adults in the U.S. who are “unbanked”. If you have a bad credit rating or a history of “stiffing” a bank, you won’t get to open another checking account. People without bank accounts need to resort to check cashing services to cash their paychecks, which will take 2 – 5% of the check. If you need to pay bills with money orders – they will run you $3 each. If you want to use the service to pay your phone or utility bill at the last minute so you won’t incur late fees, that could cost you 10% more.
If you manage to keep your checking account, you’ll need to watch it very carefully. When money is tight, it’s easy to forget about a check you wrote two months ago that wasn’t cashed until your account had $1.50 less than the amount of the check. That will incur a $25 to $35 overdraft fee. Which will put your account further in arrears for the $10 automatic payment you agreed to in order to get the cheap cell phone plan. Now you have another overdraft fee and your next paycheck or unemployment payment isn’t coming for 3 days!
If you borrow $400 from a payday loan they will charge you $15.50 for every $100 for a 7 day loan! So that $400 will cost you $62.
Since it’s almost impossible to survive without a debit card, you might get a pre-paid debit card but they usually charge for “loading” the card and there are transaction fees. If you are getting unemployment or benefits in California, they now come on a debit card from Bank of America. You can withdraw cash from the card at a BoA ATM in $20 bills with no fee. But if you don’t have a car and there is no BoA nearby, it’s going to cost you to get cash at another ATM. Like any debit card, you can always ask for “cash back” if you use the card to buy something at a convenience store.
Unemployment only lasts for 26 weeks now that the official unemployment rate is below some magic number. As those weeks tick by, you might find yourself accepting any job just to pay the rent. You’ll be delighted to know that low wage earners pay disproportionately higher percentage of local and federal income taxes. Minimum wage in California is going up to $10 p/hr on January 1st. It’s already been proven you can’t live on that in San Diego.
Here is an example of the choices poor people have to consider when there is never enough money for the basics. Your car needed tires and now you are short $400 for the rent and won’t be able to pay it until you get your pay next week. You will be charged a late fee of 6% if your rent is 3 days late. On a $1000 rent that is $60. If you borrow $400 from a payday loan they will charge you $15.50 for every $100 for a 7 day loan! So that $400 will cost you $62. If you are worried about keeping your landlord off your back, you might choose to borrow the $400. Now your entire pay goes to pay the payday loan. You have nothing left to pay any other bills so now your phone will be shut off and to turn it back on there will be a re-start fee. The downward spiral continues.
If you were lucky enough to hold onto a credit card when everything else went south, you might be surprised to find out they have increased your interest rate – even if you have been making your payments religiously to this one card. That’s because credit cards share credit information and of course there is the dreaded FICO score. If sirens and red lights start going off next to your name, your cherished credit card will determine you are high risk and up your rates no matter what. At 24% interest, you might not be able to even make minimum payments on the one card you had been hoping to keep.
In some neighborhoods, people have organized their own lending system. This could be good – or it could be the birth of the mafia.
If you have bad credit and low income and you are looking for a rental – you are screwed. With a near zero vacancy rate, landlords can be as fussy as they want in their requirements for new tenants. As long as they apply the same criteria to everyone, they comply with Fair Housing regulations. FICO score below 700? Be prepared to pay 2 months security deposit in addition to first and maybe last month’s rent. If you were planning on using the security deposit from your prior rental to cover the security deposit on the new one, plan on couch surfing for the next 21 days your landlord has to return that deposit. I had left an apartment in better condition than I moved in (and had the photos to prove it) but my landlord wanted to deduct $120 for cleaning because there was dust on a windowsill!
[A] $75 ticket could be the beginning of a nightmare. … If you couldn’t afford the $75, how are you going to pay the $100, or $200 or whatever that fine becomes? Then they can put out a warrant for your arrest!
Many poor people end up paying the nightly rate at a motel or SRO because they can’t get together the money they need to get into an apartment. Or worse yet, if they have an eviction on their record, no one will even consider renting to them. We have a system now where one screw up, whether it was due to poor choices or misfortune, will brand you with a low FICO score or label you a credit risk and you are condemned to homelessness.
Fines are supposed to be a deterrent to bad behavior. But when you are poor, the punishment of a fine can be disproportionate to the bad behavior, especially if it results in the loss of your car or housing. Everyone makes mistakes. It’s just part of being human. But consider the person driving a ratty junk car because that’s all they can afford. They might as well be driving with a sign on their back saying “Pull Me Over”. Say you didn’t notice that your right rear taillight is out. Really, who checks their taillights every time they go out? So you get pulled over and you get a ticket.
For you, that $75 ticket could be the beginning of a nightmare. You might have to choose between paying that ticket or making the last payment on your old car. If you don’t pay that fine on time, they will start adding penalties to it. If you couldn’t afford the $75, how are you going to pay the $100, or $200 or whatever that fine becomes? Then they can put out a warrant for your arrest! Then you have legal fees, the rent doesn’t get paid, Bingo – down the homeless hatch you go!
Lucky enough to find a job? You can spend an hour each way walking to the nearest bus stop and waiting for the bus and riding on the bus and walking from the bus stop to your job, or you can have a car and hop in it and get there in 10 minutes like non-poor people do. But the car requires car payments (and the ability to get a loan – people with poor credit pay much higher interest rates), poor people also pay higher insurance rates. Old cars usually have worse mileage so you’ll be paying for more gas. And then there’s the maintenance and repairs. Awful thing about car loans is that you could be making your payments fine for years and then hit a “bump in the road” miss a couple of payments and the repo man takes your car even if the amount you owed was far less than the value of the car.
So now you are back to the bus. There are no discounts for low income. A Compass Card costs $72 p/month. If you can’t come up with that amount all at once, you’ll have to buy a day pass every day at $5. Take the bus 20 days a month and you’ve paid $100 and probably still can’t afford the $72 for a one month pass next month.
So you are still waiting for the bus. And waiting for the bus and waiting for the bus. The bus is late through no fault of yours. But you get fired for being late for work. It would be great if you could walk to work. Tell the developers downtown that you need affordable rents close to where you work!
No car, no time, and no discount supermarkets in your neighborhood. So you shop at the local market or worse yet – a convenience store. Food choices are crappy and prices are high. You can’t buy food in bulk because you have no place to store it and no way to get it home from the store. You know your health is going to suffer in the long run, but you don’t really have many options. If you are living in a motel, or couch surfing you have even fewer options. Of course, you can’t use your food stamps for prepared food. PBJ sandwiches for breakfast, lunch and supper?
Well that covers the basics which is more that most poor people can say at the end of the month. And then, there it is, without fail, the first of the month, and you have to start all over again. Add kids to the mix and your nightmare compounds. And all the while, you know that all it would take to turn things around is a decent paying job, an affordable rental and a little bit of luck. You dream about it every night.