Terry Pratchett had a really perfect explanation for one of the many reasons why it’s more expensive to be poor than to be rich:
“Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of ok for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes ‘Boots’ theory of socioeconomic unfairness.”
-Terry Pratchett, Men at Arms
By this model, one reason the rich are so rich is because they manage to spend less money… and not just on boots.
You have to have money to save money
Of course, according to the Boots Theory of Socioeconomic Unfairness, one has to have money in the first place in order to save money in the long run. It’s difficult to save up money for that $50 pair of boots when you’re constantly wearing out your $10 boots and needing to replace them with other $10 boots. It’s not as if one can simply go without boots for months to save $50 for the good boots. And in the meantime you’re missing out on the savvy financial decision to invest in high quality boots that you won’t have to keep replacing.
Likewise, if every broken water heater, minor medical emergency, fender bender, or textbook fee is going to force you to dip into your meager savings, you’re going to have a really hard time building up those savings to the point where an emergency doesn’t force you to start all over again.
If you’re constantly shelling out money for cheap, subpar basic necessities, then at what point can you invest in a high-quality, long-term solution?
It’s not that you’ll never be able to afford the $50 pair of boots. It’s that by the time you’ve managed to save enough, the rich person will have managed to save, invest, and collect dividends on even more. And you’ll have permanently missed out on that financial opportunity.
If you’re rich, you never have to borrow
If you borrow money for big purchases like a home, a car, or an education, you’re going to be paying more for that purchase than someone who could pay for it outright with money they actually had on hand. Why? Because interest.
And if you can afford to pay outright, then you’re not just saving the money you would’ve spent on interest. You’re gaining the opportunity to spend that money elsewhere, to invest it where it will earn you still more money. A poor person, on the other hand, will permanently miss out on that opportunity. In other words: by borrowing money the poor person is delaying their ability to get rich while the rich person is accelerating their wealth accumulation by not borrowing.
You could argue, of course, that if you can’t afford to pay cash then you should just… not buy stuff. And that’s fair. Except that what you’re really saying is that the poor don’t deserve to have fancy luxuries like a college education but the rich do, simply by virtue of being rich.
It’s almost like the poor are punished for not having money.
You don’t have to buy expensive shit
Sure, you could argue that the rich spend more money—on their yachts, their Range Rovers, their organic groceries and health club memberships and private school tuition—and that therefore it’s actually pretty expensive to be rich. But there’s no rule that says you have to spend all the money you have just because you have it. Technically, the rich could be buying the same low-quality food, renting the same tumbledown apartments, driving the same used jalopies as the poor.
Spending truckloads of money on luxuries is a choice. Scrimping and saving for a $50 pair of boots or a college education that will then enable you to get a higher salary job is a necessity. So while those with embarrassingly large sums of cash on hand may be spending more money than those who desperately check the couch cushions when their children say, “I’m hungry,” it doesn’t mean their basic survival is any more expensive to maintain. It’s just easier for them to afford.
Lack of options, lack of opportunity
Personal finance bloggers talk a lot about making smart financial decisions and avoiding wasteful spending. And that’s all very well and good, but it would be incredibly myopic to ignore the fact that income inequality exists. There are some people for whom “wasteful spending” simply doesn’t exist. They don’t waste money… because they have no money to waste.
Their bad financial choices (buying the $10 pair of boots every year when the $50 pair will last a decade) are not truly choices, good or bad. They’re the only option.
We’ve talked before about the reality of income disparity. And the point here is not to make those fortunate enough to be rich feel guilty, nor to give anyone else an excuse not to try. If anything, the Boots Theory of Socioeconomic Unfairness exists to motivate, to provide perspective. Knowledge is power, after all.