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Why Are Poor People Poor and Rich People Rich?

Why Are Poor People Poor and Rich People Rich?

In a society that’s supposedly equitable, why are some people poor, and other people rich?

Piggy and I discussed a ton of things when we first started talking about starting our personal finance blog. But one thing we didn’t talk about was our target audience. We didn’t have to! We both knew immediately that we wanted to write for our younger selves. Years later, we’re older and more financially stable—but inside we still feel like a pair of broke young folks.

And maybe we always will? As we’ve discussed, money doesn’t immediately cure the financial anxieties you develop when you’re poor.

Our twenties were a decade-long financial panic. It was so stressful trying to figure everything out on our own. So we spent a lot of time talking about how traditional financial advice had failed people like us.

Some advice failed simply for being too old. It relied on outdated growth models. Or ignored a rapidly changing globalized economy. Or discounted the possibilities of living in a world transformed by technology.

These failures were innocent.

Others were not.

Much advice we’ve encountered conflates the virtues of wisdom, self-control, independence, perseverance, diligence, vision, and thrift with the state of being financially solvent. Whether directly stated or merely implied, people who are poor are poor because they are therefore foolish, indulgent, leeching, lazy, idle, short-sighted, and wasteful pieces of shit.

No. What are you. No.

I do not know of a single misconception that has damaged society more. It’s embedded so deeply in American sensibilities I don’t think I could pry it out with the claw-end of a hammer.

I have seen so many powerful people wield it like a scepter, a symbol of their divine right to their disproportionate wealth.

And even sadder, I have seen many more powerless people use it as a cudgel against one another.

The way it’s supposed to work

Here’s a representative definition of the American Dream: “through dedication and with a can-do spirit, [anyone can] climb the ladder of success.” You may transcend social and class barriers, get the life you want, own the things you need, ensure your children will want for nothing, and establish lasting stability for your family.


If you think I’m about to drop trou’ and take a shit on the American Dream, you’re wrong. The American Dream is a really, really beautiful idea! It represents a great leap forward in the rags-to-riches story that humans have been eagerly gobbling up for millennia.

Do you know what Cinderella did to get ahead? She planted a tree and watered it daily with her tears. Yeah. Angels had to take pity on her financial inertia. They threw down dresses of increasing quality until she was eventually made kween. Brb subtweeting her.

Do you know how Aladdin ended up rich in the original story? He found not one, but TWO imprisoned genies. TWO! TWO GENIES! Not trying to be controversial, but doesn’t that require both luck and the systemic exploitation of supernatural djinn labor?! Cancel him.

The way it actually works

My point is that class mobility has literally been a fairy tale for most of human history.

In moments of extreme unrest, you might get the odd up-and-comer—did you know Genghis Khan spent his youth as a homeless beggar?—but these were exceptional figures. If you give me the choice between trying to build wealth now, and any other point in history, I’d choose now.

The American Dream is a lovely thing because it promotes the idea that you have some control over your own destiny. It teaches the dreamer to value hard work, perseverance, prudence, and independence. And although following those prescriptions is not a guarantee of automatic success, each of those values are independently worthy. Even failure can direct your steps toward new and unexpected rewards.

Like this, right?
Girl. This is not a defensible financial strategy, girl.

But there is one glaring error in the supposition of the American Dream: that the world is inherently fair.

And it definitely isn’t.

More on this topic:

“Poor people are poor because they’re unlucky.”

I think this statement is true. But it’s also incomplete.

The leading cause of bankruptcy in America isn’t laziness, dumbness, or extravagance: it’s illness. 42% of Americans who filed for bankruptcy did so because they were drowning in medical bills. (We have a guide about how to pay them when you’re flat broke, because it’s such a common question!) The ugly and ungenerous part of your heart might say “those irresponsible fools should’ve had insurance.” Welp, 78% of them did.

The second leading cause of bankruptcy is job loss, at 22%. I wonder how much of that 12% minority didn’t have insurance because they’d been laid off and couldn’t afford the massive cost of paying out-of-pocket?

Sing it, sister.

It is true that there are certain things you can do to mitigate your health risks. Eat well, exercise regularly, be kind to your body. But each of these represents a tremendous task for someone living in poverty.

“Poor people are poor because they make bad decisions.”

If you’ve never struggled to make ends meet on a minimum wage job, let me guide you through a quick mental exercise.

Imagine yourself working a twelve-hour shift at a warehouse for $7.75/hr. That’s actually above the federal minimum wage right now—lucky you.

Your work is mentally and physically exhausting. Your body is strained from heavy labor and repetitive motions. And you’re starving. You earned $93 that day, and there’s a babysitter at home waiting to take $30 of it. You picked up an extra shift. It starts in six hours.

What can we realistically expect of you in this situation?

Get on the bus that may not run at that time, go to the grocery store that may not exist in your food-desert neighborhood, use the knowledge of human nutrition you may not have ever been taught in school, spend $25 of your hard-earned money on kale and lean meats or whatever, then schlepp home to spend another hour on your feet in the kitchen? Oh, and should you hit the gym before or after all that?

A $2 hamburger from the McDonald’s across the street begins to seem like a comparatively good decision, doesn’t it?

The problem, of course, is that a poor diet, little exercise, and manual labor are independently punishing to your health. Together, they’re literally deadly. But bad decisions often make sense for people who work long hours at multiple jobs for low pay.

“Poor people are poor because they’re lazy.”

It’s easy for me to make good decisions. My life is fucking easy!

I work only seven or eight hours, and only on weekdays. If I’m sick, I don’t have to go in, and I work from home whenever I like. I sit all day, which is only hard on my body insomuch as it’s too easy.

For the most part my health is good. My desk job gives me lots of downtime to find new healthy recipes to try. And I know what’s healthy because of the nutrition class I took in my (very expensive) college. It pays me enough to pursue sporty hobbies. Children aren’t part of my life plan; good thing I’ve always been able to afford birth control and gynecological care!

No one ever asks me to defend my choices. They’re not perfect, but they make sense for my life. Because I am not a walking cultural contradiction.

Unlike a hardworking poor person.

“Poor people are poor because poverty spans generations.”

Finally we get to the heart of the matter.

It’s easy to describe all these advantages as luck, and that’s not totally untrue. But when luck is so often defined as escaping systemic inequality by virtue of your birth, it’s not really luck. It’s the privilege of an unearned, unfair advantage that wouldn’t be possible in any truly fair system.

You don’t need a vivid imagination to see how a few generations of poverty can become an inescapable cycle. A parent works hard to support their family at the expense of their own health. When the medical bills inevitably arrive, deeper levels of poverty come with them. The child leaves school to take care of the ailing parent, or takes whatever job they can to keep their family afloat. They may face levels of bias based on who they are that shrink their paycheck, diminish their health, increase their odds of being prosecuted for a crime, underserve them with inadequate educational systems, underrepresent them in government, and isolate them in communities with shitty infrastructures.


A lot of people react to discussions of privilege by defensively saying “hey, don’t assume my life has been easy, I’ve struggled!”

I understand that defensiveness. I am rich now, but I have not consistently been so. My mother asked me for money often, starting when I was twelve. She needed my $300 in hoarded babysitting money and birthday checks to make rent, and she needed it badly enough to endure the shame of asking her child for money.

And it’s probably not that strange! Many rich people have stories like this.

Just because someone’s wealthy now doesn’t mean they’ve always been so. And even if they have, whatever! Wealthy people can have hard lives too. There are plenty of struggles money can’t protect you from. And isn’t feeling like you’re suffering and struggling kinda part of the human condition?

“Poor people are poor because they’re powerless.”

The critical distinction is this: my personal challenges have never erased my fundamental advantages.

Many aspects of my early life were unhappy. But I still went to a great school in a well-funded district. My parents never lost my health insurance (or their own). I never lived in a neighborhood that wasn’t safe. I was always surrounded by free and low-cost options for enriching childcare. “Spoiled for choice” is how I would describe the wealth of public parks, fantastic libraries, and wholesome Midwestern after-school activities like 4-H, Girl Scouts, church programs, and sports teams I had access to. Man, our library had a book-mobile that drove to my street corner, parked for an hour every week, and let me rent as many books and VHS tapes as I could carry home with me! That shit was the bomb!

Those are advantages that I didn’t earn, but I wouldn’t call them luck either. They’re the same advantages my middle-class family has enjoyed for generations.

They’re legacies of my family, class, race, country of origin, religion, geographic location, and local government, like a long chain of family inheritance. It’s power derived, however removed, from white supremacy, colonialism, and a host of other evils.

And that’s a pretty tough thing to wrap your brain around! I’m not proud of those advantages, and I didn’t ask for them—but I also can’t give them back. I don’t always know how to participate in their undoing. That shit’s a journey we’re all lost on together! But acknowledging the problem is the first clear step.

“Poor people are poor because they’re systematically disadvantaged. “

Bootstrapping means “getting into (or out of) a situation using existing resources.” It’s a noble thing to attempt, and entirely possible for some people in some situations.

But assuming that all people have access to the same set of “existing resources” is a destructive and small-minded folly.

It is my personal experience that one of the great virtues of Millennials and Gen Z is their esteem for the virtue of empathy. I grew up hearing hateful comments about people who use public assistance, food banks, disability, and other such “handouts.” Young people are building a culture that’s far less tolerant of poor-shaming.

Our imperfect ape brains find something easy and viscerally gratifying about passing judgement on others. Especially if it seems like they’re taking something from the rest of the group. Mock them, otherize them, vilify them, push their faces down into the mess they’ve made of their lives—it’s one way to feel good about yourself.

But it’s pretty savage. And you will find yourself no richer afterwards, monetarily or spiritually.

“Poor people are poor because they’re invisible.”

When a fabulously wealthy person walks down the street, it’s pretty common to see cameras following them to obsessively document the minutia of their lives. When a destitute person walks down the street, it’s pretty common for people to pretend they do not see anyone at all.

I think people do this because wealth is so aspirational. Subconsciously (or consciously) we think “I could be in that rich guy’s shoes one day.” So we study him, admire him, make him famous. We even vote with his interests in mind—that’s how deeply we want to become like him.

"Why are poor people poor? Idk because they're lAzY?"

And girl, can I just tell you? You won’t. The same thought, applied to the other guy, is so much nearer to the average person’s realm of possibility: “I could be in that poor guy’s shoes one day.” So many Americans live exactly one bad turn away from financial ruin. And really, what does a fabulously wealthy person gain from your respect?

Come to think of it: what does a poor person?

“Poor people are poor because they don’t have enough money. And we are too busy blaming them to ask the obvious question: WHY?”

When I was still a student, I got a freelancing gig creating a marketing video for a hunger prevention nonprofit.

One of the interviews stayed with me over the last ten years. It will stay with me the rest of my life. The woman being interviewed said:

“Sometimes there’s not enough food for me and the kids, so I’d let the kids eat. Sometimes I’d get so hungry I couldn’t fall asleep. When you’re that hungry, your body just wants to stay awake so it can go out and look for food. But I had to work the next day. So I’d set a bag of flour by my bed. And if it got really bad, I’d eat spoonfuls of flour to try to quiet the hunger enough to get to sleep at night.”

This woman had made terrible sacrifices to provide for her children what she could not provide for herself. Parents are quick to attest their willingness to take bullets for their children, which reflects a sort of impulsive, Gryffindory bravery that’s easy to promise and statistically impossible to collect.

But this woman… This woman got into bed every night and lay in the darkness with a gnawing hunger that left her physically and mentally exhausted. In the morning, she’d pulled herself up and gone to work, where she’d have to wonder if she’d make enough to feed herself this time.

If that woman sounds lazy—or selfish, or stupid, or parasitical, or profligate, or any of the other nasty judgmental words we use to describe the poor—then I have lost all understanding of what those words mean.

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11 thoughts to “Why Are Poor People Poor and Rich People Rich?”

  1. Thoroughly enjoyed this detailed description of what causes the financial divide, and why. Great job, ladies. You kicked some good financial sense with this well researched article. Love it!

  2. Damn this is good.

    The success narrative in the PF community is the thing I want to change the most. We’re too blind to our own advantages. We gloss over our own privilege, focusing instead on whatever tactics we happened to use and implying (or outright saying) that those tactics are the things that brought about the success. It’s kind of bullshit.

  3. It takes money to get a higher education. By the time your limited income has allowed you to save for an education the price has gone up. By the time you have saved for a house the price has gone up. I forecasted my budget into the future and it still didn’t help. In 2021 all rents and houses went up 25% to 35% but my income didn’t. So as a poor or middle income earner you can never get enough to get what you need. In the early 2000’s I could rent a 2 bedroom house for $500 a month now in 2021 a one bedroom is $1,200 a month. What wage can keep up with that?

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