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 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 all the bad financial advice we’d received.

Some advice was simply 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 It relied on outdated growth models, or ignored a rapidly changing globalized economy, or discounted the possibilities of living in a world transformed by technology. My grandpa loves telling his grandkids that the best way to get a job is to put on an uncomfortably formal suit and stroll into literally any workplace without an appointment or even a lead on open positions. Which sounds like a great way to get escorted off the property by security guards.

As far as bad advice goes, that stuff is kinda innocent. He’s old, and he grew up in another world. He just doesn’t get it. THIS GRANDPA is making SEVEN FIGURES with this ONE COOL TRICK—recruiters HATE him!

But the worst financial advice we grew up hearing is definitely not innocent.

The worst stuff is based around a horrific lie. It’s a lie about the fundamental reasons why poor people are poor and rich people are rich. A lie that harms and oppresses every rung of our society save the very tippy-top. And unlike my Grandpa’s stale takes, it’s constantly being revitalized and perpetuated by people who should know better.

(A version of this article was originally published on July 15, 2017. We expanded and revised the shit out of it because everything we’re saying has only gotten truer, and we’ve only gotten more pissed off about it.)

The worst, most persistent lie about success

Here is the lie:

Poor people are poor because they did something wrong. Rich people are rich because they did something right.

When our culture talks about money, in any context, there’s a high likelihood it’s aligned with this mythology. Personal finance is no exception. I hear respected authors, bloggers, and podcasters regularly conflate 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. And 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.

Even sadder, I have seen many 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!


Now, 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 folded into her local hereditary monarchy.How is that a defensible financial strategy, Cindy?! 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 gave me a time machine and told me to go build wealth at any time in human history, I’d pick a time very close to right 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?

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

And it definitely isn’t.

Poor people are poor because they’re unlucky, right?

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. It’s not surprising, given the fact that our cockamamy healthcare system links employment to healthcare. The 12% of people who declared bankruptcy due to medical bills without having health insurance… I wonder how many of them 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 surprisingly tremendous task for someone living in poverty.

Are poor people 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. (Don’t know where you found someone so cheap, but good on you.) To make ends meet, you picked up an extra shift. It starts in six hours.

What could 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 POURS are just lazy though, right?

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 are often the best available decisions for people who work long hours at multiple jobs for low pay.

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 regardless!

And those good decisions lend my life the appearance of a non-lazy legitimacy.

The activities I’m able to do make me seem pleasantly busy. But it’s an illusion. It’s only because my job doesn’t utterly deplete me that I have the luxury of time and energy to devote to myself and my household.

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 aren’t just poor in dollars. They’re poor in time, because they’re obliged to sell so much of theirs to make ends meet. As such, poor people may have no choice but to export or defer these tasks. They won’t go to the doctor because the bill scares them, and they die earlier because of it. They eat junk food because it’s either the only food they can access, or possibly the only luxury they can afford. Poverty is a cycle that creates the illusion of laziness. And I think the same cycle works in reverse, making the wealthy appear productive.

There are countless books and articles dedicated to obsessively documenting the habits of ultra-wealthy and successful people. Here’s one, that says self-made millionaires…

  • Read
  • Exercise
  • Volunteer
  • Sleep 7+ hours per night
  • Dedicate time to do nothing but think
  • Hang out with other wealthy and successful people

I can’t help but notice that “working” isn’t on this list. Sounds downright luxurious, don’t it?

Maybe they just came from poverty?

Now we’re getting somewhere interesting!

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.


Oh, so you’re saying rich people have no problems?

Definitely not.

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?

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

Are people poor because they’re powerless? Or powerless because they’re poor?

Sure, I had a lot of stuggles in childhood. (And we don’t even have TIME to get into the adulthood ones.)

But I still went to a great school in a well-funded district. My parents never lost my health insurance (or their own). Even when I wasn’t living in the best neighborhoods, I was always surrounded by free and low-cost options for enriching experiences. “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 inheritances. 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. And I wouldn’t want to! Why do that, when you can spread them around to the people who deserve them? Which is: everyone?

I don’t always know how to participate in the undoing of the world’s unfairness. That shit’s a journey we’re all on together! But acknowledging the problem is the first clear step.

Could poor people stop being poor if they just worked harder?

Bootstrapping means “getting into (or out of) a situation using existing resources.” It’s refusing to fail, powering past all obstacles, MacGyvering a solution to any problem with duct tape and personal grit. 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.

What I admire most about Millennials and Gen Z is their esteem for the virtue of empathy. I grew up in a pretty vicious post-Reagan monoculture of poor shaming. As a child, I heard so many hateful comments and jokes about people who use public assistance, food banks, disability, and other “handouts.” But young people are building a more diverse and inclusive culture that’s far less tolerant of poor-shaming. And that gives me a lot of hope for our future.

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, other 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.

Are poor people poor because they just don’t want it badly enough?

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 ma’am, 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 pulled herself up and went to work without any promises that today would be different. This mother’s persistence staggers my mind. Imagine the dedication and work ethic and love for her family she must feel. If the world were truly a meritocracy, I can’t think of a person more deserving of wealth.

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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An earlier version of this article was published in 2016.

25 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?

  4. As someone who has had her family shift from lower class to middle class, every day I am astonished by how much it took from nearly 3 generations to make it happen for my generation, who is now reaping the benefits of all their work nearly 75 years later. I didn’t even get to be considered ‘middle class’ until I was about 17 years old. This article is so incredibly important and because it emphasizes that soooo many of us have drunk from wells we did not dig. You need way more luck than hard work in order to climb the social ladder.

  5. The problem is there are quite a few ways to end up poor and a lot of them have to do with luck. Having a child at a young age out of wedlock to a deadbeat father is probably #1, and it’s incredibly common. Health care costs, as you’ve mentioned, is another big one. So many unfortunate circumstances can happen that are hard to break out of and can leave you stuck.

  6. Another excellent article.

    I am certainly ashamed of some of my actions in the past. I promise I will do better in the future (but as a geezer – nearly 62 am I) there’s a lot of baggage to loose.

    It’s not financial information that I am looking for when I read your blog: it’s life lessons like this one. I have enough dough. It’s the rest of living I need to work on.

  7. Great Article.
    I’ve been reading a book called Doughnut Economics by Kate Raworth and as both of you point out we are working with an economic policy written by middle class, middle aged, white men in the nineteenth century which has no bearing on our world and it’s problems now. I believe it is possible to eradicate the poverty issues you’ve discussed above, but we can’t do it with our current thinking.
    We need a new conversation and a new way forward and if more people like you Kitty, keep putting articles like this one forward then hopefully those in power will begin to take notice.
    No one should be eating raw flour to keep hunger at bay in the 21st century.

  8. Its such a tough topic. I think because we all know people who underachieved in spite of having all the advantages due to bad personal choices. Maybe that leads to the simplistic world view that all people who are mired in poverty made bad choices. It certainly gives everyone a pass if we can blame poverty on the poor. All your have to do to rationalize that world view is to find some NFL football player who turned millions into bankruptcy and use him as a poster child for how bad choices lead to poverty. But the fact that some poor people and some middle class people and some rich people make choices that lead to poverty doesn’t make that true for the majority. How many of today’s billionaires, if they had been born in either first or third world poverty, would have succeeded wildly? None probably.

  9. Excellent article, Bitches. I’m regularly frustrated by the posts of people that I mentally term “the dude-bros of personal finance” who think “if I can do it, anyone can!” without acknowledging the massive level of privilege that removed almost all societal barriers for them (because the majority of them are white males).

    1. Agreed. I think racism and sexism plays a part in this process too. Plus, if your parents are your role models and they don’t know how to break out of the poverty cycle, then they’re passing their mindset down to you.

  10. I’ve been setting aside 3 minutes (most) days to actively practice gratitude. A few things nearly always make it on my list of things I’m grateful for that I have almost zero control over: being a middle class white person in America, my health, and being able bodied.

    These things make my life so immeasurably better, and I did nothing to earn them. And it’s stupid that NOT being these things is such a disadvantage! It makes me mad, but I am trying to balance on the knife edge of acknowledging how these things implicitly help me, while working to change it as well.

  11. We need to take a closer look at how the government participates in sustaining the wealth gap:
    -The government shrinks the paycheque of the poor (via poor people paying for social programs such as unemployment and social security); Then hands poor people a refund each tax season, with no interest. At least the bank pays some interest
    -The government diminishes the health of poor people ( thanks to welfare, there are more single-parent households than at any other time in history). Where is the father of these children whose mother is eating flour? Look at how the welfare state has resulted in higher crime rates
    -The government increases the odds of being prosecuted (take a look at the legal aid which produces a 99% conviction rate in America, worse than Hitler’s Germany by the way)
    -The government underserves poor people with inadequate educational systems i.e. saddle poor students with loans that finance worthless degrees AND the role of affirmative action resulting in a higher dropout rate among minorities
    -The government isolates poor people in communities with shitty infrastructures i.e. social housing

    Worse of all of these, the government squarely puts the blame on the rich folks. The government takes no responsibility for their failed policies (socialism) which benefit the government at the expense of the poor. And all the government seems to advocate is more socialism so that they can stay in power.

    Please look at Thomas Sowell’s work. It will blow your mind.

  12. I am becoming a regular reader of these personal finance articles and, if I may, this is one of your best yet. Well written and completely accurate. Frankly, I cannot believe I am still reading (at age 61) about the struggles of working adults trying to manage hunger. Looking forward to more of your output!

  13. Great article, as always. But I feel as if nearly every article about poverty — including this one — only captures half the problem. Which half of the problem gets captured depends on the political viewpoint of the person writing.

    From my experience, both things are true: some poor people are poor because of circumstances beyond their control, and some poor people are poor because they make poor choices. (And really, many people are poor because of a combination of these things.)

    I grew up poor. My father came from a poor family, but my mother did not. Regardless, we were poor during the 70s and 80s. Growing up, I knew the other poor kids in school. I got to see how they lived and compare that to how we lived. My parents were poor largely due to their choices, not due to outside circumstances. With my friends’ families, it varied. Some of their parents did dumb things like mine did. Some were poor because shitty things happened to them.

    Being poor inspired me to want to go to college. College seemed like an escape from poverty. I worked hard with the single-minded goal to get a full-ride scholarship (because I knew my parents wouldn’t be able to help!). So, that’s what I did. I squandered that college education, but that’s wholly on me and an entirely different story. Ultimately, though, going to college did help me escape poverty.

    As an adult, I’ve had friends who were rich and friends who were poor. I’ve seen both sides. What I’ve learned is this: You cannot make blanket statements about poverty. You cannot generalize. Some of the poor people in my life have made stupid, stupid stereotypical decisions that cause them to remain mired in poverty. This absolutely happens. But some are poor because of medical problems. Some are poor because of bad career breaks. Some are poor because they were born in the wrong place at the wrong time.

    I’ve seen that yes, absolutely, it IS possible for a person in poverty to work themselves out of that situation. Social mobility exists. You can indeed climb the economic ladder. I’m not saying it’s easy, and I’m not saying everyone can do it, but it can be done. Truthfully, every poor person I’ve known personally who has worked hard HAS managed to escape poverty. (But my sample size is pretty small, right?)

    I’ve also seen that some folks are hit repeatedly with bad breaks. They get the fuzzy end of the lollipop in nearly everything they try. As you say, life isn’t fair. For some people, life is especially shitty. The saddest thing to see is when these people sort of give up and accept their fate. They stop trying. (I’m not trying to say that all poor people stop trying. I’m saying that I’ve seen a few surrender, though, and it breaks my heart.)

    Ultimately, I don’t care why a person is poor. I’m not here to judge. My aim is to do my best to help those who are receptive to help. Generally, that means I give whatever advice I’m able. Sometimes it means I provide silent financial help. (A couple of times, I’ve anonymously donated money through a friend of a friend in order to help somebody out.) Most of all, I try to challenge people who are dismissive of those who are poor, people who lack empathy for those who are struggling. These people piss me off. Fuck you if you take joy in the suffering of others.

    I guess what I’m trying to say is that poverty is a complicated issue, and I find myself frustrated with both the Left and the Right. Each side wants to claim the moral high ground and tries to paint the issue as black and white. It’s not black and white. It’s clouded with shades of grey. Many poor people are responsible for their circumstances. Many others, however, are not. They’re victims of fate. But all of these people deserve our help and compassion.

    1. Also, this sentence bugs me: “42% of Americans who filed for bankruptcy…” Piggy, is it REALLY okay to start a sentence with a numeral? Serious question. (You should text me the answer, though, because I won’t see the follow-up comment here.) I’ve always thought that if you start a sentence with a number, you have to spell it out. But this could very well be some made-up rule that I’ve imposed upon myself and my own writing haha…

    2. Thanks for putting this article in your round-up over at Apex Money JD or I would have never been able to read this fantastic piece of writing. Thank-you for sharing these thoughts and pushing back against on societal narrative Kitty.


    3. Honestly, I’ve rarely heard the “If they’d only get out of their own way they wouldn’t be poor” narrative. In fact the only time I really see it is in articles or memes railing against this misconception. The truth is, every single question she asked early in the article can be answered with a “yes” in many cases. In many cases, the poor are poor becuase they’ve been taught to be. Taught to be cautious, “defense” vs. offense, instant gratification vs. delayed, etc. But many others are at a disadvantage for historical reasons, genetics, geography, etc.

      But my point is that this article alludes to a narrative that I don’t really think is or has ever been a particularly common narrative.

  14. Jumpimg in here…It isn’t grammatically correct, to your point JD. Good news to me is that the internet readers seem to care more about quick readability, visuals for ease of understanding, and page speed than one or two quirky grammar rules broken. Ps, thanks for the link to this article. It’s really good!

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