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Abstract

e financial capacity to spend it — literally.A recent <a href="https://www.oregonlive.com/business/2021/02/liz-weston-recommended-emergency-fund-totals-unrealistic-for-low-income-earners.html">article</a> in the Oregonian newspaper resonated. It’s from a personal finance column that dealt with the subject of emergency funds:<blockquote id="0777">…a household with income over $200,000 would need about two months to save one month’s worth of expenses. A household with income of$ 70,000 to $99,999 would need seven to eight months to save one month’s worth. A typical household with two or more people and income of$ 50,000 to $69,999 would need more than two years to save a single month’s worth of expenses\dots</blockquote><blockquote id="ba07">A three-month emergency fund could be a long-term goal, but it’s not something that should be prioritized over more important tasks\dots</blockquote>This seems super obvious, probably because it is.If you make$ 200,000 or somewhere around $80,000, you — theoretically — have more discretionary income than the person making$ 50,000 (or less). How much discretionary income doesn’t necessarily matter. It’s what you decide to do with it. How will you allocate it?If you’re making $16,666 a month with fixed obligations of$ 12,000 (hefty mortgage, expensive cars, etc.), you lead a fixed lifestyle that might influence your discretionary lifestyle.That extra $4,666 could be gone in a flash each month if all you do is buy stuff for your house, add to your wardrobe, and eat and drink at restaurants and bars most days and nights of the week. In fact,$ 4,666 in disposable income might not be enough. More people than we probably know turn to credit cards and such to finance their way of life.On the other hand, if all you’re making is $4,166 a month on a$ 2,000 fixed cost of living, but you allocate the leftover $2,166 more thoughtfully and less recklessly, you might find yourself in better shape, at least from a personal finance perspective.Logically, the more you make the quicker you’ll amass a formidable emergency fund, if you prioritize it. If you don’t, the$ 50,000-a-year earner absolutely can beat the $200,000 seemingly high roller to it.Much of it comes down to mindset.And privilege. Because it is crazy to classify$ 50,000 as something close to poor. It really is all relative. Fifty grand in Los Angeles can go a long way. It can also be akin to middle

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class poverty. At this level, it’s all about the choices we make.While it’s fun to riff on this stuff — I do it for a living — I don’t shed tears for privileged people like me and, quite possibly, you.I mean <a href="https://readmedium.com/there-you-go-again-blaming-the-victim-e1933899b5e7">I feel for people</a> struggling to save and invest because they’ve been led astray by mainstream personal finance. I try to play some small role in ameliorating the situation.For the truly poor, it’s next to impossible to even consider something as luxurious as an emergency fund.My Mother often asks about the homeless problem in Los Angeles. She inquires — why can’t they do something about it!?I give two answers:<ul><li>There’s not enough political or societal will.</li><li>But, even more importantly, the roots of the homeless crisis are so deep and structurally multi-faceted (economy, housing, racism, structural inequality) that we can’t begin to wrap our heads around how to eradicate the situation, let alone sort of fix it.</li></ul>My daughter hates Jeff Bezos. With his billions, she argues he could “solve” an issue such as homelessness. Sounds great in theory. It might be true. Though I have my doubts, given the complex nature of the problem.There’s figuratively and melodramatically poor. There’s literally poor. And there’s so poor you’re an asshole if you even utter the words “emergency fund” in association with what amounts to a where’s my next meal coming from state.When you view it along this spectrum, it becomes clear that we need to take care with how we throw around the word “poor.” Along similar lines, we should realize that when tossing around solutions to common money problems, we’re operating from a position of relative privilege, even if it doesn’t feel like when you’re struggling.This is where mindset is all you need to do something like start even a small emergency fund. Because you have the luxury of being able to change your mindset. You have space — even if it doesn’t feel like a lot — to make decisions.The truly poor among us have much bigger things to concern themselves with.This article is for informational and entertainment purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.</article></body>

Of Course Poor People Don’t Have Emergency Funds

We should take care with how we throw around words like “poor”

When you work in a bar, you learn a lot about how people behave with money.

You’ve definitely heard this several times before. If you spent the better part of three years working in a craft cocktail bar, you heard it several times a day.

Oh my god, I am so poor right now. I have no money!

This comment often comes right before the same person orders another $14 drink.

This is not being poor.

It’s being privileged, bad with money, or a perverse blend of both.

Real poor is there’s no way you’d ever think about spending $14 (times three) during a night at the bar. Instead, you get a 30-pack of (cheap) beer from as far to the right as you can go in the beer aisle at your local chain grocery store.

Depending on the context within which you consider it, this might not even be poor. We must take care with how we throw that word around, but —

For the sake of argument, the moment, and this article, we’ll classify this as actually being poor. It’s a literal conception of being poor, whereas the person who says they’re “so poor right now” prior to spending $14 represents some figurative and slightly melodramatic version of being poor.

This takes us back to Ben Le Fort’s excellent article the other day, which I briefly summarized in an article of my own.

When you’re agonizing over your daily discretionary spending, Ben argues context matters.

If you’re comfortably meeting your needs and effectively saving and investing for your future, there’s no reason to not satisfy at least some of your wants, particularly if they’re relatively small (e.g., coffee everyday or a night out at the bar).

If you’re literally poor, $5 a day or $75 one night matters. And you probably should not be spending it. You might not even have the financial capacity to spend it — literally.

A recent article in the Oregonian newspaper resonated. It’s from a personal finance column that dealt with the subject of emergency funds:

…a household with income over $200,000 would need about two months to save one month’s worth of expenses. A household with income of $70,000 to $99,999 would need seven to eight months to save one month’s worth. A typical household with two or more people and income of $50,000 to $69,999 would need more than two years to save a single month’s worth of expenses…

A three-month emergency fund could be a long-term goal, but it’s not something that should be prioritized over more important tasks…

This seems super obvious, probably because it is.

If you make $200,000 or somewhere around $80,000, you — theoretically — have more discretionary income than the person making $50,000 (or less). How much discretionary income doesn’t necessarily matter. It’s what you decide to do with it. How will you allocate it?

If you’re making $16,666 a month with fixed obligations of $12,000 (hefty mortgage, expensive cars, etc.), you lead a fixed lifestyle that might influence your discretionary lifestyle.

That extra $4,666 could be gone in a flash each month if all you do is buy stuff for your house, add to your wardrobe, and eat and drink at restaurants and bars most days and nights of the week. In fact, $4,666 in disposable income might not be enough. More people than we probably know turn to credit cards and such to finance their way of life.

On the other hand, if all you’re making is $4,166 a month on a $2,000 fixed cost of living, but you allocate the leftover $2,166 more thoughtfully and less recklessly, you might find yourself in better shape, at least from a personal finance perspective.

Logically, the more you make the quicker you’ll amass a formidable emergency fund, if you prioritize it. If you don’t, the $50,000-a-year earner absolutely can beat the $200,000 seemingly high roller to it.

Much of it comes down to mindset.

And privilege. Because it is crazy to classify $50,000 as something close to poor. It really is all relative. Fifty grand in Los Angeles can go a long way. It can also be akin to middle class poverty. At this level, it’s all about the choices we make.

While it’s fun to riff on this stuff — I do it for a living — I don’t shed tears for privileged people like me and, quite possibly, you.

I mean I feel for people struggling to save and invest because they’ve been led astray by mainstream personal finance. I try to play some small role in ameliorating the situation.

For the truly poor, it’s next to impossible to even consider something as luxurious as an emergency fund.

My Mother often asks about the homeless problem in Los Angeles. She inquires — why can’t they do something about it!?

I give two answers:

There’s not enough political or societal will.
But, even more importantly, the roots of the homeless crisis are so deep and structurally multi-faceted (economy, housing, racism, structural inequality) that we can’t begin to wrap our heads around how to eradicate the situation, let alone sort of fix it.

My daughter hates Jeff Bezos. With his billions, she argues he could “solve” an issue such as homelessness. Sounds great in theory. It might be true. Though I have my doubts, given the complex nature of the problem.

There’s figuratively and melodramatically poor. There’s literally poor. And there’s so poor you’re an asshole if you even utter the words “emergency fund” in association with what amounts to a where’s my next meal coming from state.

When you view it along this spectrum, it becomes clear that we need to take care with how we throw around the word “poor.” Along similar lines, we should realize that when tossing around solutions to common money problems, we’re operating from a position of relative privilege, even if it doesn’t feel like when you’re struggling.

This is where mindset is all you need to do something like start even a small emergency fund. Because you have the luxury of being able to change your mindset. You have space — even if it doesn’t feel like a lot — to make decisions.

The truly poor among us have much bigger things to concern themselves with.

This article is for informational and entertainment purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.