There are, unfortunately, some people who are stuck in poverty who will always be stuck in poverty.  There are whole societies that are stuck in a poverty mindset.  They tend not to respect property rights.  They look down on entrepreneurship.

In the United States, for all of the problems, there is still a spirit of entrepreneurship. There is a respect for property rights up to a certain degree.  This is obviously not absolute or we would be living in a libertarian society. But Americans have a stronger respect for property rights as compared to many other people around the world.

Within the U.S., there are still people stuck in a poverty mindset.  This is especially unfortunate because these people are essentially enslaving themselves.

I am quite sympathetic to the plight of the American middle class and the lower class.  I hate the term “working class” because it implies that rich people don’t work.

I wish other libertarians were more sympathetic as well.  If libertarians would emphasize the struggles of the American middle class in particular, I think our platform would get more attention.

I know that there are many millions of people who work hard out there and are still struggling to get by.  Most aren’t struggling in the sense of putting food on the table.  Many of these struggling people have cell phones and televisions. But it is unfortunate that they work so hard but can’t manage to get out of the grind of living paycheck to paycheck with little in the way of savings.

If we didn’t have a central bank creating money out of thin air and manipulating interest rates, and if we didn’t have a government that took almost half of our income and that imposes thousands of regulations, then we would be far wealthier.  Someone could work a middle class job for 40 hours a week and meet their obligations and have plenty of money left over for savings.

Even though I think the government makes life extremely hard for us, it doesn’t mean we shouldn’t seek to better ourselves.  It makes me sad when I see people who have basically given up all hope. They have a poverty mindset, and it will stay that way forever.  Their only hope in life may be buying a lottery ticket.

Even here, we know the stories about lottery winners.  If you have a poverty mindset and win the lottery, it will probably just make you even worse off in the long run.  You won’t know how to handle the money.  You will spend it on material goods instead of setting up a secure and permanent cash flow.

Getting Ahead

There is a commonly repeated phrase that it takes money to make money.  There is certainly some element of truth to this, but I also think it is overplayed.  There are plenty of people who have made it big while starting with very little.  There are plenty of rags to riches stories.

I think to get out of a poverty mindset, it is important just to get ahead a little bit and to stay ahead.  You need a cushion. If you have a cushion, this will make the difference of many thousands of dollars over the years.  It may make the difference of tens of thousands or hundreds of thousands of dollars over a lifetime.

The most obvious example of this is in regards to debt.  When you owe debt, you are typically paying interest on the debt.  This is a cost.

It isn’t so bad if you have a mortgage on a house that you can reasonably afford.  Shelter is a basic human need.  If you buy something with a mortgage instead of renting, then the interest you pay may be worth it over the long run.  Still, for somebody who is on the cusp of poverty, I would recommend renting at least until getting that cushion built up (and some).

Think about other debt such as credit card debt.  If you don’t pay off your balance in full each month, you are paying interest on that debt in most cases.  It is hard to recover from this.  You are essentially throwing money away in most circumstances.  You need to pay off this debt so that you are at least starting from zero and not negative.

It is even worse if you look at people getting a payday loan or something equivalent.  These are high interest loans.  People taking these loans are generally not in a good situation.  The cycle tends to be continuous too.  At some point, they are taking out a payday loan because they don’t have money from paying back the previous one a couple of weeks earlier.

For someone in this situation, they could find extra work for just a couple of weeks.  Or they could cut down to the bare minimum for a couple of weeks.  They could drink water and eat for 4 dollars per day if they absolutely had to.  If they would just do this for a couple of weeks, they may be able to break the bad cycle.

This would be the same for someone with no money who is living paycheck to paycheck.  Take one month and try to live way below your means.  Save this extra money. Do it for a few months if you have to.  Put the extra money away in savings and don’t touch it except for an absolute emergency.

Having a cushion will not only save you from paying interest on debt.  It will help you save money by buying things at a discount. Maybe you can buy certain things in bulk that you would have bought anyway.  Maybe you can pay your insurance premiums for a whole year for a substantial discount.  This alone may save you a couple of hundred dollars per year.

When you have some money saved, and you have the discipline to not use it for impulse buys, you will find you have more power.  You can make smarter decisions over the long run with your money.  You will find little places to save that you might otherwise not bee able to if you had no extra money.

This is an important factor in breaking a poverty mindset.  You should have savings for emergencies and to buy yourself discounts.

There are tens millions of Americans right now who have virtually no money or, worse, a negative net worth.  They would not be this bad off if it weren’t for the size and scope of government.  But given the situation, most of these people could suck it up for a few months and find a way to build up a little bit of cushion.  Once you have some extra money, you will find it easier to keep it.