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Chelsea covers the super-important key differences between being broke or bad with money and actually living in poverty. Check out how one family went from broke to comfortable in one year in this video:

Poverty rates around the US

The Financial Diet blog:


Chelsea: Hi, I'm Chelsea from The Financial Diet and today I'm here to talk about a very important difference in money and in life, which is the difference between being broke and being poor. Everyone has probably jokingly referred to themselves as either broke or poor at some point, especially during college and in their 20s. Basically anytime you feel the pinch of not being able to spend for a certain amount of time, you're likely to call yourself one of those things. But there is actually a big difference betwee the two and depending on where you live, there are different sort of technical markers for what defines poverty. Here in New York, the poverty line is around $16,000 for a household of 2 people, which if you have ever lived in New York you know is a completely insane number. But everywhere is different based on costs of living and we'll include a link in the description to find out what poverty means where you live. 

Now has I've mentioned here on these videos before, I've actually experienced poverty when I was a little kid, but as I grew up my parents became more comfortably middle class. And even when I was poor as a kid, my poverty for me really meant things like not having new toys or clothes or things like that, but I never wanted for basic needs, I didn't go hungry and that meant that I could share food even sometimes with the kids who were "really poor" So even within poverty there are definitely variants. And then from about the ages of 18 to about 21 I experienced poverty again, this time very self inflicted as I've mentioned before on this channel it was really caused by my anxiety, my laziness, and my just recklessness when I did have money. My parents refused to help me out during this time because of my really dangerous behaviors around money, which meant that even though my family at home technically at that time was comfortable financially, I personally experienced a lot of markers of poverty.

For me this meant stuff like using check cashing places, driving really unsafe cars that I'd buy for like a couple hundred bucks cash and then get rid of pretty quickly. Things like not being able to pay bills or rent on time because I didn't have the money. Having defaulted credit cards and, you know, just generally never having money for luxuries and going out. And that made me really feel both ashamed and resentful because I hated saying no to things, but I also hated being put in the position to have to say no. And when friends would joke that they're so "poor" because they couldn't afford to go to a bar that weekend, it made me feel awful. I felt like I had to hide a huge part of my life because their definition of "poor" was like fun and relatable and my definition of poor was really sad and scary. Like the few friends that would come to a check cashing place with me were definitely freaked out by the experience. 

But even through all of that I would consider myself to have been broke and not poor because my situation was self inflicted and something that I could've overcome if I had changed the way I handled money. Real poverty for most often means caught on a cycle that is very difficult to escape even when you're making all the right choices with your money and it often means not having much in the way of help to get out of it. Now women especially black and latino women make up the majority of the working poor and a full 43% of Americans couldn't afford to pay their bills if they missed just one months paycheck. Now that's a shocking number, but what it also teaches us is that within poverty there is a huge spectrum of what that can mean for people's day to day lives. You could be living very materially comfortably but at the risk of having it all disappear or you could be struggling to feed your family. 

Serious poverty can mean a lot of things, but one of it's biggest day to day impacts is how expensive it can make very basic life needs. Buying items in bulk to save money or waiting for things to go on sale is nearly impossible. Buying higher quality items that don't need to be replaced or repaired all the time is also pretty much impossible. And having to use services like payday loans and check cashing places means that the poor often have to pay just to access their own money. As we can see being poor is a very real thing with a lot of very complicated often embarrasing meanings for people. So when we casually refer to ourselves that way, we're not just being ignorant or inaccurate, we're also being potentially very hurtful to the people around who are really dealing with those consequences. And broke is a more flexible term because it can often imply someone who's overall pretty financially comfortable, but experiencing a time when spending is not so much an option. 

For example, if you're at college and your parents are supporting you, but your checking account if empty that means for that time you're broke. And while you're in that situation you might have a friend who's actually poor. Someone who is on scholarships, doesn't have help from family members, is living pay check to pay check with a job she might have off campus, and so for her every weekend is your broke weekend. So that means for a time even if you're spending freezes are identical, your situations are not the same. And for her going out any weekend might be putting her in an awkward position. Really understanding the difference between the two and knowing how to talk about each situation and how to socially handle each situation is hugely important for being able to be friends with people of all different backgrounds.

For this video I spoke to my friend Danielle, her name's been changed, who grew up in serious poverty and was on government assistance until about 25 about what is was like navigating her friendships with people who weren't in the same position as her. She told me I used to be a master at hiding pretty much every detail of my life. No one say my apartment because it was a room in a creepty old guy's queens basement and my bed was a cot on the floor. I couldn't afford to eat some days and most others I would eat canned vegatables and ramen. I saved up all the money I could for my social activities so that I could keep a front of being "normal" with my friends because I was so afraid that if they knew I wasn't just "20 something broke" they way they were, they would stop wanting to hang out with me. So I would do stuff like go to a bar order one drink with a little bit of money I had and then drink water for the rest of the night and pretend it was a vodka soda by putting it in my first glass. Sometimes I'd take mostly unfinished drinks off the bar when people left them and drink those. Keeping up the appearance of being "normal" is sometimes the most expensive part of being poor. 

And it's very easy for us, especially when friends don't often talk about money in a very transparent way, to not understand what poor really means for your friends. There are many friends who are too ashamed to be honest with their social group or are asked for help when they need because they think that their friends either wouldn't understand or would no longer want to hang out with them. And we've probably all have experienced some version of this when we couldn't afford to go to something that our friends were going to and we were faced with awkward delimma of do I either say that I can't afford it and be judged or do I pretend that I'm sick or something and lie to my friends? And it's an awkward situation, but it's isolated. Now imagine if that were every detail of your life.

Remember that money means different things to different people and what might seem like no big deal to you could be the difference for someone else between eating that day and going hungry. Being careful with the way we talk about these things and the way we make the people around us feel is one of the biggest steps we can take to becoming smarter, more thoughtful, and more open about money. If we're the friend that are more financially insecure friends feel comfortable going to that is a huge life achievement. Sometimes the biggest thing you can do is just letting someone else know that you understand. So as always, thanks for watching and don't forget to hit the subscribe button and to go to for more, bye!