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Click here to get your tickets to TFD's Career Day! If you can't join live, you'll still receive a recording of each session: https://www.eventbrite.com/e/career-day-tickets-137701473815?aff=YouTubePromo

In this episode, Chelsea talks about the high costs of poverty, and the higher premiums people living in poverty often have to pay.

Federal poverty line: https://aspe.hhs.gov/poverty-guidelines

Food spending stats: https://www.ers.usda.gov/data-products/ag-and-food-statistics-charting-the-essentials/food-prices-and-spending/#:~:text=In%202019%2C%20households%20in%20the,representing%208.0%20percent%20of%20income

Lower cost of less nutritious food: https://naldc.nal.usda.gov/download/34238/PDF#:~:text=In%20rural%20areas%2C%20food%20prices,percent%20above%20the%20national%20average

Food deserts: https://foodispower.org/access-health/food-deserts/

Auto loan interest rates: https://www.creditkarma.com/auto/i/what-are-subprime-auto-loans

Necessity rental prices: https://www.nerdwallet.com/article/finance/rent-a-center-prices

Cost of frequent moves: https://www.census.gov/prod/1/statbrief/sb94_18.pdf

Working multiple jobs: https://www.census.gov/library/stories/2019/06/about-thirteen-million-united-states-workers-have-more-than-one-job.html

Health insurance premiums: https://www.ehealthinsurance.com/resources/small-business/average-cost-of-employer-sponsored-health-insurance

No health insurance: https://www.census.gov/newsroom/press-releases/2020/income-poverty.html#:~:text=The%20number%20of%20people%20in,point%20during%20the%20year%2C%20respectively.&text=The%20Supplemental%20Poverty%20Measure%20

Annual physical costs: https://health.costhelper.com/physical-exam.html

Recurring bills: https://www.washingtonpost.com/news/posteverything/wp/2018/01/25/why-it-costs-so-much-to-be-poor-in-america/

Bank fees: https://www.thebalance.com/bank-fees-you-need-to-stop-paying-3576590

Need-based programs costs: https://files.eric.ed.gov/fulltext/ED485918.pdf

Check cashing: https://www.nerdwallet.com/article/banking/cash-check-paying-high-fees

NCSL: https://www.ncsl.org/research/financial-services-and-commerce/payday-lending-state-statutes.aspx

Most underbanked communities: https://www.americanprogress.org/issues/economy/reports/2014/10/30/99967/millions-of-americans-are-outside-the-financial-system/

Watch more of The Financial Diet hosted by Chelsea Fagan here: https://www.youtube.com/playlist?list=PLD30V46E07RR99cC0gCjKUbt-BKoDUcnc

The Financial Diet site: http://www.thefinancialdiet.com

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Hello, everyone. I'm coming to you before the video starts with something very, very important. I would never preempt myself if it weren't important.

And that is to tell you that on May 15-- that's a Saturday-- I, the TFD team, and tons and tons of our best career experts are coming together for our all-day conference Career Day at TFD. It is a full day of all kinds of workshops, mentorships, activities, exercises all around the topic of transforming your career. If you're just coming out of college, if you're looking to change jobs, if you're applying for a new industry, if you're thinking about becoming an entrepreneur, if you want to take control of your professional life, learn how to negotiate, get paid what you're worth, side hustle-- all of that stuff-- it is all happening May 15 on Career Day.

In addition to the day's activities, you are going to be getting a digital goodie bag full of all kinds of great stuff to use to better your career, and a 60-plus page workbook to continue all of your professional development exercises, and really make the most of all of the day's learnings. I will be there. The experts will be there.

And so will you. Tickets are just $29, and they are at the link in our description. Space is limited, so go, go, go, go, go.

Bye! Hey, guys! It's Chelsea from The Financial Diet, and do not forget, if you haven't already-- and if you haven't, honestly, what is wrong with you?

Hit that Subscribe button and hit the Join button to level up your whole life, and join us over at The Society at TFD. What is it? Who is she?

Find out more at the Join button. And today we are starting off our video with the quote by the inimitable author, James Baldwin. "Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor." And today, that's exactly what we're talking about-- the expenses of poverty, and the things that many of us take for granted that anyone who has struggled with poverty knows is more expensive when you're poor. One of the things that we cannot stress enough here at TFD is that while we do want to offer you guys as many tools as possible when it comes to improving your financial life, the ultimate and most important means to improving that financial life is to be starting from a relatively healthy financial position.

You don't have to be rich to take advantage of a lot of what we talk about on TFD, but being at least above the poverty line is going to be a key factor for this. And although there are things that you can do living below the poverty line to help adjust your financial situation and make better choices, it's important to stress just how much more astronomically difficult getting out of poverty is than building on a foundation. In almost every way in this country, we make life more difficult, more expensive, and more riddled with obstacles for the poorest among us.

Throughout our day, we are likely to make dozens of choices and encounter dozens of situations which we don't even really think about, but which become life or death for people who are struggling financially, because one missed bill could mean a snowball effect that lands you on the street. One small issue with your car could quickly mean losing your job. Getting a utility cut off could mean a domino effect on the rest of your finances, and just accessing your own money can mean exposing yourself to predatory lending that can put you into decades of financial burden.

Being poor in this country means living on a razor's edge for about everything you're going to do on a given day. And these five things are by no means exhaustive when it comes to how expensive it is to be poor, but they do start to give you an idea of how much everyday life becomes an impossible burden. And getting out of poverty is less the American dream and more of an American miracle.

But first we should start by setting a few terms. What does it mean to be poor? Well, the poverty line for US households in the contiguous 48 states is $26,500 for a family of four, or $12,880 for a single-person household, according to the Department of Health and Human Services.

This guideline is, for example, used to determine eligibility for welfare programs, as well as serves as the formal definition for what living in poverty means. It can vary state by state slightly, but this is the value that the federal government uses. And one thing to keep in mind as we go through all of these points is that poverty disproportionately impacts Black and Latino Americans.

So even when we talk about the poor, there is still a lot of disparity in terms of who that entails. And in many cases, we're also talking about pretty distinct acts of racism and discrimination. But let's, for now, bring the lens back up and start jumping in to the five things that are more expensive when you're poor.

Number 1 is food-- the basics. It may seem, on its face, like people who are poor will spend less on food, and though that may be true in raw numbers, you quickly get a more complete understanding of the situation when you account for it as a percentage of overall income. According to the USDA, households in the lowest income quintile spent an average of $4,400 on food per year, representing 36% of their annual income.

Households in the highest quintile spent just shy of $14,000 annually on food, but that represented only 8% of their total income. Low-income households do, on average, spend less per unit on food, but in order to spend less, they typically need to pick less nutritious or lower quality food options. It's about 1% more expensive to buy the exact same basket of food in a low-income neighborhood as it would be in a high-income one, according to the USDA.

But this is just talking about the raw cost of the food. It doesn't even start to take into account things like the time it takes to actually assemble or prepare that food or, in some cases, just getting to and from a grocery store in order to stock up. Many low-income households live in food deserts, defined by the Food Empowerment Project as places where residents' access to food options is restricted, or even nonexistent, because there are no grocery stores within convenient traveling distance.

About 2.3 million people live more than 1 mile away from a supermarket and do not own a car, according to the USDA. That means that their ability to get to these grocery stores is limited by time and distance, which often results in them being limited to more restricted grocery options that have, in many cases, less nutritious and less fresh food. And when available, yes, public transportation can play a role in making grocery stores more accessible, but you're still limited by where that public transportation happens to take you and what you can realistically carry by yourself on and off that public transportation, as opposed to someone with a car.

But while food deserts lack grocery stores, they're often full of options for high-calorie, low-nutrition food which, even at a chemical makeup, is truly designed to addict consumers-- with children, of course, being the most vulnerable to these cycles. When we understand how difficult it can be for the poorest among us to find adequate nutrition for themselves and their families, it's no wonder that with each passing generation, we're starting to see more and more impacts of these high-calorie, low-nutrition diets. Number 2 is housing and transportation.

For many jobs, especially for people living in rural or suburban areas, a car is simply a necessity to staying employed. But paying for a car is generally more expensive the lower income you are. Low-income borrowers are often sold loans that are twice as large as the value of the car, with high interest rates-- up to 29%, according to the Columbia Law Review.

They often have origination fees, and can have penalties for paying them off early, ensuring high amounts of interest are accrued. Monthly payments are still around the average of $500-- more than most can afford to pay. And if a household doesn't have access to a car, that usually means they're dependent on public transportation, which has, often, high associated costs, can be unreliable, and don't often take you to and from exactly where you need to go.

And when it comes to housing, many of the basic purchases that we take for granted can be outrageously expensive or predatory when you are relying on low income or net worth to finance them. Purchases like appliances, furniture, and computers, while often necessary for both work and life, are turned predatory via places like Rent-A-Center. These businesses offer a way to get expensive items immediately via a monthly payment system, but over the lifetime of the purchase, people who buy via these methods pay 3 to 5 times what the item is worth.

And when it comes to the actual housing itself, people who live in poverty disproportionately rent versus buying, with only about 39% of people in poverty owning the home they currently occupy according to the Census Bureau. And for renters, if they aren't staying long term in a certain place, will frequently accrue all of the various fees and expenses associated with the process of moving-- not just the actual expense of getting all your stuff from one place to the other, but things like security deposits, broker fees, et cetera. People who have to move more frequently-- which is more and more common the lower income you are-- will end up accruing these fees more frequently.

And these households are often rent-burdened, meaning they must pay more than 30% of their annual income on rent. This is often due to the lack of affordable housing options, forcing them into homes that they cannot truly afford, or forcing them to overcrowd their homes to make ends meet. Number 3 is health care.

For the working poor, health insurance tends to be an out-of-pocket expense, since most low-income jobs do not offer health benefits as part of their employment package-- if the people or even employees to begin with. This is especially true of the roughly 8.3% of working adults who work multiple part-time jobs in order to make ends meet. And the average annual cost for premiums, which is the monthly payment for health insurance coverage for people with work-provided health insurance, is $6,015 for family coverage.

In comparison, an individual health insurance plan, such as one from the Affordable Health Care Act's marketplace, is, on average, $1,041 per month for family coverage, resulting in an annual cost of $12,492, which is more than double that of someone with work-sponsored health care. This is, of course, because in many cases, employers-- like TFD, for example-- subsidize a substantial portion of that health insurance coverage in order to further incentivize the employee. Without that help, you're often left bearing the full burden of that health care coverage, which can be ludicrously expensive.

But this is, of course, all assuming that the person who lives in poverty actually even has health insurance, which is not a guarantee, with about 8% of Americans in 2019 having no health insurance at all. And of course, not having health insurance-- or very low-quality health insurance-- deeply impacts the kind of health care that people in poverty receive, especially when it comes to preventative care, which is often completely ignored. And when uninsured people do seek out medical care, they typically pay much more out of pocket.

For example, an office visit to a doctor with insurance is typically a copay of between $15 and $25. Without insurance, the cost is typically closer to $200. This means that regular visits to doctors and dentists are not just incentivized.

They're almost impossible in practice, which has huge costs-- both monetary and otherwise-- for long-term health and life expectancy. It's no surprise that if you don't catch a problem early, medically, it tends to be much more serious, and therefore much more expensive. Number 4 is recurring bills.

Because a huge part of poverty is having unreliable or extremely tight income, a big problem faced by those living on those super thin margins is incurring late fees or penalties on regular bills, which can either add on interest to the initial balance, or incur flat fees. And that's not even getting into the cost of reinstating a service if a utility such as electricity or water is shut off due to nonpayment. In addition to paying the outstanding balance, there's often a turn on fee that can be hundreds of dollars.

A $70 bill can easily become a $350 one in this way. And being in poverty also means that things like auto pay and automatic debits, which can sometimes lower the actual cost of the bill, is just not an option, because it runs too high of a risk of incurring overdraft fees, or refused payments, or late fees. And that's if the person even has a bank account to begin with, which is not a given, because even just having a bank account can have fees and costs associated with it, which many people cannot afford to pay.

Many banks charge a service fee if a certain minimum is not kept in an account-- typically between about $5 and $25. In this case, it's a very literal example of charging people for being poor. Lastly, the fifth thing that is almost always more expensive for the poor is simply accessing and using their own money.

So even just in terms of accruing that money, for many people who live in more poorly-serviced areas in terms of transportation, just getting to and from work can be a huge expense that cuts into their bottom line, and working itself can actually end up costing more in the form of loss of vital needs-based assistance programs such as TANF and Medicaid. After passing an earnings threshold and becoming ineligible for these programs, it becomes much more expensive to work than it would be to rely on these programs. And in this way, we're often disincentivizing people from finding gainful employment.

And then once you actually get to your job to earn the money and have the money to use, where do you store it? How do you access it? For most of us, we would say, well, obviously a bank.

But for those living in poverty, as we mentioned, it's not really that obvious. According to the FDIC, 68 million Americans are under-banked or unbanked-- 68 million-- meaning that they rely on non banking financial providers such as check cashing services, payday lenders, and pawn shops. And that means if they are employed, they cannot rely on direct deposit, and in some cases, they cannot deposit checks at all.

As someone who used to use check cashing services when I was at my worst financially, I can speak firsthand to just how predatory these systems are. But let's look at the numbers. Check cashing services charge either a flat fee, or a percentage of the check.

It can be 1% to 5% of the check's value, or a flat fee from between $4 to $10, depending on where you go to deposit it. And you might be hearing a lot these days about moving to totally cashless systems-- restaurants, stores, and various services that no longer accept cash, and how that's a move toward the future where everything is super easy and you can just scan your telephone to pay for everything. But going cashless actually aggressively disadvantages the poor, because many of the poorest in our society simply do not have access to all of that different kind of electronic payment.

But even most utility bills now can no longer be paid with cash. Instead, if you do not have a bank account, you have to purchase a money order, which incurs an additional fee of around $1 per money order. Most credit cards require a bank account to even apply, which means that if someone experiencing poverty has a necessary cost before their next paycheck that they can't afford, they either have to go without, which could mean going hungry for days, not getting necessary medical care, and more, or they could be driven to go to a payday loan lender.

The interest rates on these loans are astronomical-- in the hundreds of percents. Around 200% to 700% is the most common interest rate, according to the Center for Responsible Lending. These loans are short-term, and can carry origination fees as well.

And under-banking particularly impacts Black and Latino communities, with about half of all Black and Latino households reporting being under-banked, compared to about 1 in 5 white households. If I leave you guys with nothing else today, I want it to be a reminder to all of you-- those of you in poverty of course, but those of you who are lucky enough to not be in poverty-- that being conscientious about your own finances and making better choices is only ever going to be a part of the puzzle. Ultimately, if we want a fairer, more just society at every level-- except for the super rich, who have been really getting away with murder for the past 40 years in terms of regulation-- much of what needs to change is going to happen at the policy level.

And it can feel overwhelming to think about how we can impact policy, but those among us who have financial privilege of being stable and healthy and comfortable need to take it upon ourselves to ask ourselves how we can make it so that so many people in the wealthiest country in the world are not struggling to such an extent everyday to get by. Personal responsibility is great, but it can't be everything. And for many of the poorest people in our country, there is simply no personal responsibility-- yourself-- out of a context which is designed to keep you exploited and behind the eight ball.

I don't say all of this to make you feel hopeless. I say it to make sure that everyone knows that we all have a part to play in making sure these changes are systemic, and not just individual. We might think the cycle of poverty is something that we can never get rid of, but just remember-- when it comes to economics, almost everything that we take for granted ultimately comes down to policy.

As always, guys, thank you for joining us, and do not forget to hit that Subscribe and Join button, as well as to come back every Monday, Tuesday, and Thursday for new and awesome videos. Ciao!