Recently it has come into vogue to speak about privilege, both within the personal finance blogosphere and among millennials in general. There are numerous PF bloggers who break up a line of posts about saving money, increasing side-hustle income, and investing with one about privilege. Often these take the form of first complaining about seeing classmates who had it easy, then talking about how hard they had it, then finally about how they were able to make it despite not having the advantages their classmates had. But yet they usually conclude that they, themselves, were somehow privileged, which contributed to their success. Their conclusion is that they were able to make it because of their privilege, but many others simply cannot.
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Now, if I really want to start up a Twitterstorm I’ll ask a question like:
“What, exactly, is someone who comes from a poor background supposed to do with this post?”
I’ll then hear about how there is all sorts of privilege in our society and that we must all confess our own privilege and realize that is what allowed us to succeed if we have. If we haven’t succeeded, it is probably due to a lack of privilege and not something that we have done or failed to do.
But, really, what if I’m 22 and came from the projects and reading a post like that? What am I supposed to do with that information? For some people, it may light a fire under them. They may get angry to see that others had it easy and that the deck was stacked against them. They may resolve to push themselves hard and break out of the cycle of poverty and, as a result, improve their lives. But many others may decide that there is no way they can succeed since they aren’t part of the exclusive club that can. They might as well not try.
Unfortunately, the vast majority of people who come from the projects will take the latter path. Such a post reinforces their feelings that they cannot make it so there is no reason to even try. That’s what makes me so angry about the whole privileged argument. You are dumping water on someone who is already drowning.
There is no privilege, just advantage
First of all, many people use the word “privileged,” when they should really be saying, “advantaged.” There is an important distinction between the two words. The first word means that you have access to special rights that others do not have. The latter simply means that you start in a better place. To see privilege, look at India where the caste system dictates what your job will be and the life you will lead. If you aren’t born into one of the higher castes, it doesn’t matter how hard you try or what you do – you’ll be denied the ability to live the life that someone who was born into one of the higher castes could lead. If you were not born with royal blood, you will not be King of England. In China, if you do not score well on IQ tests early in your life, you will not be permitted to continue on into higher education. These are examples of privilege.
To be advantaged simply means that you have a head start on others. If you start a marathon 15 miles from the start, you have an advantage over those who start at the beginning. If you have parents who have worked hard and sacrificed to raise the money to pay for your college tuition and you graduate with no debt, you have an advantage over others who come out of college with $30,000 in student loans.
Many people are advantaged, but, except in cases like those I mentioned, very few are privileged, particularly in free countries like the US. Do some people truly have privilege in the US? Yes. The children of individuals who have created a successful business may be able to eventually take over the business from their parents or get a job at the company through nepotism. Children of rock superstars are probably going to get let into clubs before those who are not. Sasha and Malia Obama are going to get people to return their calls long before they will return mine. Those particular opportunities would not exist for individuals who were not fortunate enough to be born into those special situations with those special parents. Note, however, that those opportunities only exist due to the work of the parents, so really the ability to bestow such privilege upon the children is a reward that the parents get due to their choices and hard work in life. Note also that others don’t need to have those privileges to succeed financially.
Advantage can be overcome
Let’s look at the example of the marathon where individuals start at different places on the course. Let’s say that I start at mile 10 and some of the Kenyan runners who win virtually every Boston marathon, completing it in under three hours, start at the starting line. With my heel spurs and obesity, combined with my general lack of exercise over the last several years, it would probably take me four or five hours to complete the next 13.1 miles of the race, assuming that I was able to finish at all. The Kenyan runners would probably pass me up around mile marker 15 or 16 and then finish the race hours before I do. I started with a huge advantage, but that doesn’t mean I would be able to overcome their natural ability and intensive training. The same would be true if I tried to race Michael Phelps in a swimming pool. If you put me close enough to the finish, I might be able to come in first, but simply having an advantage would not necessarily mean that I would come out ahead. Also, if I did not do what was needed to win – such as run or swim in the right direction – I would have no chance of winning the race regardless of the advantage with which I started.
Note that, regardless of who comes in first, we all have the opportunity to finish the race. There is no one sitting there at mile market 19 stopping people and dragging them away like there would be if people had privilege in the race. There is nothing stopping everyone from becoming financially independent within their lifetimes. Sure, some people may start out financially independent right from the start due to a gift from their parents, and others may start out well ahead because of their parent’s or grandparent’s actions, but that doesn’t mean that only they can reach a great place financially. There is no quota on millionaires.
“There is no quota on millionaires.”
So, why don’t more people from poor backgrounds succeed?
Let’s say that there is a large lake, one shore of which is only tens to hundreds of yards away from a group of swimmers, and the other shore of which is so far away, it is not visible. Those who are able to make it to shore live, while the others eventually run out of energy and drown. Some people are fairly close to shore, maybe ten yards or less away, while others are half a mile out. Others are distributed randomly between the two extremes.
Regardless of where someone starts, no one who doesn’t swim towards the close shore will make it. If the person ten yards out chooses to just keep treading water, or to swim away from the shore, he will drown just as assuredly as the person who starts a half mile away. Likewise, individuals who swim towards the shore, regardless of where they start, will begin to get closer to safety. If they swim for long enough, which will vary depending upon where they start, they will eventually reach shore. Obviously, it is harder for those who start farther out to reach the shore than those who start close in, given that after swimming for a while they only get to the point others ahead of them started, but it is possible for everyone to reach the shore if he/she keeps swimming in the right direction and has the capacity to swim for as long as is needed to make it in.
With finances, people who spend more time swimming towards the shore – doing things to make money and hold onto that money once they have it – than they spend swimming away from the shore – spending money and doing things that prevent them from increasing their income – will make it closer to the shore. People who keep mainly making good choices will eventually reach the shore. Also, the lake of personal finance gets gradually shallower as you near the shore, meaning you don’t need to make it all of the way to the shore to not drown and you can generally move in faster once you get close. If you follow the advice given by Dave Ramsey in The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness, you’ll eventually get out of debt and on the road to financial peace. If you follow the advice given in my book on cash flow management, FIREd by Fifty: How to Create the Cash Flow You Need to Retire Early and keep careful management of your cash flow, you’ll eventually become financially independent and not need to work to sustain yourself anymore.
People who come from poor backgrounds – the projects, the poor side of town, poor rural communities, etc… – often tread water or swim in the wrong direction. At best many swim in circles, giving up any progress that they may have made so that they never make it to the shore. There are some individuals from poor backgrounds who do make good choices and swim in the right direction. Those are the ones in invariably make it out of poverty and do well. They have a longer swim than those who come from wealthy backgrounds, but they can make it to shore if they keep swimming in the right direction. In fact, they are actually better off financially than many middle-class children. Here’s why:
Every adult starts out with no debt. Those who come from poverty, however, can get free tuition at many universities while those from middle-class backgrounds have tuition rates set based on their parent’s income. For this reason, those who come from poor backgrounds can make it out without student loans if they are able to work during school to pay for living expenses.
But too many make bad choices, causing them to tread water. Many don’t take advantage of opportunities to get a good education, making it more difficult to get a good paying job. They change jobs frequently, never gaining the experience needed to move up into positions of higher authority that pay better. They have children when they are not ready financially and don’t have children in stable relationships.
Many handle money poorly, buying expensive clothes and new cars. They don’t budget for emergencies. They run out of money and get payday loans. They buy meals out instead of cooking at home and pay for drinks at bars rather than buying a six-pack of beer or learning to make their own wine. If they get any money saved up, they blow it on a vacation. They buy expensive dogs they can’t afford and then give them away or put them in a shelter.
The real “privilege” is all in your head.
Many children of middle-class and wealthy families spend a period of their lives when they have little or no money, often through college and during their early working careers. They work their way out, however, and get themselves onto better financial footing. Children of poor families start in the same place, but the vast majority stay in poverty and never make progress. Some people attribute the success of those from the middle-class family to some sort of privilege. These could be special connections, financial support from parents and friends, or access to lines of credit or financing. While it is possible that a child from a middle-class family might get a loan from a parent or a job from a family friend, most simply do things that make them succeed. There is nothing stopping an individual from a poor background from doing the same things and having the same success.
Most “privilege” really isn’t privilege at all. It is the mindset of the individual. Children from middle-class and wealthy backgrounds may spend time without money, but they have the mindset that it is a temporary thing and that they just need to keep working to get through it. They expect to succeed and those around them expect them to succeed. If they don’t work on their homework and their grades start dropping, those around them push them to get back on track. If they lose a job, they expect (and are expected) to find another job and not go on welfare. Parents sacrifice for their children and do whatever they can to help them succeed.
Children from poor backgrounds do not expect to succeed and are not expected to succeed. They are told, over and over again, that no one makes it out. Those around them pull them down rather than lift them up. If they try hard at school, they’re called a nerd. If they are working hard to move up, they’re called a brown-noser or are accused of being full of themselves. Parents put impediments in their children’s ways, forcing them to skip school or work to do things for them. They force the children to take care of siblings rather than doing what is needed to lift themselves up like go to class or work a job.
Some in poor households also experience horrendous abuse, neglect, or situations. They have adults around them who are physically violent or always screaming at each other. They have parents who use drugs or abuse alcohol and are passed out much of the time. They have parents who go to the bars or the clubs at night and leave the children to fend for themselves. This type of behavior is detailed in Hillbilly Elegy: A Memoir of a Family and Culture in Crisis by J.D. Vance, which is an excellent book to read to understand the lifestyle to which many children are exposed.
Just as those from middle-class and wealthy backgrounds learn money management from their parents and adults around them, those from poor backgrounds learn from their parents and their community. But teaching better money management will often not change results because of the damage that was done to poor children when they were growing up. This mental damage represents a huge obstacle to be overcome before they can be successful. Simply teaching money management and financial literacy is not enough. I could give them copies of my books, FIREd by Fifty: How to Create the Cash Flow You Need to Retire Early and SmallIvy Book of Investing: Book 1: Investing to Become Wealthy, which would give them the financial literacy skills they need, but they would probably 1) not read them and 2) not follow the advice if they did.
Lifting people out of poverty
Because it is a mindset, rather than a situation, lifting people out of poverty is very difficult. You could take two individuals at age 18, one from a wealthy household and one from the ghetto, and have them swap places. Most of the time, the one from the wealthy background would pull himself out of poverty and the one from the poor background would go back into poverty. This is because it is the choices we make that either gets us closer to the shore or further out into the lake. This isn’t to say that it is the fault of the person in poverty that they stay in poverty. He has a mindset that drives his choices that causes him to remain in poverty. It can be extremely frustrating to see people continue to make bad choices, especially when they have been given a break, but it is the result of their mental state, which has been formed by their background. If it were simply a matter of giving people tools or teaching financial literacy, ending poverty would be simple. But it’s not.
Probably the only way to lift people out of poverty is to work to change the mindset, which in turn will change the behavior. They need to spend time around people who have the middle-class or the wealthy mindset, instead of those who have the poor mindset, so that they can see that different results come from different choices. They need to try to do things differently and see their progress. They need to have people around them holding them accountable and expecting more, rather than people around them encouraging bad choices and expecting nothing.
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