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Should poor people build emergency funds?

by Shawanda Greene

Halloween Pumpkin

After looking at numerous cringe worthy images, I sacrificed relevancy for this picture of a happy jack-o-lantern.

The simple answer to that question is “Yes.” You think just because your income’s low you are excused from socking away money for a rainy day? You are not.

I understand there are people in this country who genuinely don’t have the means to save a dime. However, I seriously doubt that number is as big as indicated by the federal government’s definition of poverty.

Consider the fact that many of the nation’s poor receive governmental assistance on necessities such as housing, food, medical care, and child care. Certain localities even pick up the tab for transportation. I know people who’ve had their utilities paid by charitable organizations.

I have a friend who paid $110 a week to send her son to summer camp. It only cost her lower income counterparts $10 for the same camp!

Ever heard of Individual Development Accounts (IDAs)? IDAs are matched savings accounts that help low to moderate income earners save for the purchase of a home, to start or expand a business, or to acquire formal education. I know of an organization in D.C. that provides a 3 to 1 match on up to $1,000 of savings. ┬áThat’s $3,000 of free money! (Find an IDA program in your area.)

After receiving all that monetary assistance, your financial situation probably doesn’t look so bleak. You may not be able to save up the recommended 3 to 8 months’ of expenses, but you can save something.

Now, before you beat me up, this blog post does not and will not include my opinion on how much poor people in the United States should receive as assistance or whether they should receive any assistance at all. So, simmer down if my opening statements have worked you into a partisan, wing nutty frenzy.

With that said, there’s a very specific reason I came out of hiding to write this blog post. After a recent weekend getaway, a friend of mine returned home from her trip with some new roommates – bed bugs. From what I’m told, these are not the type of folks you want in your house. It’s hard to get a good night’s sleep when you’re woken during the early morning by these blood sucking critters.

Fortunately, my friend has the means to resolve this unforeseeable and expensive situation. The final price tag is estimated to come in around $1,000. However, her neighbors across the street, who are suffering from the same predicament, do not. And as a result, they have to live with bed bugs. Given that they receive a boatload of governmental assistance and recently received a settlement check from a pending lawsuit, they are not given a free pass for being poor. They absolutely should have the money to deal with the infestation.

There are instances when government, charity, or family won’t come to your financial rescue. Be prepared by living below your means and giving up on a few of life’s little luxuries.

If you’ve searched high and low for every reasonable method to cut your expenses or bring in extra income and still can’t save. With the exception of “keep looking,” I dunno what to tell ya. Excuses aren’t very helpful when it comes to changing the world or your financial situation for that matter.

Ninety-nine percent of the failures come from people who have the habit of making excuses. ~ George Washington Carver

What are some creative ways poor people can save money?

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{ 16 comments… read them below or add one }

@ConvertingMe October 24, 2010 at 4:24 PM

Poor people are the group that needs an emergency fund more than any other economic group. With an established emergency fund, the can escape the predatory lenders like check cashing, pay day loans, title loans, etc.

Also because so many are one paycheck away from and one disaster (car repairs, unexpected bill, etc) from ruination – the emergency fund would serve as a life vest until the next pay day.

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Shawanda October 24, 2010 at 4:35 PM

I'm glad you brought up pay day loans and other nefarious debt products. It's so easy to turn to these things when you're in a financial pinch. They just make a bad situation terrible.

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Alonzo October 24, 2010 at 5:32 PM

I'm amazed when people complain about the state of their finances but then I see them eating out at KFC or McDonald's. That food is nearly 2-3 times as expensive as making a meal at home.

Cook your meals at home. If you're pressed for time cook several meals on Sunday and put them in the fridge or freezer to use during the week. Take your lunch to work. Use the savings to build an emergency fund.

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Shawanda October 25, 2010 at 10:15 PM

Great advice! I was tempted to buy another slow cooker to assist in the preparation of weekly meals. I'm going to hold off on that until I start using the one I already have more consistently.

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Brad Chaffee October 25, 2010 at 9:07 AM

Shawanda, this post is thought provoking, and as you know, those are my very favorite. I think calling an apple an apple has the most impact even though it may ruffle some feathers in the process.

While there are some poor people who struggle due to no lack of effort, your quote at the end sums it up perfectly. Alonzo hit the nail on the head about the KFC and McDonalds comment.

If you're poor you should not be driving a better car than I have. Not because I don't want you to have a nicer car than me, but because you can't afford it. I have known more than a few welfare recipients who seemed to be living a little TOO large, yet they never seemed to struggle with the fact that it wasn't bought with their dime.

Great post, Shawanda! I am glad you came out of hiding. :) Have a great week!

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Shawanda October 25, 2010 at 10:30 PM

Thanks, Brad! I'm teaching a "Pay Yourself First" class in November for that DC organization referenced in the blog post. Most of the attendees are actually really good at managing the little bit of money they have, but I always get a few folks who complain about how it's impossible to save. They'll never get my sympathy! I hope to empower people, not enable them to subsist on mediocrity.

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ctreit October 25, 2010 at 11:06 AM

It is easy to make excuses, it is difficult to make sacrifices. – I recently heard from a friend of mine who told me that she had moved in with her parents. By "she" I mean my friend, her husband, and two children. They could just not make ends meet keeping up with the house payments and the expenses of a special needs child. Her plan is to get her finances in order and then move out again. I think it is a tremendous sacrifice and it takes a lot of courage to make such a move, but I also think that we as a society think the opposite of such a move.

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Shawanda October 25, 2010 at 10:21 PM

You're absolutely right. I think more and more people are leaning on family members to make ends meet. It seems immigrants are more likely to do that. I guess your level of comfort with shared living arrangements would depend on your culture (among other things). But it seems many immigrant groups are able to get by just fine with the help of their family. More Americans should consider it. I know if things get hard for me, I would not be embarrassed at all to move back in with my mama. It sure beats living on the street.

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leslie October 25, 2010 at 12:56 PM

$1,000? Your friend is getting RIPPED OFF!! I have been through the bedbug infestation. The first treatment (whole house) that cost $450 did not work at all for us. The second treatment (spot treatment) that cost $150 worked perfect!

DO NOT BUY $100 mattress covers! The $10-20 ones at Target and Walmart are just fine.

I know you do not want to go cheap with something like this, but trust me, it does not cost a fortune either.

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Shawanda October 25, 2010 at 10:22 PM

$150?! What company did you use?

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Leslie October 26, 2010 at 6:22 AM

What worked for is was Acc-Q-Rate Pest Control, Inc in East Brunswick, NJ. Their total charge was $158 (3 bedrooms) and included a free follow up if needed. It wasn’t the whole house so we only had to move and cover our bedroom stuff which was much easier.

The first company we used was Amco Pest Services, Inc in Farmingdale, NJ. The total was $433 for the entire two-level townhouse including free follow-up. The bed bugs were back after two weeks.

We were quoted $743 by Central Exterminating and $800 by Bowco Laboratories.

We were recommended Acc-Q-Rate by an apartment complex who used them exclusively. I considered that a great reference and recommend that as a place to start when looking for pest termination companies.

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Shawanda October 29, 2010 at 7:46 PM

Thanks for great info!

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Sasha October 28, 2010 at 2:25 PM

"Saving for a rainy day" may hurt those on government assistance. If you have funds in your bank account, you must disclose that to receive services. If you have too much, the government can reduce benefits or stop them all together. The programs of which you speak are help meets. If they determine you have enough to meet your needs on your own (which you do if you have money saved in an account), they will stop giving you that assistance. So then you spend through that money you were saving to make up for the assistance you WERE getting. Then you go apply again, hope your case is still open, hope they don't ask you to produce a million pieces of verification, hope your old caseworker is there, hope and hope and hope. Meanwhile, that nest egg you had is long gone and you are in worse shape than when you started. Emergency for the government is like 3 weeks. Think of what can happen to a family of 4 with no SNAP benefits for three weeks just because the single earner parent saved up a thousand bucks for a rainy day. Poor people SHOULD save for a rainy day, but the system is not set up to encourage that.

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Shawanda November 1, 2010 at 9:47 PM

You're right about many governmental programs requiring you to disclose your assets in order to receive assistance. However, the requirements vary based on where you live. For instance, DC doesn't use your assets to determine whether you're eligible for food stamps.

I also have to be clear that I'm not an advocate for keeping your income and assets low in order to continue receiving government benefits or to receive greater benefits. If people can do better, they should. I like having more power over my money by being able to choose where I live, what I eat, etc.

There are a lot of people who aren't living up to their full potential because they're afraid of taking a risk and making more money. If you don't believe you can, then I guess you'll live off the government your entire life.

Also, governmental benefits aren't going to make you wealthy. You might get a little uncomfortable while you climb, but I think financial independence is well worth it.

Now this is just me, but I wouldn't feel right taking someone else's money when I could make more of my own. It just seems wrong.

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Sasha November 9, 2010 at 12:01 PM

I agree with you on not keeping income low for the sake of keeping benefits. Government assistance is not enough to live comfortably off of in any case. There are ways for the government to make honest effort to get people off of assistance and into the work force, but it chooses to take the route it has currently. The government determines who is "worthy " of getting help and does not have any way for those who have that potential you speak of to use it. Rather than spend billions on PR campaigns, they could create job programs or educational assistance.

I don't think any one is afraid of making more money to get off gov't assistance. If there is a well paying job that can give you that pay you need to take care of all the necessities while raising a family, I don't think there is anyone who would turn it down in favor of food stamps, especially when there is more freedom involved with that ability to make your own money. But in the way most governments see the issue, if you can save a thousand dollars, you are not so poor you need help paying for food, shelter or anything else. It's hard to save that thousand for a family living on gov't assistance and there is no incentive to do it if that negative incentive is there. An earner in this type of family may be working part time for minimum wage and due to the fact that the gov't pays some things the emergency fund can be set up, but when you tell your caseworker that you have the money in an account, you run the risk of having your benefits cut. So that emergency you were saving for better not come along, because now you have used that emergency fund for needs. Now if that person gets a decent paying job, the cut in benefits won't hurt. The emergency fund can stay and grow even. But with just a menial job, there is an incentive to NOT save for a rainy day because every cent will be gone and you'll have to work harder to get back to where you were before. Applying for assistance is a lengthy process, and a lot can happen between applying and approval. For most, it is not worth the risk.

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tmgbooks.com January 27, 2011 at 11:34 AM

Damn, girl, where are ya'!

Bare with me here…(and, yes, I intentionally used that as opposed to "bear with me!)

Anyway…I'm researching an article I'm writing and Google the term, "gazingus pin," and up pops a link to your website and here I am! Now, in the past, this connection would not have happened…instead I would have gone from my desk to the bookshelves and pulled my copy of 'Your Money or Your Life," and found my answer there. The internet has changed all that but who knows where you might end up!

Anyway, again…you write great. Do you realize that? Interesting, funny, please keep it up…I'm bookmarking your blog.

Where was I? Oh, yea–there is no such thing as a financial "emergency." and, so, no need for an emergency fund either. If you want to read my reasoning behind that statement you can do so at the "Articles" section of my webpage.

One more thing–can you provide an outline of the class you teach (Pay Yourself First)? Please? Thank you. Write. Post. Peace. Out!

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