Credit Wise
(featured column)

Living in Poverty

by Jennifer Wallis

Poverty is a serious issue throughout the world. In my home state of Oklahoma , we rank 13th in the nation for people living in poverty. Over 50% of all babies born in Oklahoma are born under Medicaid. 50% of those living in poverty reported that they are working 34 hours a week with an average income of $6.51 per hour. As defined by experts, a family of four with two children would be living in poverty if their annual income was less than $19,157.  More...

Recently, I attended a local conference regarding Financial Literacy in Oklahoma . As part of the conference they had a “poverty simulation.” The purpose was to give us some idea of what it would be like to live in poverty. I can’t say that I know what it really feels like to live in poverty because I got to end the simulation whenever I wanted. But, I can say that I learned a lot during the experience.

We were assigned an identity and given a summary of our current life situation. Stations were set up to represent the utility company, the mortgage company, a pawn shop, check cashing loan store, grocery store, and public assistance. During the simulation, I became a 19 year old, unemployed, high school drop out, single mother with a live-in boyfriend. Our bills totaled $555 per month including a mortgage on our mobile home, lot rent, utilities, food, and a car title loan that we had taken out. We also had to give transportation passes at every stop to account for the gas or the bus to get us there. Our monthly take home pay was $794.00 per month including $234 in TANF (Temporary Assistance for Needy Families) benefits and $120 in food stamps. That left us with $239 per month for everything else. Trust me $60 per week for a family of three for everything else (such as gasoline for the car, medicine, car repairs, diapers, toiletries, and other items) does not go far. Just to make it interesting we were also given several items of value to pawn if we got desperate.

Before the simulations started, I told my partner (a.k.a. my live-in boyfriend) that I knew exactly what we were going to do. We would pay our bills by priority in order of importance (housing, food, car, utilities and then the car title loan). In my real life as a credit counselor, that’s exactly what we teach people to do. I also informed him that we would not go to the pawn shop at all. I knew that I was going to fly through this exercise with no problems. I am a money management expert, right?

It was amazing to me how quickly my priorities changed. In a matter of minutes I transformed from the calm budgeting expert who had it all figured out to someone who was just living in survival mode. Much of my reason and logic went out the window. I could not pay the mortgage first as planned because we only took home $110 per week from my boyfriend’s job. It was 3 weeks before we had enough to pay the mortgage. In real life, I tell people to pay their mortgage first since we want them to avoid homelessness. In the simulation, we paid the mortgage next to last and had been evicted by the time we came up with enough money to pay it.

In real life I advise people to avoid paying high fees for services such as check cashing and to stay away from the pawn shop. Logic would tell you that it is much cheaper to open a checking account at the local bank or credit union than to pay fees for check cashing services. In the simulation, we did not have a bank account and could not obtain one. In order to cash my boyfriend’s check to get money to pay the bills, we had to pay a $10.00 fee for every check we cashed. When we got a cut off notice for the utilities, I found myself in line at the pawn shop to hock my stereo. I took the money from hocking the stereo to pay the gas bill just before they cut it off. I also had to stand in a long line at the public assistance office just to confirm my TANF benefits. I had to take my baby with me since I could not afford daycare. I stood in line for so long that the office closed and I had to come back the next day. I witnessed another single mom making her sick child stand in line with her because she had no other choice. She could not afford daycare and the child could not go to school when she was sick.

It was so amazing to me how quickly I changed my priorities during this exercise. In reality, it is pretty easy to sit behind a desk and tell people what they “should” do with their money. When you have extra money, it’s easy to talk about all of the responsible things you should do with it. I guess it’s the financial equivalent of armchair quarterbacking. In my job, I recommend the logical, money saving way to live. However, when I found myself in the situation of not having enough money to take care of my family and keep from getting evicted, I just did what I could to survive. If a station forgot to ask for my transportation pass (we were required to give them at every station) I didn’t offer it. I just kept it and hoped to get through the transaction without having to give it up. When the gas bill was due and payday was days away, the pawn shop looked like a pretty good option. When the problem of no checking account stood between me and getting money, I did not care that I had to pay the $10 fee for every check. I just needed the money.

One hot topic in Oklahoma is payday and B loans, which are loans that cost around 421% interest. In Oklahoma , these companies grant about 89,000 loans per month. Opponents say that they target low income clients and take advantage of them with exorbitant interest rates. Loan companies say that they are designed to loan money for emergency situations and that all of their fees are clearly disclosed. As credit counselors we advise people to try other options instead of taking out a high interest loan but we also help people repay their obligations. After the poverty simulation I can see that when you desperately need money, you will agree to almost anything to fill that need. When you have money, you have options. When you don’t, you just do what you have to do to keep a roof over your head and food on the table.

After a few-hours simulation, I can’t pretend to intimately understand all of the issues that people who live in poverty face. However, I do feel like I learned some things. As advisors, we need to make sure that the good advice we are giving is practical to the person receiving it. It is important to be aware of all of the programs available to help people rise above poverty. For example, I learned about a program that would allow me to go back to school to learn a trade and provide daycare for my child so that I could take classes. When assisting people who live in poverty, we may have good ideas that may not be immediately possible. It’s important to help them bridge any gaps that may keep them from being financially stable by referring to other programs that may offer help.

While making the right choices and personal responsibility are certainly factors in financial stability, there are many others that come into play. We must make sure that people have the resources necessary to help them succeed. Lawmakers, social service organization employees and the general public would benefit from a poverty simulation.

Even though I just walked one short mile in the shoes of someone living in poverty, the knowledge I gained will definitely impact my job as well as my personal life. Next time you think that you would never end up making the same choices as poverty stricken individuals, I encourage you to try it. You may be surprised. I was.

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Copyright © 2006 by Jennifer Wallis. All rights reserved.

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