Psychology of Money

How to Break Your Financial Vicious Cycle Part 1

Financial Vicious Cycle Part 1

One of the many many reasons I blog is to share my experiences and strategies on how to break out of poverty just in case somebody out there in the nameless void can benefit from what I say. If there’s one thing that I pride myself on and consider myself an expert, it’s finding and implementing ways to break out of the financial vicious cycle. I was in poverty for the first couple of decades of my life. Getting out of poverty has taken me a good portion of the next decade. So I can claim that I have plenty of experience.

 

Contrary to what many financial bloggers and vendors of personal finance and self-help books say, poverty is not just caused by some unhealthy mindset that you can defeat by thinking positive thoughts to attract wealth from the universe. Many times, the causes are much deeper than just not knowing how to track your finances or going out a lot on weekends with your girlfriends to hang out in bars or having a scarcity mindset. Being entrapped in the financial vicious cycle of poverty is not just about being broke and living paycheck to paycheck.

 

It’s that feeling, backed by years of experience, that whatever you do, you’ll never get ahead in life. That your life will be one endless struggle to stay afloat. It’s that sinking feeling that despite having substantial savings at some point, it’s only a matter of time that a disaster looming around the corner will bring you back to square one. I’ve seen this play out over and over again within my family that it’s no longer interesting.

 

Before I dig in, I have to concede that there are times that poverty can be rooted in psychological or mental reasons. Many of those who find themselves in a financial vicious cycle lack impulse control, for example, or are uninformed about financial options.  Many times, they just plainly don’t earn enough.

 

IT’S NOT JUST IN YOUR HEAD

Structural causes of poverty

But what many financial guru neglect to mention is that many causes of poverty are structural. This means that poverty is not just in our head; there are actual government regulations and policies – or lack thereof –  that keep poor people poor. Some examples at the top of my head:

 

  • The low quality and oftentimes physically inaccessible educational facilities (father: “I had to walk HOURS to get to primary school);
  • Almost non-existent hygiene and health facilities (indoor plumbing was virtually unknown on our side of the mountains until late ’90s, when I was last there); and
  • Limited work and economic opportunities (younger cousin living in our home province: “yes, I’m very content working in a call center because my only other option is to work as a saleslady”)

 

It’s obviously extremely hard for uneducated and frail people to compete in the current job market and look for better opportunities elsewhere unless they have external support, either from the government or from slightly better-off relatives. Which leads me to my next point – that poverty is not individual. It’s not just you who’s poor, it’s your entire family/clan.

 

Inter-generational poverty

Many of us who are products of inter-generational poverty are most likely to stay in poverty. If your parents, grandparents, great grandparents were poor, you’ll most likely to end up poor. The children of poor people, statistically, will end up poor the same way that the children of rich people, statistically, will stay rich. To learn more about this claim and also to prove that I’m not just pulling this information out of my ass, follow these links to studies conducted by the Chronic Poverty Research Center.

 

If you are lucky enough to have a family member who, against all odds, is able to get ahead in life either by marrying up the economic ladder or by working abroad, you can be sure that the entire family, nay clan, will look at them for support. This makes it hard for that person to completely turn their economic future around. Rightly or wrongly, the clan will see them as an economic lifeline, a bouy that will rescue them in times of real or imagined need.

 

This is just one of the many ways that inter-generational poverty is perpetuated. There are as many stories about this as there are families in poverty.

 

Beware of all advice

We have to acknowledge that being trapped in a financial vicious cycle is caused by many factors and that we should be wary of people selling us an easy way out.

 

I know that many of these so-called financial experts and gurus are aware of these structural causes intellectually but choose not to address them. Why? For one, thinking and talking about poverty is such a bummer. More importantly, it’s very hard to sell services and books that basically say that it’s extremely hard, on an individual level, to get out of poverty, let alone amass riches.

 

It will force them to do more research and think outside of the box instead of just essentially copying what other writers have already said over and over again. 

 

It’s so much easier to say that poor people merely need “discipline”, “hard work”, and “positive thoughts” and then sell them unimaginative books borderline plagiarized from the next guru.

 

As a formerly poor person who has family and loved ones still mired in poverty, I want people to know that those who think we only need hard work, discipline, and positivity (among other things) are condescending, insulting, and unhelpful. I can’t think of a job harder than karga-tapas (manually cutting and loading sugarcane into a truck or train wagon), which my uncles do, and it pays shit.

 

Don’t be jackasses, guys.

 

Ultimately, simplifying the problem and blaming the poor for their poverty give a free pass to government authorities and officials who promise us the world during elections and fail to deliver on these promises.

 

It’s disheartening to see that poor people are blamed for their poverty, as if they WANT to remain poor. As if they CHOOSE to be poor by not working hard enough. I’m just saying that if you, your parents, your grand parents are poor, it’s most likely not your fault.

 

THINKING OF WAYS TO GET OUT OF POVERTY

Why am I saying all these downer things? Because it’s better to be prepared than to be delusional from all the unrealistic advice floating around.

 

The truth of the matter is, there is no simple way out of poverty. Trust me, I personally tried some of these unhelpful tips myself. Among the unfruitful things I’ve done is to try to have the universe conspire and give me massive riches (leading me to join several networking companies, naturally. POWER!!!). I had big hopes because one of my friends told me that he got his dream boyfriend this way. Well, the riches didn’t materialize and the boyfriend turned out to be a catfish. We were both out several hundreds of pesos for the book alone.

 

But it does not mean that there are no measures we can take to get out of our financial vicious cycles and improve our economic futures. I laid out some causes of poverty first to make you think about your particular situation. There is no one-size-fits-all approach out of poverty. However, thinking deeply and understanding your specific case is a great first step.

 

I’m telling you this now because getting out of poverty is not going to be easy. It’s going to take years and it will need your attention. You need to be strong. It will break your heart. But it’s going to be worth it.

 

If this does not apply to you, great! I’m envious.

 

But if you were or are in poverty, you need to gird your loins just to bring up your net worth to zero. It’ll be hard, but you also need to be kind to yourself. Circumstances are stacked against you, after all. Also slightly better off people are ready to dismiss, blame, and ridicule you for being poor.  No need to internalize that negativity.

 

In my next post, I will share the specific, actionable steps I took to get out of poverty. Please watch out for that. Even if only one person will benefit from what I’m writing here, I’ve already done my job.

 

What do you think causes poverty in your home, family, or community? Are there things you want to share? Please share your thoughts below in the comments section.

2 thoughts on “How to Break Your Financial Vicious Cycle Part 1

  1. Wow, new posts!! I need to catch up!
    The truth about poverty hurts and I’m scared to live the rest of my life being stuck in this cycle. I’m so thankful there are free resources and people like you to promote financial literacy. I’m sharing this with my friends to extend the learnings to my community. Thanks, Uncle. You’re the best!

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