Living in Poverty

They say money can't buy you happiness, but according to the research that is not completely true. Research indicates that money significantly impacts happiness up to a certain income level, where basic needs and security are met. This threshold varies by location but is often around $75,000. This tweet highlights the difficulties of living on the lower end of the income spectrum and how it can affect mental health. 

Poverty and Mental Illness

Poverty and mental illness sadly are intertwined. Being in poverty can lead to mental illness and mental illness can lead to poverty. This can create a spiral that is difficult to come out of. Improving mental health or income can both be beneficial.   

Poverty's Impact on Mental Health

Stress and Anxiety:

• Chronic Stress: Living in poverty often involves chronic stress due to financial instability, housing insecurity, food insecurity, and lack of access to healthcare. Chronic stress is a known risk factor for various mental health conditions, including anxiety and depression.
• Daily Struggles: The daily challenges associated with poverty, such as unsafe living conditions, discrimination, and limited social support, can also contribute to heightened levels of stress and anxiety.

Trauma and Violence:

• Exposure to Violence: Individuals living in poverty are more likely to be exposed to violence and traumatic events, both in their homes and communities. Exposure to trauma is a significant risk factor for mental health issues like post-traumatic stress disorder (PTSD) and depression.

Lack of Access to Resources:

• Healthcare Access: Limited access to mental health services means that individuals in poverty are less likely to receive timely and effective treatment for mental health issues.
• Education and Employment: Poor access to quality education and employment opportunities can lead to feelings of hopelessness and low self-esteem, which are associated with mental health problems.

Physical Health:

• Co-Morbid Conditions: Poverty is associated with poor physical health, which can exacerbate mental health issues. Chronic illnesses, malnutrition, and lack of healthcare can all contribute to or worsen mental health problems.

Mental Illness's Impact on Poverty

Employment Challenges:

• Job Stability: Mental illness can make it difficult to maintain stable employment, leading to job loss or underemployment. This loss of income can push individuals and families into poverty.
• Work Performance: Mental health issues can affect cognitive functioning, concentration, and productivity, making it challenging to perform well at work.

Social Isolation:

• Stigma and Discrimination: Individuals with mental health conditions often face stigma and discrimination, which can lead to social isolation and reduced social support, further exacerbating poverty.
• Support Networks: Reduced social support can limit access to resources and opportunities that could help alleviate poverty.

Healthcare Costs:

• Treatment Expenses: The cost of treatment for mental health conditions, including medication and therapy, can be prohibitively expensive for individuals living in poverty, creating a cycle of worsening mental health and financial strain.

Purchasing Power Stagnation

The combination of rising costs and significant inflation spikes has meant that many people have not experienced a meaningful increase in purchasing power in the past couple of years. We are working harder, making more money yet with rising costs we cannot afford as much. It's the perfect storm for anxiety and stress. Running on a treadmill not gaining any ground. It's no wonder the therapist in this tweet believes “what most people really need is money”. Since 1973, wages have not kept up with productivity, meaning people are working for less than they are worth or have been paid in the past based on GDP per person. 

Money is not always the Answer

People over the threshold of $75,000 are not immune to mental illness and especially financial struggles. Lottery winners have been known to blow through their winnings losing their fortunes in a few years. Individuals making over $100,000 can even run into financial struggles. A 2019 survey by Northwestern Mutual found that individuals earning $100,000 or more still carried significant debt, with about 18% of them indicating that they felt overwhelmed by their debt. 

Also around 30% of high-income households (those earning $100,000 or more) carry credit card debt from month to month. 

Being a higher earner does not eliminate financial woes or mental struggles. Lifestyle creep can occur at any income. If you are constantly spending 105% of your income you will constantly be dipping into savings or worse debt. Living within your means at every income is the best way to live and to stave off the poverty mental illness spiral. Always budget to be saving at least 5% of your income so when a rainy day does occur your savings can hold you over till the rain lets up.

Money doesn’t make you financially literate, but it currently helps the stresses of life. Having the financial freedom to leave a bad job or to pursue further education, start a business, or invest in personal well-being can significantly improve one’s quality of life and open up new opportunities.

Financial Literacy for Low Earners

Some people Wendi C. Thomas included believe it's immoral to suggest financial literacy for those earning poverty-wages. Now I obviously believe people need to earn a living wage and that wages should be keeping pace with productivity and that we have a big issue with workers not gaining the benefit of technological improvements in efficiencies. The gap between the rich and the poor is widening at an alarming rate and we are working the same 40 hour week and getting paid less statistically all while producing more is a massive problem that needs to be addressed.

 

But with that being said, saying financial literacy for those earning poor wages is immoral, seems quite immoral to me. Everyone needs financial literacy regardless of life situation or income. Two things can be true at the same time. Living wages can be needed and financial literacy can be needed. It is not immoral to try and educate. But I understand her message, she is insinuating that the powers that determine wages are using financial literacy workshops as a scapegoat to not raise wages. This is shifting blame or responsibility from the primary issue of the need for greater wages.   

   

Potential Solutions

Universal Basic Income (UBI)

As automation and artificial intelligence creates more wealth and efficiency for those with access to these new technologies UBI can help ensure that economic benefits are distributed more equitably across society. Universal Basic Income is a financial program in which the government provides regular, unconditional cash payments to all citizens, regardless of their income, employment status, or wealth. The goal is to ensure that everyone has a basic level of income to cover essential living expenses which would lift those on the lower end of the income spectrum out of poverty. UBI would help alleviate poverty and mental illness if it ever gets implemented. 

Value Added Tax (VAT)

As technology places concentrated wealth in a limited number of people who wield the newest AI or robot, adding a value added tax will help the government raise money from companies' increases in productivity that never ends up benefiting workers. It would tax a robot working on the assembly line and tax an AI that replaced a graphic designer. Companies will have decreased staff in the future which will lead to increased profits all while the government will have less people employed thus collecting less income tax. The VAT helps to elevate this issue and is a large way that UBI can be paid for.     

Addressing poverty requires a comprehensive approach that includes both immediate and systemic solutions. While financial literacy is a valuable tool that can empower individuals to manage their finances more effectively, it is also critical to advocate for living wages as well. This will ensure that workers are paid fairly for their labor, which is essential to breaking the cycle of poverty and improving mental health. Additionally, innovative solutions like Universal Basic Income (UBI) and Value Added Tax (VAT) can help redistribute wealth and provide a safety net for those most affected by economic and technological changes. By combining these efforts, we can create a society where economic stability and mental well-being are accessible to all, ensuring a more equitable and prosperous future.

If you found this helpful and would like help budgeting or investing please email me at taylormckeecoaching@gmail.com