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How Poverty Taxes the Brain

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Re: How Poverty Taxes the Brain

#71

Post by lightbritefight »

Swizec wrote: post #62
scott_s wrote: post #26

Earlier quoted context omitted.

I observe this at the grocery store. The ones I visit have people from a wide range of economic status. When I go in, I grab what I need and don't think about price - it's almost always just the staples like bread, milk, fruit and eggs, and I know with certainty that I can afford it. And that I don't think about price is literally true until I'm told how much it costs, then I pay it, then I promptly stop thinking abo…

For an even more interesting observation: I have grown up not quite in poverty, but still in a single parent home with mum having to work multiple jobs at times to support me and my sister. Thinking about money has rubbed off on me. Nowadays I personally have zero money problems on account of my freelancing business doing great. But going to the grocery store habits learned over half of my life still kick in. Do I bu…

Easier doesn't mean better. You learned risk aversion and prioritization skills from your mothers habits. The fact is that you don't need to employ that aversion at the moment, but its a tool you have if you do need it.

The number of people I see who blow though heroic gobs of money astonishes me sometimes. I realize that my metric is entirely variable, but I'm talking about paying 2-3x for a similar good simply because its closer at hand, or offers some entirely minor benefit. This behavior isn't an issue when the wind is at your back, but I've had the unfortunate experience of helping, and eventually just watching, people that had a bad turn that just got worse because they didn't know how to stop their bad spending habits when they couldn't support them anymore.

Your mother gave you a gift. Its a gift with a mental toll, but in the long run its a fine price to pay for it.

Re: How Poverty Taxes the Brain

#73

Post by nickthemagicman »

msandford wrote: post #31
ritchiea wrote: post #14

I can speak to this. For a while in 2010 I was completely broke after leaving my first job out of college, which I hated, and having some other employment opportunities fall through. Having that little money changes your decision making process about absolutely everything. Obviously every financial decision is effected, even the tiniest purchases weigh into bigger questions like "will I have enough money in my bank a…

I agree with a lot of what you're saying but one thing that's always bugged me is how we account for sub-optimal decisions. What I mean is that if I make 60k per year and I choose to spend very little of it by driving an un-fancy car and cooking all my meals at home and living in a small apartment (perhaps with a roommate) I might be able to save half my net income. Or I could spend nearly all of that income on a big…

Your logic is flawed in that people in poverty everything is a priority.

When you live paycheck to paycheck you don't make 'decisions'. You just function and watch TV.

Re: How Poverty Taxes the Brain

#74

Post by sejordan »

randomdata wrote: post #67
bartonfink wrote: post #37

Earlier quoted context omitted.

I don't think it's that people with money NEVER stress about spending money - it's a matter of degree. Most software engineers are good earners by US standards, and as such, going to the water park for $40 doesn't really register. Buying a $1 soda isn't even worth thinking about. However, buying a $20,000 car would certainly lead to some thoughts like "Can I afford this? What won't I be buying because of this car?" T…

I find having a good income just brings on the stress of ensuring that you are saving enough for when you no longer have a good income, and so that $1 soda is still a mental hurdle, even if you can easily afford it.

I've found that automating my finances make a lot of those stresses go away.

I don't have to worry about accidentally overspending in my checking account and not being able to pay my bills because my bills are paid from a separate account, and they're all on auto-pay.

Likewise, my savings and retirement investments are automated and I just know that enough is going there. I have a checking account, which is labeled "Spending" and that's what I use to buy groceries, etc. It doesn't matter that it's literally dwindled down to almost $0 a couple times a month because my bills and investments are automatically managed.

My wife and I lived pretty poor for the first 3 years of our marriage, and only the last couple years have I been earning enough to be able to "set-it-and-forget-it" with my finances. The reduction in stress is HUGE, though. Earning more money definitely allows you to spend your time thinking about things that don't cause such stress.

Re: How Poverty Taxes the Brain

#75

Post by jerawolfe »

venomsnake wrote: post #42

Being poor is a full time job. I have fasted for weeks without problems and yet on the one occasion in the last 20 years where I was unable to buy food for three days the hunger was severe and overwhelming - the experiences had nothing in common. The cognitive load I have seen on friends struggling with poverty is immense - they are permanently mentally exhausted of all the hard decisions and complicated math needed…

The poor do tend to acquire cell-phones. They're necessary for survival and appearing that you aren't a lost cause.

So this would help many many struggling folk who do have access to the tech.

The prices for cellular service are still very high, though, and that's the biggest barrier. The poor who can't make the payments. But its not a bad idea that would help many people trying to move out and away from poverty

Re: How Poverty Taxes the Brain

#76

Post by jerawolfe »

venomsnake wrote: post #42

Being poor is a full time job. I have fasted for weeks without problems and yet on the one occasion in the last 20 years where I was unable to buy food for three days the hunger was severe and overwhelming - the experiences had nothing in common. The cognitive load I have seen on friends struggling with poverty is immense - they are permanently mentally exhausted of all the hard decisions and complicated math needed…

http://goo.gl/TjeDJq

Re: How Poverty Taxes the Brain

#77

Post by msandford »

nickthemagicman wrote: post #73
msandford wrote: post #31

Earlier quoted context omitted.

I agree with a lot of what you're saying but one thing that's always bugged me is how we account for sub-optimal decisions. What I mean is that if I make 60k per year and I choose to spend very little of it by driving an un-fancy car and cooking all my meals at home and living in a small apartment (perhaps with a roommate) I might be able to save half my net income. Or I could spend nearly all of that income on a big…

Your logic is flawed in that people in poverty everything is a priority. When you live paycheck to paycheck you don't make 'decisions'. You just function and watch TV.

I don't think you can make that argument reasonably. Everything is a priority for everyone on the planet, always. Demand is infinite and supply is finite. The world's been like that for as long as people have been around. Monkeys exhibit behaviors that you could argue have to do with some kind of understanding of "fairness"

http://www.cbsnews.com/8301-205_162-57497280/video-monkey-an...

If you have free time to watch TV it's because you're choosing TV as a priority over the extra money that a second job would bring you. That second job would also put a dent in the amount of free time you have to watch TV and be sold a story that you need to buy things in order to be happy. That's all advertising does.

Are there people working two jobs and still perpetually living paycheck to paycheck? Absolutely. Hell there are people working 80 hours a week making over $100k a year living paycheck to paycheck.

http://www.cnbc.com/id/26645137

It seems to me that "poverty" is a combination of where you start out in life and the trajectory that your decisions cause. What I mean is that someone who is born with a $10mm trust fund could easily whittle it down to nothing by the time they're 40 years old. And that a person who starts out with nothing, plus some malnutrition due to growing up in poverty can still get ahead if they make choices to consume less than they earn (no matter how little) and to invest their savings in things that can bring a return.

How does someone who makes only $20k per year manage to save money and invest it? I don't know the specifics to be honest. I'm having a hard time finding good investments myself and I make substantially more than that.

But I don't think it's right to say that people are 100%, unequivocally victims of circumstance and that once in poverty it's impossible to escape is correct. We as human being don't have any control over where we're born or who our parents are, but we do have some control over the choices we make.

Re: How Poverty Taxes the Brain

#78

Post by smtddr »

This makes perfect sense. If you're all stressed out trying to figure out if you'll have next month's rent or how you're gonna eat this week, you won't have the mindset to read a good book, consider how to improve your life in the long term or just relax your mind with some smooth jazz.

A sorta near-topic question.

How often do people check their bank account balance? I've been told I'm odd for not checking at least once a week. Do people who have more money not bother checking it? I only check once a month, when I'm about to pay my mortgage. Sometimes not even then, which means I don't know what my balance is for 2 months.

Re: How Poverty Taxes the Brain

#79

Post by nwhitehead »

This is a good paper but I believe it is misinterpreting the results. There is strong evidence that people have a limited capacity for making tough decisions. This "willpower" or "bandwidth" gets used up as decisions are made. I think the right interpretation of the results of the experiments is that fixed price decisions are tougher decisions for poorer people than for richer people. This interpretation would differ from "poverty impedes cognition" in the decisions of richer people to bigger price tag scenarios. I would expect asking richer people about what they would do if their house were destroyed in a plausible way not covered by their insurance would induce a similar cognitive impairment.

Re: How Poverty Taxes the Brain

#80

Post by nknighthb »

msandford wrote: post #31
ritchiea wrote: post #14

I can speak to this. For a while in 2010 I was completely broke after leaving my first job out of college, which I hated, and having some other employment opportunities fall through. Having that little money changes your decision making process about absolutely everything. Obviously every financial decision is effected, even the tiniest purchases weigh into bigger questions like "will I have enough money in my bank a…

I agree with a lot of what you're saying but one thing that's always bugged me is how we account for sub-optimal decisions. What I mean is that if I make 60k per year and I choose to spend very little of it by driving an un-fancy car and cooking all my meals at home and living in a small apartment (perhaps with a roommate) I might be able to save half my net income. Or I could spend nearly all of that income on a big…

Everyone has a sustainable comfort level. For most (single) people, that level is well above poverty, but well below a typical Silicon Valley programmer income. It's what you end up spending on ordinary monthly bills, food, and other routine needs and wants, including minor impulse purchases.

For me, when I lived in Santa Clara, this ran me about $2500, including medical premium and certain somewhat expensive tastes (and rarely cooking anything myself). It's where I typically ended up without thinking about it. (If I did watch myself a little more, I could pretty easily stay under $2000.)

I'm in a cheaper area now, but bought and partially renovated a decent sized house on half an acre in a semi-urban area, so the number has actually gone up a bit rather than down, but at the same time, some of the difference is effectively increasing my basis in a valuable asset.

If my income doubled, I'd get more work done on my house, but my routine expenses would otherwise remain largely unchanged. My savings would grow a lot faster. I would not have materially less money-related stress, because my needs are already more than met, not because my spending increased to compensate.

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