Why Am I Poor? Understanding and Breaking the Cycle

Millions of people around the world ask themselves, “Why am I poor?”. In fact, poverty affects 9.2% of the world’s population, making it one of the most pressing issues of our time. As of 2022, 12.4% of Americans lived in poverty, up from 11.2% in 2021 This marks the first increase in SPM poverty rates since 2010.

This is an unfortunate question that is laced with shame, frustration, and a desperate longing for more. It also deserves a thoughtful response, not a quick answer. After all, the cause of poverty is rarely a simple one. Rather, it is an intricate tapestry woven from individual choices, systemic realities, and historical threads.

Understanding the Roots of Poverty

To start unraveling this web, we must acknowledge that your question is valid. Poverty is a real struggle, and it should not be dismissed or minimized.

Now let’s look at the potential factors contributing to your financial situation.

Systemic inequities.

In most cases, poverty is not caused by a personal failure. Many times, it is rooted in systemic inequalities that disadvantage certain groups based on their racial, economic, and social backgrounds. There are various ways in which these inequalities manifest, from unequal hiring practices to unequal access to quality education and healthcare.

As an example, Black and Latinx individuals are less likely to be approved for loans in the U.S., regardless of their creditworthiness.

Limited opportunities.

Children growing up in poverty often have limited access to quality education, skills training, and professional networks. In turn, this can limit job opportunities and perpetuate poverty due to a lack of marketable skills.

Moreover, geographical location can have a significant impact. Poor infrastructure and limited job opportunities may make it difficult for individuals to escape poverty.

Generational poverty.

Often, poverty is a generational issue. A lack of quality education, health care, and nutritious food can prevent children from developing skills and knowledge that will help them break free.

A lack of parental wealth also limits investments, entrepreneurship, or higher education opportunities.

Predatory practices.

Individuals can be trapped in a cycle of debt by payday loans, high-interest credit cards, and predatory leasing contracts.

As an example, credit cards can charge borrowers rates from 28 to 36%, but payday loans can charge rates as high as 398%. Furthermore, many borrowers are unable to repay the loan within the two-week repayment period. In the end, they are sunk deeper and deeper into debt by borrowing or paying another installment of fees.

Poor financial decisions.

In some cases, it is necessary to look in the mirror to understand why we are poor. We can lose a lot of money if we make bad financial decisions.

Let’s say you’re addicted to credit cards and live beyond your means. If you cannot afford your bills and credit card payments, you can quickly fall into poverty.

According to a Clever Real Estate survey of 1,000 U.S. credit card users, approximately 3 in 5 Americans (61%) are suffering from credit card debt. The average credit card debt is $5,875. Suffice it to say, that you may fall into this group.

However, if you have made poor financial decisions that have caused financial hardship for yourself, it’s not the time to criticize yourself. Instead, think about what you can do to change your finanical situation

Unfortunate tragedy.

Not to be a Fear Mongor. But, unpredictability is a part of life, and it can strike at any time — despite how prepared you are. There are many types of emergencies that can leave families destitute, including medical emergencies, accidents, fires, natural disasters, and identity theft.

It is common for medical expenses to cause financial trouble and even bankruptcy, as can the destruction of your home or an injury that prevents you from working. Approximately 20% of Americans report having medical debt, and medical debt accounts for 62% of bankruptcies.

Ultimately, getting out of poverty becomes nearly impossible when you are trapped in a cycle of poverty caused by the crisis.

Breaking the Cycle of Poverty

To escape poverty, you must be determined, self-aware, and committed to continuous improvement. The following steps can help you get started.

Shifting the mindset.

Every journey begins with taking the first step, and in this case, shifting your mindset is the first step.

It may not be obvious to many of us. But, our relationship with money is often influenced by our beliefs, experiences, and societal conditioning. Depending on how we view it, it may be viewed as a scarce resource, a source of stress, or even a measure of our worth.

What if we were to rewrite the narrative? Imagine if we could cultivate a healthy money mindset, one that empowers us to make smart choices, achieve our financial goals, and experience abundant living.

That may seem impossible. However, you can change your money mindset by following these…