Lattes Don’t Make You Poor — An Unequal Society Does

TFD has previously made it clear that “the latte factor” (i.e., the savings from not buying a daily latte can make you rich) is mostly b.s. At the same time, TFD does admit that making your own coffee at home will save you some money. It won’t make you a millionaire, but it might help you put an extra $20 per month into your emergency fund, which is nothing to scoff at.

But much of the personal finance advice out there still operates under the idea that you are in complete control of your (financial) destiny. The personal finance world does admit that unplanned, likely non-preventable things happen — that’s why you’re advised to have an emergency fund after all! If you get seriously ill, your car breaks down, or your roommate moves out right before rent is due, you want to have a metaphorical piggy bank to break open. But beyond unforeseen circumstances like these, other factors may prevent you from reaching financial success, no matter how hard you work and how smart you are with money.

This is true even in the United States, the supposed “land of opportunity” itself. Americans love a good pull-yourself-up-by-the-bootstraps tale of rags-to-riches, but there’s a reason that those tales make such inspiring stories — they’re rare.

Much has been said about income and wealth inequality in U.S., especially since the 2016 primary season, where economic inequality was one of Democratic hopeful Bernie Sanders‘s main talking points. And with good reason. Between 1993 and 2015, the real income of the top 1% of the population grew by 94.5% (in other words, it almost doubled), while the real income of the other 99% of Americans grew by a paltry 14.3%. Today, the top 0.1% has almost as much wealth — about a quarter of the nation’s — as the bottom 90%.

Adding to the problems faced by those of us not in the top 1% or 0.1% is the fact that while inequality has been on the rise, social mobility has declined. In 1980, a 30-year-old had an 80% chance of earning more than his/her parents. As of 2016, a 30-year-old had about a 50% chance of achieving that same feat. Slow wage growth since the Great Recession has certainly not helped with that matter.

Once upon a time, getting a college degree was a great way to increase your chances of out-earning your parents. Going to college these days is extremely expensive, and having a college degree no longer guarantees a well-paying job with benefits. In many fields, that expensive degree is just the price of entry, but an entry-level job that requires a college degree may not pay enough for individuals to start paying back their student loans. To top it all off, the percentage increase in income for B.S. or B.A. holders over people with a high school diploma is lower for people who grew up poor.

I think that it is important for the role of pervasive socio-economic inequality and the realities of social mobility to be emphasized more in the personal finance world. TFD has addressed this in the past, and the ladies of TFD are always very up-front about their privilege, but I would like to see more of this from other personal finance bloggers (and ideally lifestyle, food, and mommy-bloggers as well — let me dream, okay). Because no matter how financially savvy you become, if you are born poor if the U.S., it is extremely difficult not to stay poor. If you are born middle class, you will likely stay middle class. And if you are born wealthy, you will likely stay wealthy, even if you spend less time thinking about finances than that hypothetical poor person. Social mobility has become one of the greatest American myths, up there with Columbus “discovering” America.

To be clear, I’m not telling everyone to adopt a totally bleak, woe-is-me attitude, accept that you are consigned to the socio-economic class into which you were born, and completely give up on your quest to become financially savvy. Nor am I suggesting that all personal finance advice can be summed up in the statement, “Be born into a wealthy family, if you can.” What I am saying is that you shouldn’t necessarily feel guilty if you aren’t able to leap up the economic ladder with ease, home-brewed coffee in one hand and iPhone with the Mint app in the other.

You have to recognize that we live within a system that literally prevents some people from climbing that ladder. Or rather, that gives one person a ladder with five-foot gaps between the rungs, while ushering the next person onto an elevator. Sometimes, you’ll do all that you can reasonably do to take control of your finances, and it still won’t be enough to get you the kind of lifestyle that you dream of or that you see on Instagram.

So, yes, you should still make a budget and pay off debt and try to cut back on how often you eat out. You should put extra money into a savings account or emergency fund if you can. However, we all need to be aware of the injustices of the system that surrounds us in the U.S. (and in many other countries) and fight back against them. While you’re cutting back on your Starbucks consumption, you can also do what you can to support progressive candidates and policies, get involved in local government, donate money to causes you care about, support local small businesses, be aware of any privileges you do have, and speak up. Personal finance bloggers should acknowledge the realities of our social and economic systems — and then they can go back to yelling at us for ordering takeout.

Rachel Suppok is an aspiring librarian and writer who spends most of her free time reading, writing, and watching British crime dramas. She can be found at her blog, The Way of the Worrier, and on Twitter.

Image via Unsplash

In-Post Social Banners-04
  • Mj D’Arco

    I almost follow you until your last paragraph about progressive candidates… as an immigrant who came here with nothing and who’s currently making a very good salary because of my hard work studying and getting into good schools, also picking a practical major I think the American dream is alive and well it’s just not free and not catered to people who want to follow their passions when their passion is underwater basket weaving.

    • Court E. Thompson

      You’re not wrong. The American Dream does work for some. But just while you may out-earn your parents, the majority of our generation will not. And we probably won’t in perfectly respectable fields that just aren’t STEM. We need teachers and marketers as much as we need financial analysts and they deserve to be able to buy a house if they choose and raise a family and live debt-free without working three jobs and cutting out every single minute luxury in life. Wage stagnation and rising costs of everything are leaving a lot of people behind no matter how hard they work.

      Also, what do you mean by nothing? Just the clothes on your back? No money or place to stay or acquaintances? If it was truly and completely nothing, then you win the American Dream. But even coming to the country with a little bit of something can give you a leg up.

  • Three cheers for speaking up about the actual inequalities in the system. The red herring “underwater basket weaving” arguments are so often used to dismiss that real systemic inequality that exists. No one is saying that people can’t succeed in this world, we’re saying that many of us benefit from privileges that others don’t benefit from. As an Asian, I’m part of the “model minority” group so I am afforded some privileges reserved for white people, *as long as* I conform to the expected “good behaviors”. I’m strongly aware that if I were to stop conforming and speak out, I would lose those privileges pretty quickly. That doesn’t stop me, but that’s reality. That same privilege is not extended to black people, no matter how hard they work or how much they conform to the white notion of non-threatening and acceptable. Just look at how this nation treated our First Lady when the Obamas were in the White House: solid marriage, accomplished lawyer, dedicated wife and mother – but none of it was good enough. People still ran her down for being a black woman.

    We should ALL do our best for ourselves with what we have, but let’s not mistake the privilege of birth (race, sex, ethnicity) for anything we actually accomplished. Let’s not forget that there is systemic inequality and most of us would benefit from working to correct those inequalities.

  • Austin A.

    So what’s the solution? Simply yelling that the world is unfair doesn’t make it any less so. Can we be more specific about what prevents people from moving up in terms of financial prospects? What parts of the system “literally prevent people from climbing the ladder?” I’m genuinely curious about the answers to these questions.

    • There are certainly whole other articles that could be written to answer these questions! To address just one of your questions–parts of the system that prevent people from climbing the ladder include lack of equality in access to affordable (or even any) healthcare, childcare, and education; tax policies that favor the wealthy (looking at you, capital gains tax reductions); ridiculously low minimum wages in some states; corporatism. Of course, that is only a small list of factors contributing to income inequality, but those were the ones that first come to mind.

    • Fae Ehsan

      there’s no one “solution.” a lot of it involves organizing together to lobby our government for fairer policies, especially a fairer tax structure where wealthy people pay a higher percentage of their income in taxes and we tax corporate gains. those taxes then can pay for things like healthcare! universal pre-k! universal college! cities are actually doing a great job alleviating some of these issues, so start local!

  • Wolf

    I would like to read posts by poor (or formerly poor) authors.

  • Caitlin K

    I really love this. It’s important to be frank but hopeful and that’s a perspective that took me a long time to appreciate. My father is one of those rare bootstraps type stories. He was one of seven kids, had no advantages in life. Busted his ass doing physical labor on weekends to pay for his degree. Graduated with an engineering degree and worked for the highway department before joining the private sector. Was a really smart guy and a damn good employee, so he quickly rose to the top, building loyalty between himself and his clients that would eventually lead to him starting his own company. He went from driving a busted old truck with no AC to working billion dollar jobs. Growing up in that house and with that story and my dad’s mindset really impressed upon me this idea about work and opportunity that just doesn’t exist in this country.
    It wasn’t really until I went to graduate school and learned about the individual lives of my peers that I was able to see how huge the gaps in life experiences were. This article does a great job pulling that into hopeful perspective.

  • Desirae Odjick

    “If you get seriously ill” <— I genuinely don't know a single person who wouldn't be financially ruined by a truly serious illness if they didn't have insurance in the US, which is *bananas* to me. Sure, I'm Canadian and a socialist monster (proud of it, btw!) and yes, I write about personal finance—but that level of emergency savings is pretty much hands-down impossible. I couldn't agree more with this entire article. When getting a serious illness can lead to bankruptcy, personal finance is not just "choose better." The systems and structural issues are real, and serious.

    And hey, Canada has a lot of ~stuff~ too, even if you can break your arm for free. So just like… ALL the praise hands for this article.

  • I love this, best article I’ve read in a while 👏🏽👏🏽👏🏽

  • Love this. Thanks for writing such a thoughtful and nuanced piece. While I don’t agree with parts of the progressive agenda (ones that involve fantasizing from a blank page instead of dealing with the mundane and complex realities of bureaucracy), I do think the American aversion to public healthcare and education is insane. That being said, how we spend our money and time is also the only thing we can control. Like poker, I think there’s an argument for playing the hand you’re dealt the best you can. This might involve major sacrifices that people in more fortunate situations wouldn’t have to make. The latte factor isn’t about the negligible savings, it’s about buidling small habits that snowball into larger ones.

  • Love this. Thanks for writing such a thoughtful and nuanced piece. While I don’t agree with parts of the progressive agenda (ones that involve fantasizing from a blank page instead of dealing with the mundane and complex realities of bureaucracy), I do think the American aversion to public healthcare and education is insane. That being said, how we spend our money and time is also the only thing we can control. Like poker, I think there’s an argument for playing the hand you’re dealt the best you can. This might involve major sacrifices that people in more fortunate situations wouldn’t have to make. The latte factor isn’t about the negligible savings, it’s about building small habits that snowball into larger ones.

    • PS. I doubt the people we admire on Instagram lead the lifestyles that they dream of. Everyone is just chasing their own tails. As far as the world is concerned, the less that money is attached to self-esteem and happiness the better.

  • Stevie

    Very interesting read — thanks for contributing to the site.

    After reading the article, your bio blurb, and a bit of your blog, I’d like to speak about going to grad school for a Masters in Library Science. I have a MSIS and work in the related field of archives. I’d advise you to start looking at currently open positions and the salary (if posted). I’m five years into my career and have had great positions, at both ends of the underpaid and fairly paid spectrum. I have friends from my program who are still struggling to secure full time positions with benefits. Most that have secured positions have had to make cross-country moves due to the low availability of jobs. There are so many other areas in the Information Field that are in higher demand and have a greater potential for salary growth. With your undergrad background, I’d encourage you to look into these areas such as UX design and human-computer interaction if you are concerned about the cost of graduate school and the salary potential over the course of you career.

    Best of luck!