financial independence

Why Poor People Can’t Achieve Financial Independence

Well, yes, they can. But it’s a lot harder.

Recently I authored a post about financial independence and income inequality. The topic got me thinking about financial independence for those of less means. Let’s face it – many FIers come from middle class (or better) backgrounds. Myself, for example: I can go on and on about how neither of my parents went to college, I grew up in a household of 5 people in an 1100 square foot house, etc. – but at least I had parents and a (stable) house.

Through personal experience, observation, and research, I have noted that it is possible but far more difficult for those with less means to achieve financial independence. The reasons are myriad, but here are a few of the top ones:

They Make Less

Well I guess this is the first and most obvious barrier. A minimum wage worker, making $25,000- $30,000/year, is going to take longer to achieve financial independence than a software developer making $100,000. And, as pointed out in a recent blog post by Nick Maggiulli, their fixed expenses take up a larger portion of their income – so it’s much harder to sock away 50% of their paycheck. And even if they could, their FI journey means they need to live more frugally and for a far longer time, than a middle class office drone.


I can speak from personal experience. In high school my economic status was similar to my classmates, so it was no big deal. But in (an expensive private) college and (Ivy League) grad school, I felt a huge gap in means between myself and my friends. I spent money on stupid things to hide my limited means and carried those bad habits with me for a long time. I can still see this all around me – i.e., those of modest backgrounds overspending on fancy cars and clothes to try to hide this fact from their peers – all the while making them worse off financially in the long run.

No/Limited Access to Financial Intelligence

Middle class folks take classes like Statistics, Economics and Algebra in college and in better high schools. These hardly insulate them from poor money decisions, but the basic math skills at least allow them to see scams like payday loans, high load funds and Ponzi schemes with some realistic context. If you weren’t educated on basic finance, it’s easier to fall prey to anecdote, testimonials, or desperation.

They Have Bad Models

Poverty has a way of duplicating itself. So does wealth. If your parents live paycheck to paycheck, you grow up seeing this as “normal” and have a greater tendency to do it yourself. Same thing with debt, lack of saving or investing, and all other poor financial habits. Often subconsciously, we model our behavior after our parents – and have to fight extra hard to rid ourselves of the bad habits we grew up with.

Their Families

The families of the poor play a reverse role in their financial lives: meaning, they drain money from them vs. helping them out financially. The underclass doesn’t get tuition assistance, a house down payment, a first car, or any of those other things from their parents. And any one of these things can dramatically accelerate the path to financial independence. Imagine the impact of graduating with no student debt vs. just $50,000 in student loans. Or, more to the point, an $8,000 hand-me-down car upon college graduation. That $8,000, if invested in the stock market, would turn to $180k by age 60, given historical return patterns. That’s $180k that a poor kid doesn’t get since he needs to buy a car to get to work.

Instead, their parents (especially when elderly) often require financial support themselves. I rarely see FIRE advocates factor “parental support” into their budgets. This additional expense makes it much harder to get by, much less achieve FI.

What To Do About It?

So if you’re not a software developer or looking at a significant inheritance, should you approach the FI journey differently?

I think yes, in several respects:

  • Be patient with yourself: those that start out with less, need to first realize that it will take that longer to achieve financial independence than those with even just a middle class foundation – for all the reasons listed above. And when they do reach this goal, it will be a vastly more significant accomplishment.
  • Educate yourself: follow blogs; read the Wall St. Journal; access online classes that teach finance basics. You may not have been given an adequate financial education growing up – so now you have to do it yourself.
  • Understand that you can help others by helping yourself: Abigail Disney, the philanthropist and Disney heiress, once said that she had considered giving all her money away in her early 20s. But then she realized that if she hung onto most of it, a vastly larger sum could be deployed later to help those in need. The same thing works for those with lesser means (even more so). If you are committed to supporting friends and relatives financially, couldn’t you do a much better job of it post-FI?
  • Don’t make your background a big deal: I’m not going to tell you not to be ashamed of your poor beginnings. Shame is not something you can just turn on and off. If you feel it, you feel it. But don’t try to hide it from others that may have grown up with much more. If you a act cool about it, they’ll follow your cues and they won’t see it as a source of shame either.
  • Never stop trying: the milestones will come harder and slower, but don’t get discouraged. FI is a long game for everyone, but more for you than most. But, as referenced before, you’ll have more pride, confidence and a greater sense of accomplishment than someone who made it to home plate after starting out on third base.

Additional Reading

Here are a few very well written, thought provoking posts on the subject by other bloggers:

A Dime Saved: Frugal Not By Choice

Of Dollars and Data: The Biggest Lie in Personal Finance

Do you have any advice for those with limited means that still seek FI? Have you faced any of these barriers? Tell me about it in the comments below.

11 replies »

  1. This is such a great post! I don’t think people educate themselves about finance and the importance of being smart with your money. It’s so easy to fall into that category of spending money just to avoid shame or even make yourself look better. I totally agree that It’s harder to achieve financial independence starting from a low income family, and I believe this has a lot to do with your point about economic intelligence. A lot of those who start in a high income families have the education to invest well, but also, the means for financial advisers. Really interesting topic. |Meera-Abroad

    • Thanks so much for the comments. Yes, I would like to write more about the path to financial independence if you don’t fit the standard (middle class, tech worker) profile. Appreciate the support!

  2. your story seems kinda similar to my own. i had 2 parents and a middle class upbringing and found myself at a fancy a$$ northeast liberal arts school and was like a fish out of water. thank goodness i didn’t care. we weren’t financially savvy growing up and i have to say it would have been an easier path the other way. that being said, it feels like a real accomplishments to be self-taught as an investor.

    • Great point. People coming from modest circumstances seem to be prouder of their accomplishments and more comfortable with where they’ve landed in life. Thanks for the comment!

  3. This resonates with me. I think there’s also a mindset shift that needs to take place. I grew up buying the cheapest shoes and other needs because it’s all we could afford. Then, they’d fall apart before the end of the school year. I’m certain we ended up spending more in the long run because we replaced these cheap things so often. It took me YEARS after graduation to start to spend some more money on quality things that actually last.

    • I hear you. It is definitely cheaper in the long run to “buy quality”, whether it’s shoes, cars or even education. Of course, not everyone can afford to buy that quality in the first place.

  4. Nice post. It’s sad and without the increase in income, very challenging. I was a single Mom living paycheck to paycheck, and my only saving grace was my college degree that allowed me to raise my standard of living over time with better and better jobs.

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