Have you ever wondered why when you're poor and struggling there are always things coming up that seem to suck extra dollars out of your paycheck? You thought your check was say $500, but before you can turn around you're down to three or four hundred bucks and you haven't paid a single bill yet?
If this seems to keep happening don't worry you are not alone. You are just a victim of the old adage of why the rich stay rich and the poor stay poor. Your problem is simple - you are paying way too much Poverty Tax.
What is Poverty Tax?
Simply put, Poverty Tax is something that poor people pay, simply as a result of doing things that poor people do to survive. These "Taxes" are not taken by the Government (usually), they are simply extra fees and charges that you pay as a result of lifestyle and circumstance. Pay too many Poverty Taxes and you can never get ahead financially.
Below are some of the most common Poverty Taxes, along with what you must do to avoid them
Check Cashing Fees - One of the most common Poverty Taxes that poor people pay is the Check Cashing Fee. Check Cashing stores charge anywhere from $5 to $50 just to cash your check. Before you can even see the money from your $500 check you have given away $50 for the CC to do NOTHING except launder your money.
How to Avoid the Tax: Open a checking account at a local bank or credit union. Banks do not charge a fee for cashing your check. Better yet, if you have a stable job you can get direct deposit so that your paycheck is AUTOMATICALLY deposited into your checking account.
ATM Fees - People who have a decent amount of money in the bank go to the ATM to withdraw maybe $100 at a time. If you are poor maybe you can only afford to withdraw $20. Either way the bank is charging up to $5 for using the ATM. For the $100 withdrawal, the $5 charge equals 5%. For the $20 withdrawal the $5 charge is a whopping 25%!! Each $20 ATM withdrawal is being taxed at a rate of 25% (again the bank is taking your money for doing NOTHING)!
One $100 ATM withdrawal will leave $95 in your pocket, while five $20 withdrawals leaves only $75 in your pocket.
How to Avoid the Tax: Never use the ATM unless you are going to withdraw at least $100. Even better, go inside of the bank and withdraw your money. Inside the bank there is NO CHARGE.
Payday Advance Fees - sometimes you can't make it to the next paycheck and you need to borrow some money. When you borrow from a payday Advance store you are paying fees plus interest. the initial fee can be anywhere from $5 to $50 (which is too high!) but in addition you pay interest rate of up to 400% annually). The longer it takes to pay off your advance, the longer the sucking sound continues until you have ended up paying more than the original advance!
How to Avoid the Tax: Avoid the places at all costs - period. If you can afford to pay off the money in 2 weeks (when your check comes in) just don't borrow the money. Make arrangements with your creditors instead. Most bill collectors will wait for two weeks, especially if you call them early and let them know the situation.
If you have to borrow the money, borrow it from a friend and offer them a "fee". Usually it will be less than the Payday Advance place and besides it's better to pay your friend than those Payday Advance vultures!
Money Transfer Fees - Western Union can kill your budget. Sending money to family and friends in another state or country using Western Union will cost you $5 or $10 for every $50 you send.
You think you are paying for the "convenience" of the recipient getting the money "right away" but actually it takes several hours if you count your time to get to Western Union, stand in line, the time of the transfer, your friend driving to Western Union, them standing in line, and after filling out all the paperwork finally getting the money!
How to Avoid the Tax: Again - get a checking account at a bank and tell your family member to open an account at the same bank (different branch). Wire transfers between two branches of the same bank are free. If you think this is a person you will send to all the time get an extra ATM card for them and then they can withdraw the money as soon as you deposit it.
Late Fees (Bills) - Everybody has bills, but when you're poor it's hard to pay them on time. When you pay late you have late fees. For a credit card the fee is typically $35. Pay the cell phone bill late and you're looking at another $35. These late fees add up really fast and it gets even worse if your services get shut off. You then have to pay a restoral fee and maybe even a deposit ON TOP OF the original bill.
How to Avoid the Tax: The most obvious way to avoid this tax is to pay your bills on time. More importantly however is to avoid having multiple credit cards and services above and beyond what you really need.
Buying things on credit using multiple credit cards is the quickest way to guarantee a lifetime of poverty.
Buy things with cash whenever possible. When it comes to your monthly bills, setup automatic bill pay at the bank. this way you set the date the money comes out of your account and your bill always get paid on time.
Other Poverty Taxes - any things can suck your money away unnecessarily. If you can try to avoid:
Parking Tickets - $50 a pop. Pay it 3 months late and your ticket amount DOUBLES
Fast Food Tax - You think you're saving when you go to McDonalds and get a $1 McDouble and $1 Fries, but how often do you actually stop at just 1 snadwich. Besides, a 5 pound bag of potatoes cost 99 cents (on sale). That's 10 orders of fries!
Credit Card Interest - Stretching out your credit card payments may feel good each month but hurts you in the long run. The added interest could make you end up paying twice as much for the item purchased.
Lottery Tickets - Give it up, you're not going to win. You're just taxing yourself each month.