1. Debt

Medical debt, student debt, mortgage, credit card debt, car payments — these loans have become entirely normalized.

The average American consumer has a personal debt of $90,460. And many industries benefit from this trend. The USA’s total consumer debt is $14.1 trillion.

But these “normal” practices force people into hefty interest rates, which sometimes cause them to pay thousands of dollars more than the original price.

Individuals and families who have the finances available to make big purchases in one payment will often do so. People who don’t have the capital to pay for something upfront often end up paying a higher price driven by interest rates, fees, and fines.

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Sometimes people aren’t even given the option to pay in one payment. For example, car dealerships may refuse to accept cash. Many car dealerships charge an interest rate of 25% or higher. In “Shortchanged: Life and Debt in the Fringe Economy” by Howard Karger, one consumer who had tried to purchase a car said, “[The dealership] wanted $1,900 for that car … and wouldn’t take cash for any of their vehicles. They wanted us to put $1,000 down and pay $89 a week for two years.” In the end, that would amount to over $10,000 for a $1,900 car.

Also fueling the average family’s debt in the US is the exorbitant price of medical care. Prices of medical care are growing faster than average income. In the last ten years, the price of medical care has grown 33%, and the median income has grown by 30%. This has consequences. 24% of Americans, and 41% of working-age Americans, are paying off medical debt.

For this reason, many people simply choose to withgo medical care that they need or neglect preventative care until it becomes a health emergency. The prices of medical treatment can force even the most financially responsible families into debt, in a literal life or death situation.

Fueling this medical debt crisis is the fact that unhealthy food is cheaper in many places, which can lead to low-income families having more health problems, especially in the long term. People with excessive debt do not only suffer physically but also mentally.

Constant mail from debt collectors can cause anxiety and even depression, further contributing to poor financial decisions made in haste, under pressure.

2. Energy

A recent study by the ACEEE (American Counsel for an Energy-Efficient Economy) found that 25% of American households have a “high-energy burden,” which means they spend more than 6% of their income on energy bills. For context, the average family spends only 3% of their income on energy bills.

But the most surprising finding of the study was that almost all the families with a high-energy burden were low-income. In fact, 2/3 of low-income families in the US have a high energy burden, disproportionately affecting Black and Latino households.

Why is there such a large discrepancy? Low-income families are more likely to live in older houses with older appliances. These homes may have poor insulation and old heating and cooling equipment. Weatherizing a house to avoid extra expenses on energy can be pricey, especially in up-front costs, and many families can’t afford it.

High-energy burden households also have a negative effect on global warming, as poorly weatherized homes require much greater energy generation.

3. Extra Fees

More than 40% of Americans say that they struggle to pay their monthly bills and would be unable to pay an unexpected $400 expense. The pandemic, presumably, has made this percentage greater. For that reason, fees that may be a nuisance to a financially comfortable family can be dangerous for working-class families. And yet, for working-class families, these hidden fees and sneaky expenses are quite common.

In addition to requiring minimum balances in a lot of cases, banks also charge overdraft fees, usually $35 each. But often, the account owner is not alerted to the overdraft for 2-3 days, meaning someone could unknowingly rack up fees in just 3 days that could take months or years to pay off.

Many banks have even shut down their branches in low-income areas like certain small, rural towns or urban areas, to save on costs. This forces citizens of those areas to use cash-checking establishments, where you often have to pay a fee to cash checks.

Many municipalities and states fund their budgets through tickets and fines. If you can’t pay a fine, even for a minor traffic offense, you could face jail time. For example, the ACLU once had to get involved in the case of a 19-year-old in Georgia who made an illegal left turn, then was forced to spend five days in jail when he couldn’t pay the $838 fine.

People living in low-income areas often must pay more for groceries, because it is difficult to buy in bulk if you are traveling by public transportation or walking home. This means people without cars often must buy their groceries in rural grocery stores or in corner stores, where the prices are higher.

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Sometimes the nature of a job forces people into extra expenses. For example, low wage work rarely allows work from home, so parents must pay for daycare. Sometimes people pay for a day of child care and transportation only to arrive at a retail or warehouse job and be told that their services will not be needed that day.

Many workers are listed as part-time, meaning they get no benefits like healthcare, but their “extra hours” mean they end up working full-time, just without any benefits.

Low wage jobs also often mean less free time, and hours that are not flexible. This makes it difficult for many families to go through the lengthy, bureaucratic processes required to receive government assistance.

There are many people who need or are eligible for government aid, but they do not receive it because they do not have the time or money to wait in line, fill out paperwork, or attend meetings during work hours.

4. IRS Audits

Last year, a ProPublica report found that the IRS audits the working class at the same rate as the wealthiest 1%. Every year, the IRS receives less government funding, and millionaires are significantly less likely to be audited.

Lawmakers brought this study to the attention of the IRS’ Commissioner, Charles Rettig, and pointed out the absurd discrepancy. Rettig did not deny the report’s findings, but he pointed out that auditing the poor is cheaper than auditing the rich. Auditing the poor requires less labor, hours, and expertise.

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Rettig acknowledged that the IRS disproportionately targets the poor. But he also said that the IRS cannot begin to audit the wealthy to the appropriate degree until congress provides them with enough funding to hire and train large numbers of specialized, experienced auditors.

The IRS agreed that it would be a good idea to audit the wealthy more, but they have no plan to change their policies unless they receive more funding from congress.

Do you see how it can be expensive to be poor?

Low-income families:

• Are more likely to pay for things with loans and interest rates, rather than one-time payments
• Spend more on energy bills
• Get slammed with extra fees
• Are more likely to get audited by the IRS.

These concerning differences make it harder for people to escape poverty. This cycle of poverty has innumerable effects, including physical health problems, mental health problems, and generational trauma.

What can be done

Access to financial education is a great way to help families avoid debt.

Another option that low-income families have is to vote in their own best interest and stay involved in local politics. It will also be important for not just politicians, but also business owners, to make decisions that benefit all classes of Americans.

In 2020, there is an avalanche of messaging to remind people to vote and to vote early and that is the most important point of this article as well. An example of a very large movement of Latina Moms carrying this voting message is Vote Like A Madre.

Thousands of mothers have taken the Pinky Promise to give their vote to their children. This means they are choosing candidates who have bold plans to fight climate change, so their kids have a chance at an economically stable life, to breathe fresh air,  and to live in a world filled with natural beauty.

Do you have a voting plan?  What date does your state open up early voting?

Please visit the #VoteLikeAMadre campaign, make a pinky promise, and make your vote count!

Disclaimer: This sponsored article was produced and distributed in partnership with Latino Victory Project, in support of the Vote Like a Madre campaign.