'Hand to Mouth' author Linda Tirado: Broke means bad money decisions
Why do some people repeatedly make shortsighted financial decisions? According to Linda Tirado, a former IHOP night cook turned freelance writer, many people do so because they're just trying to fumble their way through an exhausting day.
Low-wage workers, in particular, often don't have the time, energy or resources to make better decisions, she argues. And even when they do, nothing seems to change.
"I make a lot of poor financial decisions," wrote Tirado in an October 2013 forum comment that ultimately went viral. "None of them matter in the long-term. I will never not be poor, so what does it matter if I don't pay a thing and a half this week instead of just one thing? It's not like the sacrifice will result in improved circumstances."
LINDA TIRADO, AUTHOR,
'HAND TO MOUTH'
Linda Tirado's idea behind her book started with a lengthy post to an online forum explaining why poor people do things that seem so self-destructive. A former IHOP cook and student, Tirado explains that while personal finance advice is great, it is often geared for those who already have money.
At the time, Tirado was going to school and working two low-wage jobs when she decided to answer a question on Gawker Media's discussion forum Kinja that asked, "Why do poor people do things that seem so self-destructive?"
Tirado responded with a passionate, 1,500-word post that broke down what it's like to live in poverty and just barely get by from one day to the next. "The thing holding me back isn't that I blow five bucks at Wendy's," she responded. "No matter how responsible you are, you will be broke in three days anyway. When you never have enough money, it ceases to have meaning. I imagine having a lot of it is the same thing."
Not long after, Tirado submitted her post to the front page of Gawker Media's Jezebel.com and the post went viral, eventually appearing on the Huffington Post, The Nation and Forbes online. Soon, Tirado was receiving thousands of emails from people who either took issue with her post or thanked her for describing what they felt.
Tirado later expanded her post into a book titled, "Hand to Mouth: Living in Bootstrap America," that outlined in detail her experience working low-wage jobs that barely paid her enough to live on. Like millions of struggling Americans, Tirado was cut off from access to affordable credit and inexpensive banking services and had to resort to donating plasma to a blood bank and taking out payday loans just to survive.
She also found that when she turned to personal finance books for advice, the guidance she received didn't apply. According to Tirado, many personal finance experts are tone deaf to the experiences of the working poor. And financial services providers are missing out, too. CreditCards.com caught up with Tirado and talked with her about what it's really like to live on the financial edge.
Q: You made an interesting comment in the book when you wrote, "Money advice is geared only toward people who actually have money in the first place." How did you find that to be true in your own life?
A: Personal finance experts will say things like, "Well, you should save more. And imagine what you could do with $50 a week," which is fine. But when you're telling me that I should save money when it's clearly impossible for me to do so, it just seems like silly advice. It's geared toward people who have a little bit of money that they can cushion themselves with.
Q: You also said you once read a book that seemed to give solid personal finance advice, but none of it was actually very practical.
A: Right, so you get all these pop personal finance books of how to climb into the middle and upper classes and again they're geared to the sorts of people who can go to Costco and buy in bulk, which is a fantastic money saving tip. But if you don't have the upfront capital to do that, it's not particularly helpful. Same goes with things like, "Shop around and invest in the best performing car, the one that will last you longest." That's all well and good and it is hard, money-saving advice in the long term, but it also comes with the sticker price of buying a new vehicle, which is not a thing that most folks do.
Q: Is there anything you wish you had been told instead or that you think would make better advice for people who are living on the financial edge?
A: I think the thing that I would say instead is: Don't try to behave as if you're doing better than you are. Find ways to save money that actually make sense for you in the short-term. And that's going to be individual to your situation. Maybe it's get lucky and find a job that's closer to home and that's what you spend your time looking for so that you don't have to spend so much on bus fare. Things like that. Those are ways to actually save money short-term.
So you get all these pop personal finance books of how to climb into the middle and upper classes and again they're geared to the sorts of people who can go to Costco and buy in bulk, which is a fantastic money saving tip ... But if you don't have the upfront capital to do that, it's not particularly helpful.
Q: You write a lot about how exhausted you are everyday. How do you think that's affected some of the money decisions you made?
A: People will say, "Why are you making these short-term financial decisions?" And I say: "A lot of it is about keeping ourselves going." It's a question of what's going to give you energy, what's going to get you through today, because today is exhausting. And sometimes those things are conveniences and when they're conveniences, they're more expensive ... We're not thinking purely in financial terms. That's a thing a lot of people don't understand. We don't get to make independent financial decisions that are separate from our well-being ... You can't just sit down and be like, "OK, well, I know all of these basic things are going to be taken care of, so how much do I put into entertainment and where can I skim off there?" We don't get to budget like that because our lives are in such flux. There is not that stability. And more to the point, that's a little higher up the financial pyramid where you have the luxury of doing those sorts of things. What I tell people is, it's not necessarily a financial equation. Because finances to us are such a mess and so hard to stay on top of, sometimes it's, "I want the cheeseburger and that's what's going to get me through this shift."
Q: When you've run into emergencies, such as your car broke down or you lost your job, what were some of your immediate options when you needed cash?
A: You borrow from people and you ask your family for help if you have those resources. You go get a really, really part-time job. [For example, most people] have something where if you need $50, you can ask somebody and they'll know somebody that needs something done. It's a very gray barter economy. And so there's a lot that. But, you know, when it comes right down to it, even if you just need $100 cold hard cash, you can go to the plasma center and donate and literally sell your body part. There are all sorts of things. The thing that people don't realize is that a good portion of the energy that we're expending is these little ways to get cash.
Q: I know you've also turned to payday loans several times and have said you have kind of a love/hate relationship with them. How so?
A: Whatever million percent APR [they charge] is clear usury, right? It's exploitative and of course it is, but what is my better option? There are only so many times they let you actually sell your plasma in a week. And then what happens if something you need is at least $400 instead of $200 and then you're screwed. So, payday loans, they exist to fill a need. And there are a lot of people who would literally be out on the street without those places. But there's a flip side and this is what it is to be poor. You never get to just have a service be helpful. Right? So the flip side is that you're not going to be any less poor next paycheck.
Q: Right, and when you're poor, everything from having a bank account to trying to get a loan is more expensive than it is for people who are a lot better off.
A: Right, I mean, as soon as you can prove you don't need money, right? That's the cliche. And it's just kind of true. There's nothing really to be said about it except that it is true.
It's easy to bounce a check when you have to keep track of pennies on top of everything else. If you've got an extra $1,000 in the bank, you never really have to think about it: Just don't write an extra $1,000 check. But when you're really talking about pennies, it would actually keep me up at night.
Q: I know you're not a big fan of banks and you've avoided getting a bank account. Why is that?
A: Look, it's hard to keep on track of all of the details. It's easy to bounce a check when you have to keep track of pennies on top of everything else. If you've got an extra $1,000 in the bank, you never really have to think about it: Just don't write an extra $1,000 check. But when you're really talking about pennies, it would actually keep me up at night worried that I'd miscalculated somehow and that something wasn't going to go through and they were going to charge me $25 for that. And then I'd have to deal with calling the companies and telling them, "I'm so sorry about my check." It's like this whole host of concerns. It's hugely embarrassing, and it can also be financially ruinous because if you're the sort of person who's counting in pennies, a $25 bounced check fee is kind of the end of the world. And, you know, if you can stick with prepaid cards and you run out of money or you miscalculated somewhere and you try to run it, the transaction just says declined. You cannot possibly be charged extra money for not having enough money. The service charges are straightforward. Every time you do this, you're spending X amount of money to do it. Everybody understands the system. And it's nice and stable and there are no variables and so it's much easier to plan around.
Q: You write that poor people have bad credit because life is more expensive than you can tolerate. Can you expand on that?
A: Well, I mean the first instinct always is, "OK, I lost my scholarship, what should I do? OK, I'm going to go get student loans." Or, "I ran into a medical crisis, what should I do? OK, well, we can put that on credit." But you're essentially taking a gamble that you will, with enough determination and strength, be able to pull yourself out of whatever situation you're in. And then, sometimes it just doesn't happen like that. You're basically gambling, but you're having to do it on credit. And so credit is hugely frightening to me. But you need it to survive in a lot of cases, right? If you have bad credit, you get charged more for an apartment or you can't rent a decent apartment and then it might cost you more to get to work because you're having to live farther away because you don't have the credit to get a nice apartment, even if you've got the job now. You can prove to them you've got the job. They're still going to say, "No you can't live here." It has an impact that a lot of people never stop to think about. But it's also a necessity. Because sometimes there are situations where you need some time to get your cash together or what not. That happens to super rich people, too. We have no liquidity, what do we do? We open a line of credit, right?
Q: And there were times when you couldn't even get into a hotel because you didn't have a credit card.
A: Right, and I didn't want a credit card. This was before I was carrying around a prepaid, or maybe I had one and it didn't have enough money on it, I'm not sure. The point was I had no credit card to use there and they straight up won't rent to you. You can give them however much collateral you want. I literally told them, "Here are my car keys." And it just doesn't matter. You need the card. You can't buy an airplane ticket without a card without risking being flagged for higher security. And so again, it's all kinds of little cascading effects that have a huge impact on every facet of life. It's one of the reasons that these prepaid cards are becoming so popular. It's because you need them.
Q: Do you have any advice for people who are in a similar situation and are just trying to make ends meet?
A: I do. Do not believe that your access to the market and the size of your bank account has any bearing on your actual value.See related: Eldar Shafir Q&A: Money worries lead to poor financial decisions
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