I spent the first 18 years of my life raised by a single mom living in low-income, government subsidized, public housing projects. I’m 39 now and haven’t lived in those conditions for over 2 decades, I spent my childhood as poor as you could be as an American youth.
I’ve learned to describe the poverty I grew up in that way—“American Youth”—because one, I always had a roof over of my head, and if things got really bad and we were evicted from the projects, I’d become a ward of the state and be cycled around the foster system.
I’m not saying the foster system is good or bad, but as a minor in America, I legally couldn’t end up homeless unless I ran away or something like that—and as far as I’m concerned, being homeless is the poorest you can be.
Secondly, I’ve seen what being poor is like in places like Mexico, Colombia, and the Dominican Republic. Once, on a volunteer trip to Puerto Plata in the Dominican Republic, I did some work in a neighborhood where the houses didn’t even have floors. It was just dirt that would turn into mud during a rainstorm. I rode through massive shanty towns outside of Mexico City, where there was no plumbing or electricity—just buildings and kids playing soccer on concrete.
America gets a lot of flack for wealth disparity, but you don’t realize how bad it could be until you visit a few other places where the GDP ain’t quite so high. Still, growing up in government-subsidized, public housing projects ain’t no picnic either.
We were on food stamps. We relied on the school’s food bank, the Salvation Army, and free lunch and breakfast.
When school was out, my mom put us in summer camps funded by HUD and the Housing Authority, so we still had something to eat.
It was just my sister and my mom, but at any given time, we had between 2 and 7 relatives living with us, and I’ve been working since I was 11 to make sure I had money to at least get a bus pass or buy myself shoes more than once a year.
We faced a few evictions but never ended up on the street—because if you get evicted from the projects, there ain’t anywhere else to go—and the phone got shut off a few times.
I tell you all this so you know I know what being poor is like. I’ve found that when most people talk about growing up poor, they mean they weren’t rich, or, in some realistically rare situations, they’re talking about their parents only being qualified to do low-paying manual labor jobs.
I’m not here to have a “whose upbringing was rougher” contest. Everyone’s battle is hard for them because it’s all they’ve known, but I’m also not going to pretend that having two working parents, a car, and being able to afford unsubsidized rent or mortgage is on the same level as not being able to eat or afford a place to live without government assistance.
I grew up in the Terrace Village Housing projects, and then, when those were demolished, I moved to the Northview Heights housing projects. Anyone who knows the Pittsburgh area can vouch in the comments that these are the city’s roughest, most dangerous, poorest areas. I lived this way until I was 18.
Then, my dad died during my senior year of high school.
Now, my dad wasn’t really part of my life. I knew who he was, and I talked to him on the phone sometimes, but he moved out of town, so I only saw him a few hours a year when he came back to kick it with his friends—and never to explicitly visit his kids.
But I guess he had a soft spot in his heart for us because despite not being a presence in our lives, I got $55,000 in life insurance money along with some cash from social security since I was a minor the year he died. All in all, I think I pocketed like $60k from my dad’s death. This was May 2003, and for the first time in my life, I didn’t know the stress of poverty. However, that would soon change.
By August 2004—only 15 months later—I had not only blown through it all, but I was purposely overdrawing my bank account to have some money for food. I went to the ATM and just kept withdrawing money until they wouldn’t let me anymore—I made off with about 400 dollars in money I didn’t actually have.
In the following years after that, as I survived by working minimum wage customer service jobs, sleeping on my aunt’s floor (because moving home with my dysfunctional ass mom was out of the question, but that’s a story for another video), and using the old “walk around the grocery store while eating the food and leave without buying anything” trick, I thought long and hard about how I blew that money.
I didn’t travel or buy anything extravagant—hell, I hadn’t even become a full-blown alcoholic yet.
The Chicken or Egg Dilemma: Poverty and Poor Decisions
I wouldn’t get the complete answer for almost 20 years when my mom died, but before I get to that, let me ask you a question: Which comes first: poverty or poor decisions? Let me put it to you another way:
Does being poor cause you to make bad decisions that keep you poor, or do you make bad decisions that lead to you to lose your money?
If you’re like most people, you probably think it’s the latter. You probably think something like, “Stop wasting all your money on Jordans, video games, and weed,” or the more gentrified version, “Stop buying lattes and eating out, and you’d have more money to invest.” And look, those ideas have a LOT of truth in them.
Let’s say I do something dumb, like get a DUI charge.
I’m gonna lose my car, which means I probably can’t get to work—if I still have my job in the first place. I’ll have to pay all types of fines, restitution, attorney and court fees, towing and storage costs. The court is even gonna make me pay for that thing you have to breathe into that starts your car only if you’re below a certain blood alcohol level—and that’s assuming I don’t go to jail and have to post bail..
And, because I know someone is gonna miss the point, let me clarify.
These aren’t the worst parts of getting a DUI. That would be running the risk of ending someone’s life. I’m just pointing out how dumb decisions can put you in the poor house. And if you’re one of those people making dumb decisions like driving under the influence, check out my videos on “how I got sober” and “the worst mistakes men can make.” I put both in the description.
So, to get back on track, yes, you can do one big dumb thing that puts you in the poor house and keeps you there for years OR you can do a series of little dumb things that ensure you never get ahead of your bills.
However, when I was writing my next book and memoir, “Hard Lessons From The Hurt Business: Boxing and the Art of Life” (you can download a free chapter here), I realized that there’s a lot of truth in the idea that growing up poor can cause you to make terrible decisions, many of which guarantee you’ll always be fighting an uphill battle with your finances.
The Poverty Inheritance: How Financial Stress Rewires the Brain
Growing up poor makes you more likely to be poor. While this feels intuitively accurate, why does it work that way? It’s only recently that this connection has been measured and verified. In 2016, Stanford economists confirmed that the lower your household income, the less money you’ll likely make at age 30 (source).
When you grow up in poverty, there are–by definition–no examples of healthy financial habits. You don’t grow up with any financial sense because you never saw anyone around you with financial sense. So, if you grow up in low-income public housing, surrounded by people who lack the resources to get out of the projects—and the person you spend the most time around, the one who is raising you—has repeatedly demonstrated zero financial sense, you’re already set up for financial failure. But that’s not even the worst part.
A 2013 Princeton Study found that when low-income people are under financial stress, they score worse on tests of IQ and logical reasoning. Their IQs appear to drop by at least 13 points (source).
To put that drop in perspective, the average range of IQ is 85 to 115. For someone on the tailend at 85—lower but still average and fully capable of contributing to society living without assistance—a thirteen point drop would take their IQ from 85 to 72, putting them in the same category as someone who meets the clinical diagnosis of an intellectual disability.
The stress of poverty makes you more likely to do things that exacerbate your poverty and less likely to do things that would alleviate it. And yet, it gets EVEN WORSE.
From Lottery Winners to Brain Science: The Neurological Trap of Poverty
Have you ever wondered how it’s possible that lottery winners? If we take the “dumb decisions cause poverty” approach, it seems like a pretty simple explanation. And don’t get me wrong—buying a bunch of houses you’ll never live in and cars you’ll never drive makes a contribution, but why buy that stuff in the first place?
Not every lottery winner or every athlete goes broke, but what can we observe about the ones who do squander it all? Let’s start with something obvious—poor people play the lottery more than anyone else because (source). If you look at this like someone who’s never experienced chronic poverty, this makes zero sense. Poor people should be saving every dollar they have!
You’re not wrong, but when you live every day of life simply trying to make it to the next, long-term planning just isn’t a thing for you. You’re just trying to make it to the end of the week and, in some cases, just to the end of the day. So, why not spend a few bucks on lottery tickets and give yourself the hope of winning? Remember that, as it will become highly relevant in a few moments.
We now know that poverty also triggers some depressing, long-term changes in your brain.
When you’re poor, the limbic system—the part of the brain responsible for behavioral and emotional responses- constantly sends fear and stress messages to the prefrontal cortex—the part of the brain that’s been receiving a lot of attention lately in feel-good pop psychology for being the final part of the brain to mature and not doing so until you’re almost 30.
There are lots of implications of this that are simultaneously related to and beyond the scope of this video, but the biggest one got my cousin released from prison after serving 33 years of a life sentence for murder.
The prefrontal cortex is responsible for decision-making and planning. The constant stress of poverty causes it to shrink slightly, making a person less able to solve problems, set goals, and complete tasks most efficiently. I take it that you already see where this is going.
A set of experiments conducted by Anuj Shah, an Assistant Professor at the University of Chicago Business School, demonstrated this effect. Shah studied the impacts of scarcity on decision-making by using a series of games in which participants were paid based on their performance (source).
In each study, some participants received abundant resources to play the games, while others received limited resources. In some studies, players could borrow extra resources at an interest rate.
Shah found that the games took on greater urgency for people with fewer resources. These participants became more focused on the task at hand to make the best use of their scarce resources. However, this added focus came at a price—including mental fatigue, costly borrowing decisions, and poor overall performance.
Through this experimental design, Shah examined how financial scarcity influenced people’s decision-making and game performance. For example, in a game where the goal was to knock down targets, players with only three shots per round spent more time aiming than those with fifteen shots. This improved performance but had downsides. When given the chance to “borrow” extra shots by giving up shots in later rounds, those with fewer shots made counterproductive borrowing decisions that hurt overall performance.
While these experimental games are not the same as real-life poverty, they capture the main problem of being poor.
Decisions considered routine by the affluent can take on great urgency for the poor. This added urgency can lead to poor choices in other matters by monopolizing attention and draining cognitive resources.
It’s not that people with money make many more good financial decisions than poor people. In fact, the research suggests that poverty forces you to make more efficient use of your resources, which leads to higher decision quality. The problem is that when poor people make the wrong decision, they suffer more significant consequences.
The Predatory Debt Spiral: My Payday Loan Nightmare
When I was in my early 20s, a few years after I squandered the life insurance and social security windfall in a way that only a poor person could, I got caught up in the insidious cycle of payday loans. These loans are where the only requirement is a verified job. They are great in a pinch when facing a surprise expense, but the interest rates are exorbitant. I had more than a few loans with a 20% interest rate.
The type of person who needs a $500 payday loan to cover a sudden emergency doesn’t have $600 to pay back. I was that type of person, so I did the most obvious thing: I took out another payday loan to help me when I fell behind on the first one.
When I fell behind on that one, I took out another. This vicious cycle continued until I closed the bank account from which the companies took their payments. Over the next few years, I heavily screened my phone calls as I paid them back on my own time.
Fortunately, these companies’ barely legal nature means they can’t report delinquency to credit bureaus. This seems fitting, as these places disproportionately target low-income areas. I always tell people that you know you’re in a low-income area if you see a liquor store, pawn shop, and payday loan building in close proximity to one another.
Shah observed this type of counterproductive borrowing decision in the experiments. When you’re poor, survival is the highest priority. You either make decisions that ignore the long term so you can make it to payday, or survival mode shuts down your ability to handle immediate problems intelligently.
This research explains why we make these short-sighted decisions under the duress of poverty. People are quick to look at research like this and propose a simple solution: give people money so they stop feeling the stress of scarcity, and with a little financial education, we can eradicate poverty.
However, if this were true, then how do we explain the lottery winners, professional athletes, and musicians who go broke after the immense wealth they had? How do we explain what I did with my $55,000 life insurance money?
The Mental Legacy: Why Wealth Can’t Instantly Undo Poverty’s Damage
Scarcity mindset doesn’t instantly change if you suddenly become flush with cash. If your brain has been dealing with the stress of being poor for decades, the damage your prefrontal cortex took doesn’t just undo itself any faster than you drop all body fat you put on because you ate an apple instead of cookies and went for a run one time.
The longer you’re poor, the worse you’ll be with money if you ever make it.
This has also been proven. By analyzing the tax returns covering the U.S. population from 1996-2012 and then evaluating the tax returns of their children, it was found that the more money your parents made, the more likely you were to be employed at age 30 and the higher your income would be (source).
I think this relationship is notable because they evaluated the children at age 30. At that age, this means that whatever the economic status you had as a child is still the economic status you had for 60%—the majority—of your life
Given that poverty changes your brain, and the longer you are poor, the more extensive those changes are, it’s no wonder the children of the poor are more likely to repeat the same habits as their parents.
My Mother’s $150,000 Settlement: A Case Study in Scarcity Mindset
Now, to my mother.
In 2018, she was in a nasty car accident that was nearly the end of her, but fortunately, she made it. The driver was at fault, and she ultimately won a $150,000 settlement. At the time, my mom was living on a fixed income and had her life more or less good on $2500 a month.
I used to tell her that getting into that accident was the best thing to ever happen to her because she would never have to worry about money again because of the lump sum and the fixed income.
My mom died the week before Christmas in 2021. My sister and I assumed that she had a bunch of money left because there was no possible way she spent even half of that $150k, given that she was on a fixed income and had purchased nothing extravagant, taken any trips, or really showed any signs of spending it. My sister spent a lot of time with my mom and was positive she hadn’t bought anything crazy.
Well, my sister was wrong. My mom had bought multiple dish sets she never opened, clothes she never wore, and furniture she never assembled.
She’d given relatives money, put money on my cousin’s books, who was serving a 24-year drug conviction, and paid many of my sister’s bills. However, the biggest expenses were daily DoorDash, Uber Eats, and lottery tickets.
Not only was she out of money, but she had racked up a bit of credit card debt. My mom spent the final 3 months of her life in a hospital, but if she had recovered, she would have been in a WORSE financial position than she was before the accident.
Giving people more money will never fix poverty if they still see the world as a poor person.
Something I never understood growing up was how people had been living in the projects for two or three generations. I knew many kids whose grandmothers lived down the street were still in the projects after all these years, and everything we’ve talked about is why this happens.
In this video, I talk about another aspect of living in the projects that’s even more debilitating than poverty. Watch this if you wanna know what it’s like living next to drug dealers and drug users.
