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6 Things That Put You at Risk of Poverty -- and They’re Mostly Out of Your Control

By Selena Maranjian - Dec 15, 2015 at 8:05AM

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Poverty isn't something that only happens to others. You can take some steps to make yourself less likely to end up in it.

Photo: FolsomNatural, Flickr.

Once poverty is gone, we'll need to build museums to display its horrors to future generations. They'll wonder why poverty continued so long in human society-how a few people could live in luxury while billions dwelt in misery, deprivation and despair.
-- Muhammad Yunus, founder of the Grameen Bank

It's not as hard as you might think to fall into poverty. There are factors both under your control and out of your control that can make it more likely to happen.

Let's start with some eye-opening statistics about poverty:

  • More than 80% of the world's people live on less than $10 per day.
  • Roughly a billion children -- about half of all children -- live in poverty.
  • In the U.S. in 2014, nearly 47 million people, or 14.8% of the population, lived in poverty.
  • The U.S. poverty guideline, used to determine eligibility for various programs, is $11,770 for a single person in 2015, $15,930 for a couple, and $24,250 for a family of four.

If you began this article thinking that poverty is manageable, that last bullet point should make it clear it's not. Imagine living on $12,000 a year, or $1,000 per month -- and having to use that sum to keep a roof over your head, food in your belly, presentable clothes on your body (in order to land and keep a job), and more, such as transportation costs, utility costs, and so on. It's a tall order, and will clearly make sound financial goals, such as saving for retirement, essentially impossible.

Most people reading this article are likely very far from living anywhere near poverty level -- but poverty can still happen to us. Read on to learn about a host of factors tied to poverty in America.

Born more likely to be poor
First off, if you're elderly, a child, female, African-American, or Hispanic, you're more likely to live in poverty than the overall population. Part of that is due to a sharp rise during the past few decades in the number of households headed by single women, and, of course, to the persistent gender gap in salaries.

Recent data shows that female full-time workers earn $0.78 for every $1.00 a man earns. African-American women, meanwhile, earn just $0.60. Part of it is also due to the phasing out of pensions, leaving more and more people reliant on retirement plans they have had to largely fund themselves, often with inadequate financial skills.

Costly healthcare
Healthcare is another factor tied to poverty. We all know that it has grown extremely expensive. According  to the Kaiser Family Foundation, total national health expenditures surged from $1.8 trillion in 2003 to $2.9 trillion in 2013 -- a 61% increase in just a decade.

Obamacare has made a big difference for many, but millions are still working jobs without health insurance, and have not purchased coverage for themselves. Even those with coverage are at risk of facing bills that can total thousands of dollars. Paying for healthcare can make poor people poorer. Or, if they choose to go without, or avoid seeking medical attention in order to save money, they can end up very ill or can die.

Inadequate employment
Millions of Americans are working jobs that leave them still struggling to get by. Some offer inadequate wages; some, inadequate hours. A study from the University of California Berkeley Labor Center noted that so many workers are underpaid by employers like Wal-Mart and McDonald's that they end up on public assistance while working -- costing taxpayers more than $150 billion annually.

This is a factor somewhat under our control. By training for careers in sturdy, growing fields that pay decent wages, and keeping our skills current, we can increase our odds of staying employed, and earning enough to prosper -- or at least staying out of poverty.

Photo: Pedro Ribeiro Simões, Flickr.

Geographic and educational issues
Where we live can also contribute to our likelihood to be in poverty. In some parts of America, housing values have seen such steep growth that homes are unaffordable to many, and cost those who buy a big chunk of their incomes. In many regions, there can be a lack of affordable child care, or lack of access to transportation, making it hard for people to get and keep jobs.

It's no secret that education can lift people out of poverty, enabling them to get hired in better-paying jobs; but the cost of education, like healthcare, has been growing at a brisk rate in recent years, making higher education out of reach for millions.

Millions of those who do manage to attend college are now graduating with severe debt loads that make it hard to get ahead financially. According to the College Board, the average cost of tuition and fees at public, four-year schools is about $9,139, up from less than $500 (in current dollars) in 1971. That's an annual average growth rate of more than 7% -- more than twice the average annual inflation rate.

Bad luck
Finally, a key factor that plunges many Americans into poverty is simply bad luck. Many people unexpectedly lose a job, or face a costly medical issue, and have no way to manage that financially. They may end up charging thousands onto a credit card, which can quickly spiral into greater and greater debt; or they might take out a home equity loan and end up losing their home. For many people, the difference between entering poverty or avoiding it can come down to whether they have an emergency fund.

It's easy to assume that such bad luck will never happen to you, especially if you have money in the bank. But it's smart to have a considerable sum easily available to you -- enough to cover at least several months' worth of living expenses (mortgage, food, utilities, taxes, insurance, etc.) -- if not many months' or a year's worth.

Poverty isn't something that only happens to others. You can take some steps to make yourself less likely to end up in it -- despite plenty of factors being out of your control.

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