Wednesday, July 18, 2012

Avoid the Poverty Trap & Get Rich(er)

Earlier today I experienced a mini version of the poverty trap, mostly due to my own cheapness.

Two months ago I took my car in for regular service. My mechanic, a brilliant automotive specialist with a penchant for terrible jokes, advised me to change the brake pads but I didn't want to spend the extra $200 because my family was going on vacation and I wanted the extra cash, just in case. So I delayed changing the brake pads.

We went away and had a great trip. When we got back home, I promptly forgot all about my brake pads and went about my normal routine. Then yesterday I started hearing that lovely grinding noise that informs the ignorant car owner that the brakes are in trouble. So I took the car back to The Joker.

What should have cost me $200 (two months ago) cost me $650 today! In addition to brake pads, I needed new rotors because I had ground them into powdery uselessness. Apparently that grinding noise really is something grinding -- who knew?

This is the exact same trap that leads to persistent poverty. Because poor people don't have the money to spend on preventative maintenance, they end up paying more in the long run. This economic logic applies to every aspect of their lives -- not just with car repairs.

For example, poor people buy cheap shoes which wear out/break thereby forcing them to buy another pair of cheap shoes. The cycle propels itself along. Whereas the wealthy can afford to buy top quality shoes (which are astronomically expensive compared to the Walmart varieties) which can become family heirlooms because they last forever.

Simplified version: the rich spend money once and then don't spend it again. Poor people spend money over and over on the same things.

Because I was cheap and I didn't want to spend the extra $200 (for whatever reason), I ended up spending 3 times more. But all was not lost -- my stupid cheapness has become this blog post so you can avoid the same mistake.

Don't nickel and dime yourself into spending more later. Spend a little now on preventative maintenance and save yourself money down the line. It applies to cars, shoes and computers too. Pay now, or pay more later. It's up to you.

R-Squared Computing | Lou RG | Nearly Free IT | Firm Wisdom

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