The Rich get Richer, and …

My company offers a 401k program, matching up to 3 percent of your contributions. They also have an employee stock purchase plan, whereby you can withhold up to 15 percent of your annual income, and are guaranteed at least a 15 percent return on that withholding. Combine these two, and that’s a cool five percent raise over your paid salary, above and beyond what your 401k money will earn by the time you retire.

Of course, there’s a catch, and the catch is that you have to be willing to postpone part of your salary. The stock plan is roughly equivalent to delaying two paychecks a year for six months each. Getting the full match on the 401k means you have to live on 94% of your salary, and you don’t see the money you gave up until you’re retired. In other words, you need to be well off –certainly not living paycheck-to-paycheck – to enjoy these benefits.

That’s just the start. Having at least some slack in your finances is self-perpetuating in many ways. You can buy higher quality merchandise, lowering cost of ownership over the long run. You’re more likely to live in low-crime areas. You can afford preventative medicine, and preventative maintenance. You can easily invest in education to better your job. Not to mention that better education often means wiser financial choices. I’ll stop there, but presumably that list could be extended for quite a while.

The book Shortchanged made me think about the flip side. If you’re poor, and you have to participate in the fringe economy because you have bad credit, or live in an area with no access to mainstream financial services, then the cards are stacked against you. You pay a hefty markup simply to get access to your own money.

Oh, let me give one more example of how it pays to be affluent, one that the book touches on a little. When we bought our house, the closing consisted of us wearing our hands raw signing all these documents and acknowledging all sorts of fees. Needless to say, we did not read everything we signed in detail, and I’m sure we got ripped for fifty bucks here and there a few times. Oh well, we survived. But I never worried about any sort of wholesale fraud. I double-checked the monthly payment against the interest rate we were quoted – it matched close enough, and then we started signing left and right. Now those documents we signed certainly could have had nasty clauses to rip us off big-time. But I knew they didn’t. And I knew that because it was a mortgage company that dealt with middle-class customers, and we had a middle-class realtor who lived off of middle-class customers. No company has a business plan that relies on swindling middle-class customers, because they will not stand for that sort of thing.

Contrastingly, there are mortgage companies whose business consists in large part of swindling or otherwise taking advantage of lower-class customers. If you’re poor, it’s much harder to get a fair deal, and you have to exert more effort to make sure you don’t get ripped, possibly turning down good deals because you’re afraid there might be fine print.

I understand why things are the way they are, and that we have a freewheeling, every-man-for-himself environment. That personally works out well for me, since I’ve learned how to navigate it (and through my parents’ efforts I was fortunate enough to start from an advantageous position), but I don’t always think it’s fair.