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How Feeling Poor Hurts You – and How to Stop It

Which would you rather be: a multimillionaire whose friends and neighbors are all billionaires, or a worker making $10 an hour in a neighborhood where most people are scraping by on minimum wage?

Speaking strictly in dollar terms, you’d have to say the first person is better off. But there’s a good chance the second one is a lot happier with their lot in life. Although they’re not making much money, they’re better off than everyone else they know, and so they feel rich. By contrast, the first person, who is rich by most people’s standards, is likely to feel poor because everyone they know is richer.

Over the last few decades, economists have learned a fair bit about how money affects your happiness. One of their most interesting discoveries is that it’s not just how rich you are that matters; it’s how rich you feel. Feeling poor can make you less satisfied with your job and your life, lead you to make poor choices with money, and even harm your health – regardless of how much money you actually have.

What Makes People Feel Poor

How rich or poor you feel doesn’t necessarily have anything to do with your actual income. For instance, in 2015, Jesse Klein, a student at the University of Michigan, published an opinion piece in The Michigan Daily arguing that her family was middle-class, not wealthy, despite their $250,000 yearly income. At the other end of the spectrum, blogger Donna Freedman wrote in 2007 that she was not just surviving but “thriving” on an income of just $12,000 per year.

Comparisons to Other People

The main reason Freedman felt well-to-do on her tiny salary, while Klein did not, was what they were comparing their circumstances to. Klein’s family lived in Palo Alto, one of the most expensive cities in the country. She described their $2 million house as a “modest three-bedroom, two-bath.” To her, the real “insanely wealthy” people were those in neighboring Los Altos Hills, where homes cost around $4 million and came with pools, movie theaters, and “multiple BMWs and Teslas in the garage.”

Klein’s situation is by no means unusual. A 2015 survey by CNBC found that only 9% of millionaires considered themselves “rich”; the rest said they were middle-class or upper-middle class. Similarly, sociologist Rachel Sherman writes in her book “Uneasy Street” about interviewing a woman with a household income of at least $2 million who said she only felt middle-class because “no matter what you have, somebody has about a hundred times that.” Even though this woman was wealthier than more than 99% of Americans, she still felt poor compared to her even wealthier friends.

Comparing yourself to others is a problem, because it makes it hard for anyone to feel rich. No matter how high your salary, it’s always possible to find someone else who’s making much more – particularly in the U.S., where income inequality is extraordinarily high. In 2008, The Wall Street Journal reported that survey respondents, when asked how much money it takes to be rich, most often say the amount is exactly twice as much as they have personally – even if they have millions in the bank.

Other People Comparisons

Comparisons to Your Own Past

Feeling rich or poor isn’t always a matter of how you compare to others. Sometimes, it depends more on how your life now compares to what it was in the past.

The main reason Freedman felt so satisfied with her life on $1,000 a month was that just a year earlier, she had been struggling to support herself with a patchwork of freelance and babysitting jobs while also going to school full-time. Compared to that constant grind, which left her exhausted and frequently ill, her life was much better. Even though all her clothes were from the thrift shop and she often had to rely on food from her local food bank, she felt lucky to have enough to get by.

Of course, this type of comparison can also work in reverse. If you used to be a CEO with a salary in the millions and now you’re earning “only” six figures, you’re likely to feel poor, even though you’re still making much more than most Americans. Neal Frankle, writing for Wealth Pilgrim, notes that many Americans felt poor in the wake of the Great Recession, when the average American’s net worth declined by 40% over a four-year period. The average net worth at the time was $66,740, which isn’t a trivial sum – but compared to what they used to have, it felt like poverty.

Consequences of Feeling Poor

Feeling poor hurts you in a variety of ways. Not only does it make your life less satisfying in the present, it can also lead you into poor decisions that make it harder to improve your life in the future. It can even affect your physical and mental health.

1. Less Job and Life Satisfaction

When people feel poor – in particular, when they feel underpaid relative to others – they’re less likely to be satisfied with their jobs. A 2011 study by researchers at Princeton University and the University of California at Berkeley studied how California state workers felt about their jobs after looking at a public database that shows how much other state employees make. It found that when workers learned they were making less than others in the same position, they were more likely to be unhappy with their jobs than workers in similar positions who hadn’t looked at the database. They were also more likely to report that they were interested in changing jobs.

Interestingly, however, the Berkeley study did not find that people who learned they were making more than average felt happier with their jobs as a result. They were exactly as likely as the control group to say they liked their jobs or wanted to switch jobs. The study suggests that comparing your salary to those of your peers only make you less happy with your situation.

Feeling poor can also make you unhappy with your life in other ways. Psychologist Keith Payne writes in his book “The Broken Ladder: How Inequality Affects the Way We Live, Think, and Die” about the exact moment he learned he was poor. He was in the fourth grade and was part of his school’s free-lunch program. When a new cafeteria worker didn’t recognize him and told him he would have to pay $1.25 for his lunch – money he didn’t have – he realized for the first time that he was different from the other kids he went to school with.

According to Payne’s book, this humiliating experience changed his whole attitude about his life. He started feeling embarrassed about his clothes, his haircut, and his way of speaking. He’d always been shy, but after this experience, he stopped talking at school almost entirely.

2. Risky Financial Behavior

According to The New Yorker, Payne’s experience of the damaging effects of being poor – or more specifically, thinking of oneself as poor – led him to study the subject professionally. One thing he discovered was that people who see themselves as poor are more likely to take unwise risks with their money. Some policy-makers argue that people are poor because they are unwise with their money – but studies show that in many cases, it can actually be the other way around.

One such study appeared in Personal and Social Psychology Bulletin in 2008. In it, subjects were ranked on a made-up scale, the Normative Discretionary Income Index, which was deliberately skewed to make some people look richer than their peers and others look poorer. The researchers then offered the subjects $20 to either keep or gamble on a card game. They found that people who were told they ranked low on the scale were more likely to gamble.

In another study, done by Payne himself, participants were allowed to place a series of bets. They could choose either a low-risk, low-reward option, such as a 100% chance of winning $0.15, or a high-risk, high-reward option, such as a 10% chance of winning $1.50. When participants were told ahead of time that the most successful players won much more money at this game than the least successful ones, they were much more likely to choose the risky bet than those who were told there was little difference between players. In other words, just knowing that there’s a big gap between winners and losers makes people more likely to take risks.

Payne thinks studies like this can partly explain why poor people are more likely to buy lottery tickets. Playing the lottery is a terrible bet for anyone, but it’s even more harmful for the poor, since the cost of a ticket takes up a bigger share of their available cash. However, if you feel like the lottery is your only reasonable chance of ever getting ahead – even if this isn’t true – risking a couple of bucks on a game suddenly looks like a sound financial decision.

Risky Financial Behavior

3. Health Effects

Feeling poor can even harm your physical health. A pair of experiments called the Whitehall studies – one published in the Journal of Epidemiology and Community Health in 1978 and the other in The Lancet in 1991 – looked at health outcomes for British civil servants who work in a highly status-aware system. Both studies found that workers higher up the status ladder had better health in just about every way – and that their better health depended not only on their income or education, but also on how they saw themselves compared to others. People in lower-status jobs were consistently more likely to take health risks, such as smoking or not exercising, and more likely to suffer from many types of illness.

Another study, published in the Journal of Adolescent Health in 2008, found that the way teens view their status has a  significant effect on their health, even when factors like income, education, and race are adjusted. The authors actually found that teens’ own views of their place in the pecking order could be “a more sensitive predictor of health and health changes” than how much money they actually had.

There’s even evidence that feeling poor can damage your IQ. A study in the American Journal of Preventive Medicine found that Americans who had spent at least 20 years living in poverty lost more cognitive function as they grew older than those with more money. That’s hardly surprising, since poor Americans are much less likely to have access to good healthcare.

But interestingly, the study found the same effect for “perceived financial difficulty” – that is, people who weren’t poor in dollar terms, but felt like they were. Those who said they often had a hard or very hard time paying their bills saw the same kind of decline in IQ, even if their actual income put them above the poverty level.

How to Stop Feeling Poor

Unfortunately, knowing that feeling poor is bad for you isn’t enough to stop you from feeling it. If you’re surrounded by people who are better off than you, or if you were once better off yourself, it’s hard to avoid feeling poor by comparison.

Fortunately, there are ways to counter these feelings. First, you can look at your life from a new perspective that helps you see how rich you really are. Second, you can take steps to improve your financial situation, so you can feel good about where you’re headed. And finally, you can adopt behaviors that make you feel rich, even when you’re on a tight budget.

1. Change Your Perspective

One reason you might feel poor is that you’re always comparing yourself to others who are richer. It can help to shift your perspective and look at how many other people in the world are worse off than you financially. When you see what real poverty looks like, you’ll feel rich – and fortunate – by comparison.

Here are a few ways to get a new perspective on your finances:

  • Check Your Position. The Global Rich List is a tool that shows how rich you are compared to others – not just in your country, but around the world. You can input either your income or your net worth in and see you stack up against the rest of the world’s population. Using this tool can be an eye-opener for people who live in wealthy nations like the U.S. The official poverty guideline for Americans in 2017, set by the U.S. Department of Health & Human Services, was $12,140. According to the Global Rich List, a person making this amount is in the top 14% for income worldwide. So, even if you’re poor by American standards, using this tool can make you feel rich from a global point of view.
  • Challenge Yourself. If seeing numbers on a screen isn’t enough to make you feel wealthy, try seeing what it’s like to be poor in a more personal way by taking the Live the Wage Challenge. The point of this challenge is to try to live for one week on the federal minimum wage, currently set at $7.25 an hour, or $290 for a 40-hour week. After taking out taxes and housing costs, this leaves about $77 to cover all your other needs, such as food, healthcare, and transportation. Dozens of politicians and bloggers who have taken this challenge say it helped them understand how hard it is to live on such a bare-bones budget. Many of them expressed gratitude for how much they have by comparison. If you’re already living on minimum wage, try an even stricter challenge: Live for one day as if you have no cash at all. Having to walk everywhere or skip meals because there’s nothing in the fridge will quickly make you realize how much worse your situation could be.
  • Volunteer. Another way to change your perspective is to volunteer at a homeless shelter or a food pantry. Seeing what real poverty looks like will help you realize how much you have to be grateful for. At the same time, doing something to help others who are less fortunate will help you feel good about yourself.
Volunteer Homeless Shelter

2. Improve Your Financial Future

No matter how much money you have, you always feel better about your financial situation when it seems to be improving. That means taking steps to firm up your finances – getting out of debt, earning more, and putting yourself on a path toward financial independence – will also help you feel better.

Here are a few basic strategies that can help you secure your financial future:

  • Learn Where You Stand. The first step in getting your finances on track is to figure out how you’re doing right now. First, sit down and calculate your net worth, including all your debts and assets. Next, if you don’t already have one, make a budget that shows exactly how much you make and how much you spend each year. That will tell you how fast your net worth is growing (or possibly shrinking).
  • Cut Your Spending. If you find that you’re spending more than your income, or spending more of it than you’d like to be, you need to look for ways to cut back. Your first instinct might be to cut out small, frivolous expenses like a daily cup of coffee – but if you’re in real financial trouble, little changes like this won’t cut it. To make a real difference, take aim at the biggest items in your budget, such as housing, transportation, and food. See if you can find a cheaper apartment, give up your car, slash your food costs, reduce your healthcare bills, find cheap entertainment, or learn to shop secondhand. Aim to retool your budget so you’re saving at least 10% of what you make – or more, if possible. The more you can cut your spending, the more you’ll have to save and invest so you can build up your nest egg.
  • Boost Your Earnings. If you can’t save as much as you want by cutting your spending, look for ways to increase your income instead. You can try to make more at your regular job by asking for a raise or earning a promotion, or you can get a second job or start a side business to bring in more money. A longer-term strategy is to look for ways to build passive income streams, such as rental income, royalties, or income investments.
  • Pay Off Debt. Once you’ve managed to squeeze a little extra money out of your budget, the first thing to do with it is to pay off debt, if you have any. The interest you pay on debt is dead weight in your budget, costing you money month after month and giving you nothing in return. Paying off your debt frees up extra cash that you can use to start building up your savings and investments. Start by focusing on high-interest debt, such as credit card debt, which is the biggest drag on your finances.
  • Invest Wisely. You don’t have to wait until you’ve paid off every penny of debt to start investing. When the economy is doing well, you can actually get ahead faster by investing rather than by paying off low-interest debt like student loans and mortgages. However, it’s important to be careful: If you put all your money into high-risk investments because you’re after the biggest possible gain, you could easily end up losing everything. To reduce the risk, diversify your portfolio, spreading out your money over lots of different types of investments. One way to do this is to build a “lazy portfolio” of a few index funds or ETFs (exchange-traded funds) that cover a wide range of stocks and bonds, and then keep investing in them at a steady rate. If you’re not sure how to do this, choose a financial advisor who can guide you.
  • Track Your Progress. Now comes the fun part: sitting back and watching your nest egg grow. Seeing the numbers on your quarterly statements rise gradually over time gives you the sense that you’re really getting ahead. If you want to make your progress even more visual, make a chart that tracks your net worth over time. As you that line creeps upward, so will your spirits.

3. Make Yourself Feel Rich

Unfortunately, building up wealth for the future won’t help you if you feel deprived in the present. If you’re eating rice and beans every night so you can put every spare dollar into your investments, you won’t feel wealthy – you’ll feel broke and miserable.

To avoid this problem, leave yourself a little spare cash in your budget to spend in ways that will make you feel wealthier right now. Set aside a small sum each month, even if it’s only $10 or $20, to spend on cheap luxuries that will make you feel pampered. Treating yourself to a great cup of coffee, a bottle of champagne, or a bunch of fresh flowers can make you feel rich without putting too big a dent in your budget. That way, you can build up wealth for the future and still enjoy yourself in the present.

Another way to spend money in a way that makes you feel richer is to give to charity. When you set aside money each month for the less fortunate, even if it’s a fairly small sum, you’ll feel rich by comparison.

Studies show that giving away money can make you happier with your life as a whole. A 2008 study published in Science found that when people were given a small sum of money to spend on others, they reported feeling happier at the end of the day than people who were given the same sum to spend on themselves. A later study, published in the Journal of Personality and Social Psychology in 2013, looked at data from 136 countries and found that in 120 of them, people who gave away money reported greater levels of happiness.

Charitable giving can even improve your physical health. A 2005 study in The Journals of Gerontology Series B found that older adults who gave away more money to others had better overall health. When you give money to charity, you help others and also help yourself – a real win-win.

Make Yourself Feel Rich

Final Word

A final way to make yourself feel richer is to remember that wealth isn’t just about money. If you’re living the life you truly want, then you are already rich – no matter how much you have in the bank.

So, if you are ever feeling poor and unhappy, try focusing on all the things you do have in your life, aside from a bulging bank account. Think about your health, your family and friends, and all the little things you have to be grateful for, such as sunny weather or trafficless roads on the way to work. The more you reflect on everything you have to be thankful for, the richer you’ll feel.

Of course, that doesn’t mean you shouldn’t also work on improving your financial situation if you can. You can learn more about how to get out of debt, cut your spending, and invest money in our archives.

Do you think of yourself as poor, rich, or somewhere in between?

Amy Livingston is a freelance writer who can actually answer yes to the question, "And from that you make a living?" She has written about personal finance and shopping strategies for a variety of publications, including,, and the Dollar Stretcher newsletter. She also maintains a personal blog, Ecofrugal Living, on ways to save money and live green at the same time.