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How Income Inequality Created The Vilest Empathy Gap

By Frugaling 5 Comments

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Mansion The New Rich Middle Class War
Photo: jorge lascar/flickr

Trickle-down economics worked — for the wealthy

Over the last few decades, incomes have become disproportionately unequal. Large amounts of wealth are hoarded by the 1%, with trickle-down economics failing to provide shared gains we were promised. The average employee makes a small fraction of their executive counterparts.

We know America has terrible income and oligarchic-level wealth inequities. We know that Citizen’s United and other lobbying efforts make the wealthier voices louder.

As the rich get richer and poor get poorer (or stay poor), a rigidity formed. Lower income populations largely stay in lower income towns, jobs, and levels of education. Meanwhile, higher-income populations largely stay in gated neighborhoods, choose what education options are available via economic and geographic means, and enter higher-income vocational networks (i.e., “Hey, your dad helped me get this job!”).

But honestly, we already knew this information. What we fail to grasp is how income inequality shapes us psychologically — the wealthy and impoverished, alike. This level of economic stratification is decades in the making, but we are just beginning to see how this affects well-being and treatment of others. With huge differences in wealth and declining social-class mobility, an income-empathy gap has developed.

Income and wealthy inequality led to an empathy gap

Empathy is defined as the “ability to understand and share the feelings of another.” This feeling can occur with pets, family members, and even fictional characters from favorite novels. Empathy is built, maintained, and formed by our experiences in life. These feelings motivate us to volunteer at soup kitchens, donate to charities, and serve each other. The least empathic among us are traditionally called violent and/or antisocial, as they do not exhibit or understand the pain they cause to another (i.e., terrorists).

As incomes diverged and wealth generation stagnated for lower-income populations, this income-empathy gap widened. People in higher incomes now struggle to empathize and provide for lower-income groups. Propagated on every medium, statements by the fortunate few and privileged sound like this:

Poor people are poor because:

  • “…they buy iPhones and eat out too much.”
  • “…have too many children.”
  • “…make terrible life choices.”
  • “…they are lazy.”

Trust me, the list goes on, but it’s the same mythical vitriol — over and over again. I needn’t perpetuate and propagate these economic mad libs any further. While some may be lazy, frequent iPhone buyers, these messages typecast and discriminate — they’re only used to harm. The voices are judgmental and painful to those in lower-income populations. They’re pejorative and denigrating, and exemplify a true lack of empathy for someone suffering economically.

Poverty shaming doesn’t solve the problem

We know that negative voices can harm others, and yet we keep doing it. For instance, individuals with obesity and weight concerns frequently hear similar messages, which are fail to provide empathy:

  • “Lose the weight fatty!”
  • “Have you thought about putting down the Cokes?!”
  • “You’re so fat!”
  • “Thought about going on a diet any time soon?!”

The research suggests that when you fat shame, individuals don’t suddenly lose weight. In fact, they may gain more. Potentially, income and wealth shaming may do the same thing; thus, making it more difficult for an economically disenfranchised individual from making better choices.

Okay, so shaming doesn’t work, and yet privileged people are using these same tactics with lower-income populations. Why then must a well-off person denigrate, disable, hurt, harm, and verbally accost another? What motivates someone to yell flagrant economic “advice” to someone already struggling to make ends meet? How could they actually help another in need?

Unfortunately, these answers all trace back to the income-empathy gap. After decades of growing social-class stratification, income inequality, and wealth gaps, we are a country in need. But ironically we don’t need more wealth. Instead, America needs more empathy.

To steal and modify a line from Uncle Ben of Spiderman, “With great wealth comes great responsibility.” The economically well-off and privileged have a tremendous opportunity to help those disenfranchised — even beyond charitable giving. It starts with being able to reach out your hand to support another.

How to truly help impoverished and disenfranchised

If you’re wealthy, you may be upset that there are homeless people sitting outside your favorite restaurant. Just know that yelling at that individual to “get a job” won’t ever help as much as providing tax revenue for mental health services, job training and placement offices, and drug and alcohol treatment centers. Just know that typecasting a “ghetto” or “lower-income neighborhood” as a bunch of hoodlums will never help as much as serving that community’s churches, food banks, and schools.

Potentially (and hopefully), if our income-empathy gap closes, so to will the income and wealth gaps. We have a terrific opportunity to change the status quo and shed these antiquated ideals for something better.

We live in a great, prosperous nation that was created for us all — the present person and future immigrant. By closing these gaps, we will all benefit.

Filed Under: Social Justice Tagged With: Elite, empathy, gap, Income Inequality, Occupy Wall Street, poor, poverty, rich, unequal, wealth inequality, Wealthy

How Media Makes More Money Publishing About Fake Self-Made Millionaires, Whiz Kids

By Frugaling 7 Comments

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Whiz Kid Story in New York Magazine
New York Magazine Article on a “Whiz Kid”

At the spry young age of 15 and 16, I began trading stocks. I read Jim Cramer’s autobiography and was inspired by his love of markets. Memorizing the two, three, and four-letter tickers for major companies provided a unique joy; frankly, I’m not sure why. I loved watching CNBC and seeing the symbols dance up and down like a permanent Christmas tree of green and red.

Every now and then, a story would catch my eye. It was someone like me; passionate about the markets, but they were making boatloads of cash. They made me jealous, and I wondered how I could emulate their success.

That was until I realized most were fake, underreported, and often, downright lies. These were hardly the role models I should’ve been following. Today, I wanted to point out a few recent stories that highlighted frauds — willingly and with seriously piss-poor reporting.

The already-rich, “self-made” millionaire

Anton Ivanov was a serial entrepreneur and personal finance blogger for years. I had multiple conversations with him after starting Frugaling. To avoid anything slanderous, I’ll just say that I planned on never working with him. Something just didn’t make sense about his riches and efforts in the personal finance world.

Then, shortly before his 27th birthday a slew of stories were written about Ivanov. He even wrote an article for the occasion in one of my favorite personal finance sites, Budgets are Sexy. Yahoo Finance interviewed him to discover how he had succeeded to save, invest, and make wealth in record time.

Being a 27-year-old, self-made millionaire is a unique club that’s generally reserved for entrepreneurs and young tech whiz kids. The Internet has enabled a new generation — Millennials — to see millions and billions in record time with the sale of apps and sites.

Ivanov reported that he did it with old-fashioned hard work and dedication. Remarkable! His advice centered on a few steps: set clear and actionable goals, track net worth, save more income, avoid consumer debt, have an emergency fund, save for large expenses, and invest.

Yahoo Finance reported that Ivanov had successfully entered the workforce at a young age, started hustling at a young age, and then got into the real estate game. The article is filled with blasé quips like,

“He hopes to own at least 10 properties by the time he hits his 40s, but he’s in no rush.”

See, it’s not that his advice was fraudulent and questionable. The heart of the problem was that he wasn’t actually a “self-made” millionaire (as if anyone magically prints money themselves). Here’s what Yahoo Finance then wrote,

“Since the publication of this story on Nov. 4, new details have come to light which have made Anton Ivanov’s claims of becoming a self-made millionaire highly suspect. On Monday, Ivanov admitted to Yahoo Finance that 75-80% of his wealth consists of an inheritance that was left to him by his parents, who died several years ago.”

This kid made $72 million… From his parents

Ivanov isn’t the only fake “success story.” New York Magazine found a “whiz kid” that supposedly made millions trading stocks on his “lunch hour.” It was the ultimate viral article. With a catchy title that spoke to ridiculous riches — $72 million made from trading — and a young man looking to become a hedge fund manager.

Mo Islam was a 17-year-old kid who had already been profiled by Business Insider, as a “20 under 20.” He was going somewhere in life because of his vast wealth creation. Islam supposedly started buying penny stocks — over the counter and paper-based companies that don’t necessarily trade on the major exchanges. These stocks vary greatly and are dangerous for 99.99% of investors to even think about.

The penny stocks didn’t pan out, so Islam swiftly switched to oil and gold. That’s when New York Magazine says he struck bank account success. He quickly amassed about 8-figures of wealth.

If the story is unbelievable and astonishing, it might just be unreal and manufactured. Only a couple days later, every major media outlet was discrediting the kid and New York Magazine’s story. It was all made up, and while the “whiz kid” did have a large bank account, it is because very wealthy parents.

The media is rewarded for good, fake stories

Over and over again, false stories are reported in the media. They used to make me envious for their success. I thought, “Wow! If they can do it, why can’t I?” Well, there was an essential distinction between them and me — lots and lots of money to start. Both Ivanov and Islam started with wealth that was either inherited or given to them. The trading, saving, and investing that came afterwards didn’t essentially make them rich — it just added to their earnings.

These weren’t the mythical “self-made millionaire” and “whiz kids.” No, they were privileged with familial riches. Today I’m writing this story, not to further discredit these two people, but to highlight the severe media mismanagement and horrific reporting that was associated with both stories (and many others I don’t have time to cover).

With each story, the media outlet claimed that the individual told them that he had made boatloads of money. With each story, they reported that claim without properly vetting the source. And with each story, the media outlets made vast advertising dollars in spite of their errs. In fact, they made even more than they would’ve if they honestly vetted and reported the stories!

Ordinarily, these people are singular stories — one-hit wonders. They’re popular for a little while and then the media company moves to the next story. They make money from that one story, but here’s the genius: if they get it wrong, there’s at least two stories to come!

Here’s how you make more money as a news company by reporting fraudulent stories:

  1. Publish a poorly vetted story
  2. Make money from visitors to the “incredible” story
  3. Receive harsh critique and censure from observers of the story, which sends a surge to the original article
  4. Make more money from visitors to the “incredible,” fraudulent story
  5. Publish a story highlighting the “truth” regarding the “self-made millionaire”
  6. Make even more money from visitors to the “incredible truth” about the fraudulent story

All the while, media outlets work diligently to discredit the source, while excusing the journalist’s poor reporting. And meanwhile the mythical narrative of the “self-made millionaire” continues, stubbornly. The narrative doesn’t change, despite the blow to accuracy. Everybody wins when the narrative stays the same, right?

What do you think, can people actually be “self-made” millionaires? What’s the best way to make and build wealth? Is there actually one-size-fits-all advice that works for everyone?

Filed Under: Make Money, Social Justice Tagged With: cash, market, Millionaire, millions, money, New York Magazine, self-made, stocks, trading, whiz kid, Yahoo Finance

These Bootstraps Are Broken

By Frugaling 5 Comments

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American Flag
Beautiful Red, White, and Blue! Photo: Mike Mozart/Flickr

The American, individualistic dream

America has a work hard, play hard, get rewarded mentality. People grow up to become productive members of society, and contribute to our capitalistic creation — creating and spending. Those who hustle harder are said to “make it” and achieve great financial success. For a fortunate few, that’s the path to success; for the rest of us, we’re stuck slugging it out with minimal success.

We live in a deeply individualistic society that prides independent triumphs. Popular media tends to highlight and personify movements by their individual leaders. For instance, there’s an archetype of the perfect politician. The picture is someone that came from nothing, had a janitor for a father, and still made it to become a representative, senator, and/or president. That vision stretches beyond polemics and parties. Both Elizabeth Warren (D-MS) and John Boehner (R-OH) ran and won on these models of poverty to individual achievement.

The counterculture is a collectivistic society, which are common in Colombia, Taiwan, and Venezuela. These groups support shared and “other-focused” goals. Essentially, my success is less important than the success of all of us. There are few popular archetypes for collectivistic success, but the Occupy and recent #BlackLivesMatter campaigns and protests are two terrific examples. There is not a singular representative for news media to turn to; instead, they interview the loudest voices of the collective.

What failure looks like in America

Individualism and personal triumphs directly influence how we treat those who have not achieved great financial gains. These are some words that quickly come to mind: “failure,” “lazy,” “unmotivated,” “unproductive,” and “weak.” Independent people believe that an individual’s lack of success is their fault. The message is powerful enough to become an internal message for many in America. Suddenly, it’s not just others who think negatively about financial disappointments, you may begin to believe the societal script.

When someone believes this social script, and sees a homeless person, they may be more inclined to use those powerful words of denigration. It’s their fault for being homeless, alcoholics, and/or penniless. Meanwhile, collectivistic cultures seem to see a failure in their social systems and themselves; if one falters, we all fail.

Financial independence is often inversely related with interdependence. When we become personally more affluent, the financial gains enable independence. Simply, we don’t need other people as much when wealthy. Money has a powerful distancing effect on our ability to empathize with others and see the needs of the greater collective.

“I wish I had done so much more.”

American society has a deeply ingrained version of capitalistic success: make more money, and you’re more of an achievement. Money equals worthiness in society, and this mentality means that with greater wealth you should command more attention. In a post-Citizen’s United (3) world, that’s exactly what we have. Those with greater funds can lobby, campaign, and advertise for their desired candidates more than an average citizen. Thus, their voices are louder than any one person should be. In our individualistic culture, we prop up this “freedom.”

This has deep consequences for the people that cannot and will never be given an equal chance at success. I have an acquaintance that uses an electronic wheelchair because he has a severe disability that prevents him from having much of motor control. His speech is slow and difficult, and you can see the strain on his face as he tries to share his thoughts. Conversations with him are slower, and less “productive” because he literally cannot produce speech at the same rate as most people.

It was his birthday, and I asked him what his plans were. He said he’d be going to Buffalo Wild Wings. I complimented his decision, and asked how old he’d be turning. While much of his speech is slow and challenging for him, I could tell he hesitated a bit more in telling me his age. I got sarcastic, and said, “What’s that hesitation for? You’re not going to tell me?!” He gently smiled, and then his face saddened. “I’m 63,” he responded. I said, “Happy birthday! Wow, 63! Well done.” His face stayed saddened, and I asked him what he was thinking. His words cut through me, as he said, “I wish I had done so much more. I expected I’d do so much more. I feel like I didn’t do as much as I should have.”

I held back tears (as I do writing this) for about 10 minutes, and then after he left I started crying. Here’s a man who had no choice but to be in a wheelchair because of his disability, and yet he still feels and owns society’s expectations for independent, individualistic norms. Here’s a man that feels like his lack of productivity is a failure and less than he should have made for himself.

Unshackle us from capitalistic ideals

America is entrenched in this concept of success. I’m not optimistic it’ll change very soon, if at all. But as the ideals live on, we are harming those who cannot achieve in the same ways or in the same amounts. Frankly, I’m saddened we haven’t done more to move beyond financial success being the greatest measure of achievement.

Societally, we are hurting people and could desperately benefit from more collective goals. When we tell people to pull up and tighten their bootstraps, work harder, and hustle more, we are promoting a society that punishes those less fortunate — they’re the victims of our blame.

We are socially and economically stratified more than ever. The ability for people to move social classes has been reduced into a terrible caste system of poverty. Incomes are unequal, with upper management sucking up tremendous percentages of wealth. These bootstraps are broken — there’s nothing to pick up anymore. We need to repair our society, values, and believe in some collective good and goals. Until then, most will struggle and suffer under the weight of our capitalistic system.

Filed Under: Social Justice Tagged With: America, American, BlackLivesMatter, Collectivistic, Communal, Independence, Individualistic, Interdependence, occupy, Politicians, USA

One Nation… Poor, Divided, And Unequal

By Frugaling 8 Comments

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Statue of LIberty Inequality
Photo: Statue of Liberty. Credit: Juanedc/Flickr.

We’re in economic trouble. As the deficit wages on and the country continues to spend billions of dollars on wars that make no sense to average citizens, it’s easy to say that we need austerity and tax relief. That’s what this country voted for in the mid-term elections, as a slew of new Republicans were elected to Congress. Unfortunately, that action is shortsighted and relief will not last.

The elected Republicans are responding to a warranted distrust and unease with our current administration, but this new direction could corrupt our chances of lasting economic recovery. It may sound tragic, but we need greater taxation more than ever. In these economically troubled times, we are digging ourselves deeper by talking about cuts to budgets and public programs.

About 30 years ago, President Reagan began a long series of cuts to federal agencies and public funding — ushering in the first era of big time tax cuts for the wealthiest elite. And this trend only continued. The tax breaks hurt the most disenfranchised first. Cuts to funding generally suck necessary funds from education and welfare — programs that keep clothes on children, employees healthy, and roofs over heads. These are all in high demand.

It’s no accident that as cuts to important budgets continued, income and wealth inequality skyrocketed. We now live in a new Gilded Age. The average CEO gets about 204 times the salary of traditional employees. That’s immoral and outrageous. Are they doing 204 times more work? No. Are they doing 204 times more jobs? No. Some people point to the pressures of being a leader — the taxing life that they lead. To those supporters of income inequality for upper management versus average employees, I urge you to develop some empathy for the person that is on food stamps, working full-time, and dealing with children — all on poverty-inducing wages. Isn’t that stressful, too? I think the impoverished person would gladly take on CEO-level stress to pay their bills each month, reliably feed their children, and possibly (holy crap!) take a vacation from time to time.

Walmart is a perfect, nightmarish example, where CEOs and upper management make it big, and their precious employees wear blue uniforms and need food stamps to make ends meet (even when working full-time). It’s then that those outfits look more like prison uniforms.

Even more alarming is the growing wealth inequality. The Economist recently highlighted new research from two of the leading wealth economists. What they found was shocking. There are 16,000 families — 0.01% of the population — that have an average net worth of $371 million each. Staggering hardly describes this level of “average” wealth. The research suggests that this represents 11.2% of total wealth. To be clear, 0.01% of the population has 11.2% of the total wealth! How do we accept this inequality and disparity? How do we accept this assault on true family values? How do we accept this inequality that causes massive funding gaps?

We’ve reached astonishing levels of wealth inequality — approaching records from 1916. This disparate wealth disrupts middle-class opportunities, wealth generation, and social class mobility. All opportunities are stifled for the masses, as a select few profit. Those who’ve suffered most have the least. I cannot help but reflect on our values as a country. Could this corrupt — post-Citizens United world — truly be what our Founding Fathers set out for America?

Today more than ever, we are one nation, poor, divided, and unequal.

Filed Under: Social Justice Tagged With: CEO pay, citizens united, Congress, Democrats, Income Inequality, politics, republicans, Walmart, wealth gap, wealth inequality

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