The Psychology of Poverty: Does It Exist or Not?

Why do people become poor?

According to the UN, there are 8 billion people on the planet, of which 700 million live in extreme poverty. In Russia, according to information for the third quarter of 2024, the poverty level was set at 15,679 rubles, which means that 8% of the country's population lives below the poverty line. This underscores the relevance of the poverty problem and the need to develop effective strategies to address it.

There are many approaches to defining poverty. Each of them offers unique criteria and parameters for assessing people's standard of living. The main methods include income analysis, level of access to basic services and resources, and assessment of social status. These approaches help to identify not only material but also non-material aspects of poverty, such as lack of education and health care. Understanding the different approaches to poverty allows us to more effectively develop strategies to overcome it and improve the population's quality of life.

The concept of absolute poverty, developed by the British sociologists Seebohm Rowntree and Charles Booth. Their approach is based on defining the poverty line: the level of income or consumption below which a person or household is considered poor. The main criterion for determining the poverty level is the subsistence minimum (the subsistence minimum in Russia in 2025 ranges from 14,718 to 31,210 rubles, depending on the region).
The relative approach, developed by the British sociologist Peter Townsend, defines poverty as a situation in which a person, due to low income, cannot afford the standard of consumption accepted in society. Townsend's approach focuses not only on the quantitative aspects of poverty, but also on the qualitative ones.
The subjective approach is based on people's assessment of their own material well-being.

Alex Addae-Koranki, a lecturer at the Central Business School at the Central University of Ghana, identifies several key theories that help understand the causes and dynamics of poverty. These theories cover various aspects, including economic, social, and cultural factors that influence the population's standard of living. Understanding these theories is an important step in developing effective strategies to combat poverty and improve living conditions in societies suffering from economic difficulties. Considering these aspects allows for a deeper understanding of how various factors interact and contribute to maintaining cycles of poverty.

The theory of individual disadvantage, which emphasizes a person's personal responsibility for their situation. It argues that the main causes of poverty lie in people's personal qualities.
The cultural belief theory, according to which the belief that a person cannot escape poverty is passed down from generation to generation. It describes the concept of a culture of poverty—a set of value and behavioral attitudes that lead to the persistence of poverty in specific social groups.
The theory of economic, political, and social distortions—was put forward in response to criticism of previous theories. According to the creators of this theory, the main problem of poverty is the imbalance in the distribution of goods and the unequal starting positions of people. Achieving the same level with different starting conditions can take people different amounts of time and resources.
The geographic theory of inequality combines individual and external factors: according to it, the risk of poverty depends on the geographic zone where a social group is located. According to proponents of this theory, the main sources of poverty are remoteness from natural resource sources, population density, lack of investment, and low levels of innovation.
The concept of cumulative and cyclical relationships unites all concepts and presents the problem of poverty as a process in which different causes exacerbate each other.

Different approaches to poverty analysis emphasize the relationship between low quality of life, educational level, and the state of the labor market. Many theories emphasize that low educational levels limit employment opportunities, which, in turn, leads to a deterioration in the quality of life. Thus, to effectively address the problem of poverty, it is necessary to consider these factors in a comprehensive manner, and develop strategies aimed at increasing educational levels and improving conditions in the labor market.

Poverty is a complex socio-economic phenomenon that includes a lack of not only material resources, but also the ability to meet broader life needs. It would be wrong to argue that only changes in thinking can improve the material situation. Effectively combating poverty requires considering a range of factors, including access to education, health care, and jobs. Only a comprehensive approach can lead to real change in the lives of people living in poverty.

How Living in Poverty Affects a Person

However, this is not to say that mindset and financial outcomes are unrelated. Poverty not only represents a lack of material resources but also a source of significant stress, which can affect numerous processes in the body. This connection between psychological state and financial situation underscores the importance of working on your mindset to achieve financial well-being. Changing your mindset can help you overcome financial difficulties and improve your overall health.

People who have experienced financial difficulties or are in a constant state of money anxiety may experience symptoms similar to post-traumatic stress disorder. This anxiety can persist even after financial problems have been resolved. Constant stress from a lack of money affects mental health, creating long-term consequences. It's important to recognize that financial stability doesn't always bring immediate relief. Understanding and working through these feelings can be key steps toward recovery and improved quality of life. Research confirms that chronic stress experienced by pregnant women can cause changes in the developing brain of their children. These changes can have serious consequences both in infancy and later in life. Children whose mothers were exposed to high levels of stress exhibit increased anxiety, depression, aggressive behavior, hyperactivity, and reduced resilience to stressful situations. It is important to take into account the influence of the mother's psycho-emotional state on the health and development of the child, which emphasizes the need to create a supportive and calm atmosphere during pregnancy.

Still: the film "Oliver Twist" / TriStar Pictures

Growing up a child in a family facing constant financial difficulties significantly affects his health and Future behavior. A study conducted by researchers from Northwestern University, involving 103 respondents aged 25 to 40 from various social backgrounds, found that children from low-income families have lower cortisol levels. This may lead to them ignoring stressful situations and negative emotions, which later affects their adult life and professional activity. Additional research has found that the brain volume of people with low incomes is, on average, 3-4% smaller, and in children from poor families, this figure can decrease by 10%. These data highlight the importance of supporting low-income families to improve the health and well-being of future generations.

You don't have to be in dire financial straits to experience stress due to a lack of resources. Even minor financial difficulties can have a serious impact on a person's mental and physical health. They can cause profound and long-lasting consequences affecting various aspects of life. Stress caused by financial problems can lead to a deterioration in overall well-being, a reduced quality of life, and the development of various diseases. Therefore, it is important to pay attention to your financial situation and take steps to manage the stress associated with a lack of resources.

Is there a psychology of poverty as a set of attitudes that prevent you from getting rich?

The psychology of poverty, as it is understood online, is a set of beliefs that limit a person's perception and prevent them from recognizing and taking advantage of opportunities to improve their lives. These beliefs can shape negative thinking, preventing a person from seeing the prospects and resources available to achieve financial well-being. Recognizing these mental barriers is an important step to overcoming them and creating a more successful life. Changing your mindset and setting yourself up for success can significantly increase your chances of achieving financial stability and overall well-being.

Research confirms that financial scarcity negatively affects a person's ability to make decisions. In India, scientists observed farmers at various periods of their lives, when their incomes fluctuated from high to low. Results showed that under financial stress, farmers' problem-solving skills, especially those requiring planning and strategic thinking, significantly declined. This highlights the importance of financial stability for effective decision-making and resource management. Research suggests that the primary reason is the significant workload placed on the human brain. It is forced to cope with numerous small calculations and plans, such as saving money and ensuring the family's food supply until the end of the month. The brain's capacity is limited, and the more a person has to worry about, the less effectively they cope with more complex cognitive tasks. This highlights the importance of stress management and task optimization to improve mental efficiency. People with low incomes often find themselves in difficult financial situations, which leads to the formation of a vicious cycle. A study by a group of scientists from Harvard University has shown that some financial decisions made by people with limited resources can be ineffective. In an experiment based on a board game, participants with lower incomes were asked to "borrow" extra moves to improve their chances in the game. However, despite the possibility of increasing the number of moves, they performed better when this option was limited. This study highlights the importance of good financial management and awareness of the consequences of financial decisions for people with limited means.

Still: film "Wanted" / Universal Pictures

There are six main reasons that contribute to the formation of this type of thinking.

Cultural stereotypes. One simple way to increase your income is to ask for a raise or offer a higher salary when applying for a job. However, many people, especially women, are afraid to take such steps due to ingrained gender stereotypes. From an early age, they are taught that being assertive and openly expressing their desires is bad. But it's not only women who face this barrier; many men struggle with low self-esteem or social anxiety. External locus of control. The term "external locus of control" describes a person's tendency to attribute their successes and failures to external circumstances. Such people do not value their achievements: if something works out, it is perceived as luck or help from others. Research shows that people with an external locus of control are less likely to achieve significant success and good incomes, as they are less proactive and do not strive to take initiative in their work or seek additional sources of income. Excess egoism or altruism. It is believed that egoists achieve career success faster, but research shows the opposite. Scientists analyzed the career paths and personal traits of more than 57,000 people and found that the highest incomes are earned by those in the "moderately prosocial" range—that is, those who combine selfish and altruistic traits. Such people tend to be trusted and respected by colleagues, which opens up more opportunities for career advancement.
Underdeveloped social skills. Developed communication skills help people establish useful connections, maintain good relationships with colleagues and superiors, and negotiate salary more successfully. As a result, they often achieve higher incomes. Those who lack the ability to connect with others are more likely to remain in lower-paid jobs. Another study even found that people who actively network earn 7% more than their less sociable peers.
Sunk Cost Fallacy. This is a cognitive distortion that causes people to continue doing something that doesn't bring them pleasure or profit because they feel sorry for the time spent on it. For example, a person might not close an unprofitable business because they've already invested a lot of effort into developing it.
Limiting beliefs about money. Psychologist Bradley Klontz identifies four main types of financial behavior: money avoidance, money wariness, money worship, and self-definition through material status. The most disadvantaged category is the money-avoiding category: they don't strive for high incomes because they prefer stability (they don't quit their accustomed jobs), believe that self-realization can only be achieved through a hobby (for example, a young man loves playing the guitar as a hobby but works a low-paying job), or want to be useful and realize this value only outside of work (in charitable projects, with loved ones). Sometimes they even believe that money can corrupt people and bring trouble.

In my opinion, most of the limitations to our financial growth are related to mindsets. In a study conducted as part of my qualifications as a cognitive behavioral psychotherapist, it was found that, all other things being equal, such as gender, education, marital status, and environment, differences in mindsets significantly affect the level of financial well-being. The results showed that the level of financial wealth, income, and stress among respondents with and without restrictive mindsets differed by 2.5 times. This emphasizes the importance of changing your mindset to achieve financial success.

Adults with a high level of education and significant life experience often face various challenges. Their knowledge and skills allow them to effectively solve many problems, but in today's world, they may experience difficulties adapting to rapidly changing conditions. It is important to understand that experience and education are only part of success. It is also necessary to develop skills that will help cope with new challenges, such as digitalization and the changing labor market. Understanding these aspects contributes to more successful integration into society and the professional environment.

they often fail to notice the root of the problem;
they deny any opportunities to change the current unsatisfactory situation, as they are subject to "tunnel vision" and have a view of reality formatted by current attitudes that determine what is possible for a person and what is not.

That's it, the circle is closed. We continue to repeat the same actions, which leads to an invariable result that we are not satisfied with. This situation forces us to consider the need for change. To break this vicious circle, it is important to analyze your actions and find new approaches. Only by changing your habits can you achieve the desired result and satisfaction.

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To understand your money attitudes, we recommend taking the Klontz Monetary Attitudes Test. If you get low results on any of the four scales, don't worry—this is normal for almost 70% of people. It is important to realize that this is a signal about the need to work on your own financial beliefs and attitudes.

What to do if you notice limiting beliefs related to money

For people who grew up in poverty, understanding the plasticity of the brain is crucial. The brain has the ability to adapt, learn, and change in response to new experiences. Understanding this ability can significantly impact personal development and overcoming difficulties. There are effective steps that can assist in this process, including self-education, participation in training, and the development of critical thinking skills. These activities contribute to improved cognitive function and open up new opportunities for personal and professional growth.

Improving financial literacy. Knowing the basics of sound financial management is of great importance. The better you understand how to make sound financial decisions, the better you will be at it. Consider taking a financial literacy course to develop your skills in this area. For example, Skillbox offers a free mini-course.
Consult a psychologist. Research from the University of Cambridge shows that psychotherapy can activate the medial prefrontal cortex of the brain, which often becomes less active during financial difficulties. There are many free programs and services ready to help.
Evaluate your financial situation. It is important to periodically analyze your current financial situation. Determine whether you are truly short of funds or whether you are perceiving the situation negatively. Learn to appreciate what you already have.
Find the positive in your experience. Your difficult childhood may have given you valuable skills that will be useful in the future. Try to focus on these positive aspects.
Analyze your ideas about poverty and wealth. Compare your views with the reality of your situation and try to understand what true financial stability means to you.
Determine how much your hourly rate is worth and strive to use your time effectively.
Set boundaries for small expenses. Determine a comfortable amount you're willing to part with, and allow yourself small but enjoyable purchases without feeling guilty.
Develop a positive sense of self. Learn to forgive yourself for your mistakes and be kind to yourself.

Reading is also important for developing thinking and broadening horizons. It improves memory and concentration, and helps develop critical thinking. Regularly reading books, articles, and other materials enriches vocabulary and deepens knowledge in various fields. Therefore, it is worth devoting time to reading not only for pleasure, but also for personal growth and education. Improving your relationship with money is an important step towards financial stability and well-being. The first thing you need to do is become aware of your financial habits and attitude towards money. We often don’t think about how our emotions and beliefs influence financial decisions. Start by analyzing your expenses and income. Create a budget to help you control your finances and avoid unnecessary spending. It is also important to set financial goals. Determine what exactly you want to achieve: save for a large purchase, create an emergency fund, or invest in your education. Learning financial literacy also plays a key role in developing a positive attitude towards money. Learn the basics of investing, debt management, and credit management. Reading books, attending seminars, and courses will help you expand your knowledge and confidence in financial matters. Don’t forget the importance of the emotional aspect. Work on your beliefs about money. Freeing yourself from negative stereotypes will help you make financial decisions more easily and improve your quality of life.

Regularly review your financial goals and achievements. This will help you stay on track and adjust your actions based on changing circumstances. Building a healthy relationship with money is a process that takes time and patience, but it will bring you financial freedom and confidence in the future.

Step One: Get to Know Yourself Better. Understanding your own interests, strengths, and weaknesses will help you in personal development and achieving your goals. This will allow you to make more informed decisions and build harmonious relationships with others. Reflect on your passions and values to better navigate life and find suitable opportunities for self-fulfillment.

During the analysis, it is important not to criticize yourself or make excuses, answering questions as honestly as possible. Only after you have assembled the complete picture should you highlight the key moments that evoked strong emotions—surprise, shock, anger, and other reactions. This approach will allow you to better understand your feelings and experiences, as well as identify important areas requiring attention.

The minimum program includes the main tasks and goals that need to be accomplished. It serves as a basis for further planning and helps you focus on key aspects of the project. It is important to keep in mind that the minimum program should be clearly formulated to ensure maximum efficiency in completing tasks. Key elements of the minimum program may include setting priorities, setting deadlines, and allocating resources. It is also worth considering possible risks and ways to minimize them, which will allow you to achieve your goals on time and at optimal cost.

Monitor your financial habits using an "ABC journal" and record automatic thoughts that arise while managing your money. This will help you better understand your beliefs and behavior around finances. Regularly analyzing your records will help you identify thinking patterns that influence your financial decisions. A mindful approach to journaling will help you improve your personal finance management and create a more effective strategy for achieving your financial goals.

A - Record specific situations that cause financial discomfort;
B - Record the thoughts that were caused by the situation and led to it;
C - Record the consequences of the situation: financial, physical, emotional.

Formulate and write down three statements about money with which you strongly agree. Statement one: Money is a medium of exchange that allows you to value goods and services and facilitate trade between people. Statement two: Financial literacy plays a key role in managing personal finances, helping you avoid debt and achieve your financial goals. Statement three: Saving and investing money are important aspects of ensuring financial stability and achieving long-term independence.

Financial definitions form the basis for understanding economics and personal finance management. A budget is a plan that helps control income and expenses, optimizing cash flow. Credit is a sum of money provided to a borrower with the obligation to repay it with interest, allowing for large purchases or investments. Investments involve the investment of capital in various assets with the goal of generating income or increasing value. Assets are resources with economic value that can generate income in the future. Liabilities are obligations that require payment in the future, and understanding their structure is important for assessing financial health. Financial risk is the probability of losing money or not receiving the expected return, which requires careful analysis before making investment decisions. These definitions help build the foundational knowledge needed to manage your money effectively.

Earning is…
Money is…
Spending money is…
Saving is…
Credit is…
Investing is…
Taking care of money is…

Create your own financial genogram. List the adults who are significant to you: parents, grandparents, aunts and uncles, siblings, family friends, teachers, and bosses. Write down the lessons they taught you about money, the behaviors they demonstrated, and how their attitudes toward money influenced your financial literacy. This process will help you recognize how your environment shapes your understanding of finances and what beliefs you've inherited.

Think about people whose financial well-being you envy, and try to understand what it is about their approach to money management that you admire. What strategies and decisions do they use to achieve financial success? What habits and investment decisions contributed to their well-being? Studying the experiences of successful people can help you develop your own financial strategy and achieve the results you desire.

Creating your "financial story" is an important step toward financial literacy and resilience. Start by identifying key milestones that have impacted your financial situation. Write down your wins—achievements that have brought you financial independence or improved your well-being, whether it's successful investing, paying off debt, or accumulating a significant amount of money.

Focus on your strengths, such as your ability to manage a budget, find good deals, or make informed financial decisions. Don't forget about your weaknesses that may be hindering your financial growth—whether it's impulsive buying, a lack of financial knowledge, or a lack of long-term planning.

By analyzing your financial history, you can identify what skills need to be developed and how you can improve your financial strategy in the future. This will help you not only better understand your current financial situation but also map out paths to even greater success.

Determining your financial personality type is an important step towards successful financial management. Your financial personality type reflects your habits, attitudes, and behavior around money. Understanding your personality type helps you identify your strengths and weaknesses, which in turn allows you to better plan a budget, make informed financial decisions, and achieve your goals. Explore your financial habits, become aware of your emotional reactions to money, and strive for financial literacy. This knowledge will not only improve your financial situation but also help you create a sustainable financial future.

It's helpful to create your financial history. This will allow you to better understand your financial habits, assess your income and expenses, and identify opportunities for budget optimization. Analyzing your financial history will help you plan future investments and achieve your financial goals. Regularly updating this information promotes more effective personal finance management and improves financial literacy.

How close are you to financial well-being now, and what are your financial goals? How much are you missing?
What is the current dynamics of your annual budget (is it increasing or decreasing, what is its size).
How are you doing with basic financial actions: goal setting and planning, resource management, savings and savings, multiplication (how satisfactory are the results in each area?).

If you want to effectively manage your budget and financial plan, use the Finalbum tool. This resource will help you organize your financial goals, track expenses, and plan future investments. With the help of the Final Album, you can easily control your finances and make informed decisions, which will ultimately lead to an improved financial situation.

Step 2. Free yourself from limitations

In this step, it is important to free yourself from internal pressure and negative beliefs that hinder your development. Learn to recognize and overcome your fears and doubts. Immerse yourself in the process of self-discovery, identifying your strengths and talents. This will help you not only understand yourself but also open up new horizons for self-realization. Use visualization and affirmations to change your perception and increase your self-confidence. By freeing yourself from limitations, you can reach new heights and realize your dreams.

Once you have identified your most "categorical" and emotionally significant beliefs through journaling, try to edit and soften them. Do this on your own; if necessary, take advantage of the support of thematic groups or consult with a specialist. This will help you better understand your thoughts and feelings, as well as learn how to manage them.

Step 3. Implement Behavioral Activation

At this stage, it's important to focus on activating user behavior. Analyze current data to identify key moments of audience interaction with your product or service. Use the results of this analysis to create effective strategies that will encourage users to take action. Pay attention to how users react to various elements of your content and interface to optimize their experience and increase engagement. This will not only increase interest in your offer but also strengthen customer loyalty.

To successfully manage your finances, it's important to analyze what financial actions you've previously taken and which ones you've encountered. Perhaps some of them were difficult or didn't produce the expected results. This may be due to limiting beliefs or incorrect attitudes. You need to identify specific steps that will help you improve your financial health. By creating a clear action plan, you can effectively move towards your financial goals.

If you find it difficult to plan, then you can start formulating meanings, calculating a financial plan, writing a financial policy, and creating a list of operational tasks for the near future.
If you couldn’t manage your budget, then your field of experimentation might look like this: create and maintain a budget, live a week within a strictly allotted budget, find options for leisure without money, try to avoid going where temptations await you, or, conversely, experience extreme situations of temptation according to new scenarios, and so on.
If you couldn’t save — savings challenges from a week to six months, setting up automatic piggy banks, searching for ideas for replenishing the piggy bank, and so on.
If you couldn’t invest — open an individual investment account, choose securities for yourself, buy them, monitor their quotes and your emotions.

Keeping a diary of observations of your Understanding your thoughts and emotions during practical experiments is a valuable tool. Don't be discouraged if results don't appear immediately, and the mindset you're working with continues to recur in your life. Change takes time. Approach the process gradually and with self-care, consistently expanding your financial horizons in the areas necessary to achieve your goals. This will allow you to better understand your experiences and set yourself up for successful overcoming of obstacles. Evgeniya Bliskavka is a talented and multifaceted specialist, known for her contributions to various fields. She possesses unique skills that allow her to successfully tackle any challenge. Evgeniya actively participates in projects aimed at transforming and improving processes, which enables her to achieve high results. Her professionalism and creative approach to work make her a valuable member of the team. Evgeniya Bliskavka inspires others with her example and desire for continuous development.

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The Psychology of Poverty: Does It Exist or Not?

Contents:

Why do people become poor?

How Living in Poverty Affects a Person

Is there a psychology of poverty as a set of attitudes that prevent you from getting rich?

What to do if you notice limiting beliefs related to money