More Money, More Choices

We hear a lot about how our choices impact our money. But we don't often talk about how more money can actually mean more options.

Make good financial choices and you'll get rich.

Simple, right?

Unfortunately, the reality is rarely that simple. We like to say that it's all about individual choices and when you do the right things, your finances are set. What we often fail to talk about is how your money resources can impact your choices.

More money often means more options.

Start with More Money, Start with More Options

When talking about academic success, we like to say that it's all about merit. But a recent study published in the journal Developmental Science indicates that maybe it has a little more to do with socioeconomic status and genetics, according to a write-up in Science Daily:

“Only 47% of children in the study sample with a high genetic propensity for education but a poorer background made it to university, compared with 62% with a low genetic propensity but parents that are more affluent.

The researchers found that children with a high genetic propensity for education who were also from wealthy and well-educated family backgrounds had the greatest advantage with 77% going to University. Meanwhile, only 21% of children from families with low socioeconomic status and low genetic propensity carried on into higher education.”

While it's certainly possible to overcome genetics and your environment, you're at a disadvantage when compared to those who have financial advantages.

Georgetown University's Center on Education and Workforce indicates that being born in a higher income bracket is likely to contribute more to academic success than being born smart or talented.

While going to college isn't everything, the reality is that you have access to more foundational opportunities that impact your entire life when you have access to more money. You're more likely to be able to:

• Have parents that can help you with homework, rather than working multiple jobs to make ends meet
• Know what you need to do to get into college or a trade school program
• Be able to afford to go on campus visits and pay application fees
• Have a network of people who can help you take the next step
• Have a fallback option if things don't work out

It's not just school, either

While the opportunity to go to college, or even trade school, is one measure of options that you have with more money, there are others.

Recently, I bought my son a new (to him) car. It's reliable and will probably last several more years as long as he takes care of it. We had a wide range of cars to choose from.

After buying the car, I needed to sell his old car. I've put some money into it and it will probably go for another couple of years. But everyone who looked at the car didn't have an option to get a better, more reliable car. They don't have the resources. Their choices were constrained.

Having more money also offers more options when it comes to where you live. Sure, you can choose to live in an area with a low cost of living, but is it really going to benefit you in the long run?

Having available resources made it possible for me to move back to Idaho after my divorce and get something of a fresh start. Without money, I'd have been stuck as a single mom in an area with a higher cost of living.

Resources — It's Not Just About Having More Money

Having more money can create more choices and smooth the way for just about anything. However, it's not just about money. Access to various resources can also impact your financial situation and your options.

There are lots of reasons that I, with an almost upper-middle-class upbringing, am where I'm at. I work hard and try to work smart. But I also have the following resources:

• Good support system: My parents have a good-sized house and decent income. When they retire, their house will be pretty much paid for. If something goes wrong, I won't be scrambling. I can move in with my parents until things get better.
• Decent credit: Recent events have dropped my credit score more than I like, but it's still good enough credit to do a lot of things. One reason I'm in a good home is that I could pass a credit check. Plus, my interest rates on loans have been relatively low and I get a discount on my car insurance.
• Knowledge: Having access to knowledge matters. A lot. Because I know how to approach medical bills, my surgery last year isn't causing financial strain. I'm making interest-free payments that I can afford to maintain my cash flow. Other areas of knowledge can also help you make better money choices for your situation.

Having more money and resources won't automatically ensure success. But these things can go a long way toward helping you make better decisions — and having access to better options.

Access to Better Options

When you don't have money, the options you have access to aren't as good as they otherwise could be. Starting with fewer good options can compound your issues down the road. I started out in a decent socioeconomic position with my family growing up. I had access to a wider variety of educational and work options as a result.

My knowledge of what was even available to me allowed me to know what was even possible. Many folks growing up lower-income households don't even know what's available to them — and they might not even have access to resources to educate them about it. From the get-go, that leads to limited choices, and an inability to even know that you might be able to choose something else.

Once you get down that road, the options stemming from your initial limited choices become less good. This is especially true when it comes to the working poor. We often scoff at the fact that they might spend $5 on fast food at the end of a long week, but saving $20 a month isn't going to magically get them out of poverty. And, unfortunately, that fast food probably costs less than buying something healthy at the grocery store.

Fewer Devastating Mistakes

Your mistakes are also less devastating when you have more money and resources. I recently botched a debt consolidation maneuver for some of the last of the holdover debt from my marriage. It resulted in a judgment against me and a drop in my credit score. I was also silly enough to close an old credit card account with a fairly decent credit limit. While it makes things a little more interesting for me, the reality is that I was still able to get my son a car (even though I couldn't get a loan) and I have alternatives.

Yes, my stupid mistakes in the last year will impact me. But it's not as devastating as it would be if I'd made a mistake and didn't have assets available to me. A debt consolidation mistake for someone without my resources would be devastating. The car breaks down and you need a different one to get to work? That mistake might mean you can't get a car loan. Or maybe you can't move to a different apartment because of that mistake.

In my case, I get to be embarrassed because I should have known better. But it's not going to make my financial situation materially harder.

Yes, You Can Improve. But It's Harder When You Have Fewer Choices

Yes, yes. We've all seen the poverty porn revolving around the folks who have managed to take a bad situation and turn around. However, these stories are the exception, not the rule. We have very real systemic issues that limit choices to begin with — unless you start with more money and resources.

While you can overcome these issues with hard work, grit and whatever else people like to tout as the solution to the problem, the reality is that it's much, much harder without adequate income to begin with. And even if you work hard and do everything right, you still might not make it.

I live in an area where I see that every single day. The cost of living is low here, but not low enough to make up for the even lower average wages. There are people all around me who work two jobs, try to live frugally and still can't build up the savings they need to be secure. In the town where I live, 46% of the population lives at or near poverty. Many of these folks are working and still can't make ends meet. Their choices are limited and they don't have the resources to improve their options.

Some of them are likely to claw their way out of trouble, but it's harder than it needs to be, and if they have a setback before they can fix all the problems, they'll be right back where they started. Sure, start an emergency fund. You get it up to $500. But then your car breaks down and you need to come up with $700 for repairs. Or, you decide to buy a more reliable car for $3,000. You get a loan, but your credit is bad and dealer financing sticks you with a high interest rate.

Either way, your options are shitty, and you're taking a step backward — even though you've been working hard and trying to do things right.

And let's not even get started on what happens if a healthcare issue arises. Even if you have insurance you could be screwed.

Bottom Line

There are things you can do to improve your situation. I was fortunate in that I've been able to increase my income over time, invest and set up a situation where my options are better and my mistakes have less of a practical impact on my ability to succeed.

But, even though I experienced a few years of scarcity and struggle, I also started off in a better place. I had fallback plans if things didn't pan out. I could borrow money from my parents if needed. Or get other loans that I could pay off later.

Not everyone has that. The reality is that your starting point has a lot to do with the options available to you in the first place. Without more money in the beginning, your choices are limited, and might not even be that good. And it's really hard to overcome that, even if it's possible.