Why Privilege is so Important When Talking about Money

I went back and forth on whether or not to write this post.

Ultimately I decided privilege, and how it impacts our personal finances – for better or for worse – was too important a topic to not address.

Privilege has come up a lot in the media the past few years, especially as our society has become more divisive and had to confront painful issues such as economic inequality, the gender wage gap, and crushing student loan debt.

The language used on the right and left of the political spectrum has intensified. Some people I know who are *generally* calm have exploded and said hurtful – if not vulgar – things about people who support policy proposals such as student loan forgiveness and subsidized daycare.

While I enjoy looking at the socioeconomic factors and how policy should address issues we face as a society and nation, I also think it’s important to focus on the individual level. I specifically want to address privilege and its impact on money and personal finance.

To make sure we are all thinking of the same thing we’ll start by discussing what privilege is and what it looks like.

What Is Privilege?

 
I could start with a good old dictionary definition, but let’s start with some clear examples of what privilege looks like.

• Privilege is growing up in a stable household where you do not have to worry about where the next meal will come from.

• Privilege is having a parent who graduated college.

• Privilege is having a tutor so you can score better on the ACT or SAT. (Even having the option of a tutor or prep course is privilege).

You get it: Privilege is having advantages that others don’t have.

The most obvious form of privilege is the kings and emperors of the past couple thousand years. In pretty much every situation these individuals didn’t earn their affluent lifestyle – it was being born to the right parents at the right time. This is an extreme example, of course, but it illustrates privilege well.

Now let’s address privilege in the context of money and personal finance, and why it matters so much.

Money and Privilege – The Student Loan Debt Example

 
Privilege comes into play in nearly every situation when it comes to money. Who your parents are, where you grew up, the advantages you had due to your parents and environment…all of these things contribute to the privilege you experience (or don’t experience).

Many people don’t want to think about privilege because it can expose them. For example, when it comes to student loan debt, millions want to point to the fact that it is the personal responsibility of the individual who signed up for the loans. But the amount of debt someone incurs, and their ability to repay it, goes way deeper than a simple “they took out the loan, they should pay it back. Not me!”

Think of all these variables that come into play when talking about an individual’s student loan debt:

• The guidance the individual was given – or not given – from their parents

• Whether their parents went to college themselves – and whether their parents graduated

• Whether their parents understood the implications of student loans – and if so, whether that was communicated and explained

• The cost of the college the individual chose when they were perhaps as young as sixteen or seventeen – and whether any adults walked them through the financial implications that choosing that college would have on their finances

• The amount of financial aid (other than loans) that the borrower received

• The ability and the degree to which their parents financially helped them pay for college, including living expenses and books

• The ability for the borrower to find gainful employment after college

• The amount of debt relative to their pay, which was unlikely to be known or thought about when someone is in high school

• How much a college helped prepare the borrower for financial success

• The fact that student loans is a unique sort of debt that is difficult to discharge in bankruptcy

The list goes on and on. I’ve found that the degree of empathy you have for someone dealing with an issue grows the more time you spend learning about their life, especially their background and upbringing.

There’s a reason why women hold the majority of student loan debt, as well as why minorities struggle to make progress on repaying student loans compared to their white counterparts. It’s not a stretch to assume that, in general, white individuals in the United States have a greater degree of privilege and, in turn, are able to progress financially at a faster rate than minorities.

One of the many articles I read on student loan debt had a lasting impact on me. Unfortunately I do not know who the reporter was, but when she was interviewing people about student loan debt she oftentimes asked about their background. Did their parents go to college? Grandparents? How much did they take out in loans?

Not surprisingly the borrowers whose parents – and sometimes grandparents – went to college and graduated with little debt ended up taking out less loans themselves. They had more insight and background from their parents on how to navigate the system, and their parents typically had the means to help them. And when you take out less loans, you are able to move forward financially faster than someone else who has significant debt. And the cycle repeats.

This isn’t to say that there aren’t plenty of examples of people who succeed and move forward regardless of their starting point.

For example, think of someone whose parents funded their college, including living expenses. Compare them to someone who graduated with $80k of student loan debt, and whose parents contributed nothing. The person with $80k in debt may be more motivated to make every dollar they earn count and, over time, move ahead of the other individual financially.

That doesn’t change the fact that privilege matters. The person who was in debt was starting $80k (not counting interest) behind the other person who had a free ride courtesy of their parents.

Why Privilege Must Be Acknowledged When It Comes To Money and Personal Finance

 
There are thousands and thousands of people giving financial advice and opinions today, myself included. What drives me crazy is when people give advice or talk about money, but are seemingly oblivious to privilege.

I have heard people say on television that “it doesn’t matter how much you make” when it comes to eliminating debt. YES. IT. DOES.

Someone making $200k a year is going to be able to pay off $50k of debt faster than someone making $30k.

There are countless blog posts out there about people who paid off X dollars in X months or years. These articles, in my opinion, generally aren’t valuable unless the person writing it discloses their income and other factors, such as whether their parents helped them out financially.

And let’s not ignore the obvious: the more money you have, the more options you have, and ultimately, the more privilege you have.

There’s a reason why wealthy individuals who have been accused of a crime are more likely to either get found not guilty or negotiate a favorable plea deal than poor individuals. The wealthy individual is able to spend tons of money on their defense. The poor individual may need to stick with a public defender (whose case load is likely at a crushing level).

A final story on money and privilege I want to share is about a student loan book (no, not the one I wrote). I don’t know the author of this book personally and I know I would appreciate the respect and benefit of the doubt, but it doesn’t change the fact that privilege played a HUGE role in their ability to pay off student loan debt.

This individual paid off over $100k of student loan debt in a relatively short period of time. The book has received very mixed reviews on Amazon because of this key little fact: they were gifted a condo from a relative. They had the option (and privilege) to move back in with their parents and pay no rent. They then rented out the condo for cash flow that could go straight to their student loans.

Very few can relate to this situation because very few are gifted condos. More people can move back home but…not everyone has that privilege.

What Should We Do?

 
Most people will admit that yes, privilege has a huge impact on our society, especially when it comes to money. The inevitable questions come: So what? What does it actually change? Does it even matter?

Because privilege implies that there is an advantage that one person has over another, it is pretty obvious that yes, it does matter.

If someone started a basketball game with thirty points to another team’s zero before the game even started, it would matter.

But let’s talk about some practical takeaways:

• Don’t Assume Everyone Has the Same Background As You
   
  When interacting with others, don’t make assumptions. I see this way too much in corporate America, where many people expect everyone else to be a vanilla carbon copy of every other office worker. Everyone has had a different background, and unless you actually get to know them you shouldn’t cast judgement.

  One individual I worked with was raised by his grandmother. Both of his parents were killed before he turned five years old. Someone made a generic comment about his parents and that person was quite surprised when they found out the truth, including the difficult background they had growing up.

  Listen and seek to understand where people are coming from. It’s also important to think about how what you are saying can be perceived. For example, you may have just become debt free. That’s great for you, but someone else may be silently struggling with a massive amount of student loans. You celebrating and making comments of how awful debt is and how dumb it would be to be in debt could have a huge negative impact on the person who secretly has tons of student loans.

• Show Empathy
   
  Make a real attempt to understand how someone’s privilege or lack of privilege impacts their current perspective. Someone may have massive anxiety about money because there was never enough money growing up. Understand how that influences their behavior, opinions, and perspectives. Show empathy.

  You may think that universal healthcare subsidized by the government is a dumb idea, but put yourself in the shoes of someone who had a family member pass away from rationing their prescriptions. Think about why they may be crusaders for universal healthcare – they don’t know the privilege of having adequate health insurance and the money to actually make use of it.

If you are like me, you like having a list of things to take away and do. With privilege, it’s not that simple. It involves a lot of listening and trying to understand where people with different backgrounds are coming from. The biggest thing you can do is think about what you are saying and the effect it may have on people in different situations than yourself.
 
 

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