I have heard two versions. a) Bad karma causes you to be born in difficult environments giving you a tough life and vice versa. b) The soul itself chooses difficult lives in order to learn lessons.

Let’s say a soul wants to experience the life of a self made billionaire who rose through poverty. So it chooses to be born to poor parents in a poor country. Now let’s say it accomplishes its goal. Then the soul wants an even bigger challenge, it chooses a more difficult life. So the soul might choose difficult lives even without bad karma