Poverty has been on my mind for some time now. What is poverty? How do we measure it? How do you overcome it? How do you live in it? Each of these questions (and more) warrants a post or several posts of its own. But that last one is what I want to talk about today.
I’ve been wondering what it would look like if my wife, Michelle, and I had to live in poverty. What would we have to give up? What would we spend our money on? What would life look like living in poverty?
In this case, I’m going to define poverty according to the 2009 U.S. federal poverty level guidelines. For two people, the poverty level is $14,570/year. This level applies regardless of where you live in the U.S., which doesn’t make much sense to me since the cost of living varies so much by location. But perhaps the areas with a higher-than-average cost of living adjusts the poverty level guidelines for their assistance programs. That’s something I’ll have to look at in another post!
I could use a different measure for poverty – a global measure, for instance. But the disparity between the global poverty level guidelines and the U.S. poverty level guidelines is extreme. Based on a $2/day/person poverty guideline (World Bank threshold), we’d be looking at $1,460 or 1/10 of the income for the U.S. poverty level. I can tell you right now that would mean giving up everything except food. No shelter, no transportation, no clothing purchases – absolutely nothing but food…and not much of that.
So for this article, I’m going to use the federal guideline of $14,570/year which is pre-tax. I’m not going to include food stamps, federal/state health coverage, or tax refunds (namely, the Earned Income Credit). Some studies have shown that the poverty level income would be 30-40% higher if such benefits were included, but I’m going to stick to the $14,570 number for the sake of simplicity.
What Would Our Spending Look Like?
If our annual income were $14,570, our monthly income would be just over $1,214. Here’s what I think our monthly budget would look like. Some of these numbers are based on actual expenses now and some are based on what I estimated after making changes to our lifestyle. I’m assuming we keep our current jobs.
|State & Local Taxes
|Auto (Gas, Maint., & Ins.)
|Other (Household & Personal)
What We’d Have to Give Up
So the next question is how would this differ from our current lifestyle? Well, first we’d have to move. We’d have to find a place for 2/3 of the rent we’re paying now, and it would need to be closer to Michelle’s job to cut down on gasoline costs. A different place would also likely cut down on our utilities. This would be a major change since we’d have to move away from our family, friends, and church but not very far – just far enough to make it inconvenient but doable. We’d also likely be living in someone’s basement or sharing a place with another family for rent that cheap.
We’d have to give up the excellent health insurance we have through Michelle’s work and buy a no-frills $10,000 deductible plan that doesn’t cover office visits or prescriptions. It would only cover serious catastrophes like cancer. In contrast, our current insurance has a very low deductible ($150/$300, I think?) and covers office visits and prescriptions for a low co-pay. We’d also be giving up our dental insurance, though I’m not sure that’s much of a deal anyway.
Speaking of insurance, we’d have to decrease the coverage on our auto insurance to the state minimum levels and increase the deductible on Michelle’s car to $2,500. We’d also have to think about selling my car but that wouldn’t be completely necessary. Decreasing the coverage limits could expose us to some serious risks if we were to have an accident – likely resulting in bankruptcy if it’s a major accident.
I don’t mind that we’d be paying less in taxes. But our giving would have to go down and that wouldn’t be so great. We’d have to make some tough choices there. All of our saving would most likely be short-term savings to cover the deductibles for our insurance policies.
We’d have to spend less on groceries but not much less than we currently spend. I don’t imagine there would be any problems there. We’d just have to limit our meat intake and replace it with beans instead and shop a little more carefully. Eating out would be out of the question. We’d also need to cut our household and personal spending in half.
Beyond that, we’d have no cell phones, no Internet connection, and no TV (that last one’s not any different from now, but I’m just saying). We wouldn’t be able to pay my student loans unless we gave up saving or giving (or some of both), but forbearance or an income dependent plan would be an option at that point. We’d have no money for entertainment or travel of any kind, and every dollar would need to be meticulously tracked and spent with care. As it is now, I don’t track what we spend our ATM withdrawals on completely so that would have to change.
So while it wouldn’t be easy or “fun” to live on this budget, it would be possible. But we’d have no chance of saving anything for retirement, buying a house if we wanted to do that, or doing anything that required money outside of this budget. (That means no more sewing or jewelry making for Michelle. My hobbies don’t really require any money right now I think.)
Living Off Uncle Sam (or You, Rather)
I didn’t include government benefits in that budget, but if I had things would have worked out quite a bit better. Between Section 8 housing, tax refunds, food stamps, health coverage from Pennsylvania, and utility assistance programs I think we could live at pretty much the same standard we currently enjoy. (Except for the housing part…that would likely be a major decline.)
These benefits would probably comprise at least 25-40% of our budget in this scenario. At that rate, we could probably afford cell phones, an Internet connection, auto insurance at our current coverage, our normal household and personal spending, my student loans, and even some entertainment. Or we could choose to save that money, invest in ourselves (to increase our income), or give to people in more need than ourselves.
Possible But Not Enjoyable
I’m not making light of this scenario. I’m certain it would still be stressful and emotionally draining, but it wouldn’t be impossible to live this way. (Though I’m having difficulty convincing Michelle of this. :))
I think the reason I can say this is because Michelle and I are pretty content. We don’t have to have the latest gadgets or fashions. We are naturally frugal people who don’t enjoy spending tons of money. We have low-key hobbies, can entertain ourselves, and know how to cook. We’re also disciplined enough to say no to ourselves on the non-essentials. All these factors combine to make it easier for us to live on less than most people in America. (I don’t say this to boast but to simply point out facts. Many people get sucked into the culture and go with the flow without question. Neither Michelle nor I have ever been ones to follow the crowd.)
I’m thankful we’re in a situation where we don’t have to make these choices. God has blessed us with all that we need and then some. But I struggled with creating a sample budget for this scenario, and I now have a slight understanding some of the choices people are forced to make when they’re living on so little. I say slight understanding because I don’t think you can truly comprehend what it’s like to live on that kind of income until you’ve done it.
Do you think you could live at the federal poverty level? What would have to change for you? What would you have to give up? Share your thoughts in the comments below!