As featured in The Wall Street Journal, Money Magazine, and more!
     

Could You Survive at the Poverty Line?

This article was written by in Featured, Frugality. 79 comments.


This guest article is written by YFS, owner and author of Your Finances Simplified. YFS was born and raised in west Philadelphia and is now a financial adviser, IT contractor, landlord, and treasurer of a non-profit.

If you and your family of four received an annual income of $22,350, could you survive? You would be living at the 2011 poverty line for the 48 contiguous states. If you were to make less than this, you and your family would live in poverty. If you were to earn more than this, you and your family would be above the poverty line, though it might not feel like that. Here is a breakdown of the typical costs that everyone encounters on a day-to-day basis; you can see how quickly $22,350 can be spent for a family of four.

I’ll assume you’re in Charlottesville, Virginia, where the Cost of Living Index is 100, the national average.

The things we need

Thrift storeRent/Mortgage. We all have to pay something in order to keep a roof over our heads. This could be a mortgage payment for a house that we have bought or it could be rent for a house or an apartment. In Charlottesville, the average rent is just over $900, and the average house payment is nearly $1500. For the sake of this article, the calculation for rent or mortgage is the average of these numbers, $1,200. The yearly housing expenses are about $14,400. Subtracting this from the income leaves $7,950 to pay for everything else.

Many people at this level of income can qualify to live in subsidized housing, and many have to live in substandard conditions so that they can afford it. Those conditions could be a dilapidated apartment for low rent or sharing a house with another family. For purposes of this example, we are using average costs, which will often be much higher than what a family at this level would pay.

Bills. Even if you rent your home, you still probably have to pay some of the bills, like electricity or gas. Water, trash (sanitation), phone, cable, and internet are all some common bills to pay. Average energy costs in Charlottesville are $165 per month ($1,980 per year), which brings the total remaining down to $5,970.

At this level of income, could afford a phone or cable or internet?

If your cable and internet service costs $50 a month, that will be another $600 a year. Because it is hard to function without a telephone, for this example, we will include one cell phone for the family that costs $25 a month, which would be $300 a year, bringing the total down to $5,670.

Transportation. You can argue that a car is not necessary, and in some cases that is true. However, in some parts of the United States, you will not be able to hold a job unless you have your own transportation. This is due to the lack of extensive public transportation, especially true in suburban and rural areas of the country. Even if you have access to public transportation, how much will that cost for a year? Car payments vary depending on income, credit, and car choice. This example assumes a relatively inexpensive car payment of $300 per month ($3,600 per year), bringing the total down to $2,070.

Many people at this income level do not buy new cars or certified used ones. They find very inexpensive cars that are sold by the owner or they go without.

Insurance. If you own a car, you must have insurance. The average annual car insurance premium in Virginia is about $1,000, which we can also take off of our total. This leaves $1,070.

What about health insurance?

Do you think that you could afford health insurance at this income level? It’s unlikely that you could; however, people at this income level probably qualify for Medicaid. In most cases, at least the children in the family will qualify.

Food. The bare necessities for food are what it costs to keep a family of four fed. A family at this income level likely qualifies for food stamps, and many public schools have programs offering reduced-rate or free lunches to children who qualify. Food stamp benefits vary from state to state and situation to situation. For the purposes of this example, the family of four spends $50 a month of their own money on food (with the remaining $200 or so being provided by food stamps). Food stamps can only be used on consumable products, excluding alcohol, in most cases. As a result, the family still has to buy sundries like soap, toothpaste, toilet paper, and so on out of their own money. This results in about $600 a year in food costs, which brings our total remaining to $470.

Could you provide for a family of four with $200 to $250 a month on groceries?

Clothing. Consider not what the family wants, but items that the family needs to stay decently clothed and warm. In Charlottesville, the average men’s shirt in a department store costs about $25, while a pair of boy’s jeans costs about $20. We’ll say that the family spends about $10 a month on average for clothing. This would be a new item for one member of the family every two months or so. This would average out to about two new items per person per year, and it would bring the annual clothing budget to $120. Such a small clothing budget could be expanded by shopping at thrift stores and other organizations where needy families can receive free used clothing. The total is now down to $350.

When was the last time you bought an item of clothing? How much did it cost?

Debt. What about student loans or credit card payments? You might think that the adults in a family at this level didn’t earn a college degree, but that’s not always the case. Many college students, especially graduate students, are married, and many of them cannot or do not hold jobs while in school. This means that they might be unemployed or a part time employee. As a result, the family could be trying to survive off of one income or two small incomes. Fortunately, most student loan payments can be deferred if you are unemployed or earning below a certain level.

Credit card debt, however, continues to grow. Assume the minimum payment is $15 a month, an annual payment of $180. A payment this low would likely be for a card with a low limit, around $500 or so. This brings our total down to $170.

How much do you rely on your credit card on a day to day basis? How much do you think you would use it if you were in this situation?

The things we want

Extraneous purchases. With some skimping, federal and state assistance, and swallowing of pride, the family at the poverty level has $170 left to spend on things that they want throughout the year. This might mean a new jacket or a new pair of shoes.

How much do you think you spend on Christmas gifts?

If the couple spends $100 on each other and their two children, the total is now down to $70. If the family goes to the movies just once during the whole year, they’ll pay about $50 just for the tickets, with the average movie ticket price in Charlottesville at $10. This brings the total down to $20, and it will be even lower if they buy popcorn.

Travel. The family might travel to see relatives at some point during the year. They could not afford a hotel room or plane tickets. If they do not have their own car, they might be able to afford bus tickets. For example, four bus tickets, two adults and two children under 11, from Charlottesville to Memphis would cost over $500 one way. This brings our total into the negative numbers. If they have a car that gets 30 miles to the gallon then it would cost about $75 one way to get to Memphis with the average cost of gas being $3 or so per gallon. This means about $150 to get just there and back, bringing the total down into negative numbers again. As a result, any type of travel for this family is unlikely.

Savings. If the family manages to stick to this budget, they can save about $20 a year. However, this budget did not include any unexpected expenses, such as an unplanned doctor’s visit or family emergency. As a result, it is unlikely that a family living at this income level would be able to save anything at all. In reality, it is nearly impossible for a family of four to live at this level without going into debt.

Minimum wage

The federal minimum wage is $7.25 an hour. Some states have a higher minimum wage, but Virginia, used in this example, uses the federal minimum wage. Assuming a full-time job, which isn’t often the case for minimum wage jobs, an individual would earn about $14,500 a year before taxes. In this situation, two people with full time jobs at minimum wage (with two weeks’ vacation or sick days) would have $29,000 before taxes. This level of income is quite a bit higher than the poverty level income. However, to put things in perspective a household of four could be a single parent with three kids on $14,500 a year, which is well below the poverty line. If one or both spouses cannot find work, full-time or part-time, a family can easily fall into poverty.

Federal and state taxes vary so much that they were not included in this example. In many cases someone who makes so little money and who has children will not have to pay much in taxes at the end of the year and, in some cases, particularly due to the Earned Income Tax Credit, will receive a refund.

Do you think that you would be thrifty enough to make this work? Have you ever lived at this level of income? How would you adjust the budget to survive on $22,350?

Photo: Orin Zebest

Updated December 9, 2011 and originally published December 8, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

Email Email Print Print
avatar
Points: ♦120
Rank: Cent
About the author

YFS is owner and author of Your Finances Simplified. He was born and raised in west Philadelphia and is now a financial adviser, IT contractor, landlord, and treasurer of a non-profit. He created his blog partly due to his desire to help people with their finances. View all articles by .

{ 79 comments… read them below or add one }

avatar Paul @ The Frugal Toad

The obvious answer is we would survive but it would be devastating for our family. How would I adjust the budget? Sell the house, maintain one vehicle and take public transportation, shop at thrift stores and garage sales, and cut retirement and college savings. My daughter would have to give up or drastically scale back her competitive dancing. I would immediately start a job search, take whatever part-time jobs that are available and look at obtaining education or training to make myself marketable again.

Reply to this comment

avatar YFS

Great plan. I’m sure I can survive also but, I’m definitely accustomed to my lifestyle right now. Researching and writing this post really made me want to adjust my bad spending habits and reinforce my good spending habits.

Reply to this comment

avatar Penny

If my only income was my research stipend, I would be below the poverty line for an individual. (I also get a tuition waiver, but that doesn’t cover all fees so I end up paying a little more than a month’s stipend on those too.) I supplement my school income by working full time during the summers, and even then it’s tight. Right now I’m a little unsure how I’ll make it through the next month without help from my fiance, though I’ve got some options lined up for next semester that will be a better deal for me than research. I know it’s not as hard as trying to raise a family below the poverty line, but it is difficult when all of my friends are done with school and have real jobs. I’m going to a holiday potluck my friends are hosting this weekend, but I had bow out on the dirty santa exchange because I just can’t spare $15 on an extra gift right now.

Reply to this comment

avatar Luke Landes ♦127,435 (Platinum)

It can be difficult when the people you’ve associated with are now in a different financial situation. It sounds like you’re making good decisions, though. Still having fun, but opting not for what’s extra like the gift exchange.

Reply to this comment

avatar YFS

The key is to do what you’re doing right now. Don’t you stretch yourself too far and learn to live with what you have and what you can’t have. Do you friends understand your situation? I hope none of them try to force their type of lifestyle upon you

Reply to this comment

avatar tigernicole86 ♦55 (Newbie)

As a kid who lived well below the poverty line(I was part of a family of 7) and who has gotten used to a nicely above the poverty line now that I’m older and work for a good company, I would really have to work to get used to it. I don’t have any kids and I’m getting excited about paying off my college loans. :) However, cutting back would take a lot out and I should do it more often.

Reply to this comment

avatar YFS

I agree with you. It is harder to go from poverty to well above poverty to poverty again. I think the reason is because you’ve experienced easier times. Most people who are in poverty and in particular a family living with the numbers specified within my article have never seen a day outside of poverty. Residual income is like a 4 letter swear word to them.

I am with you. I’m sure I could do it, but I would have to adjust so much at this point in my life. Do you know anyone who had to make significant cuts like the people in the article? How are they managing?

Reply to this comment

avatar krantcents

I think you can do anything you have to do, however it is truly subsistance. I think you have to be very creative to put together some savings to work your way out of this.

Reply to this comment

avatar YFS

Creative is putting it lightly. There definitely is an income problem and a few things that can be adjusted. For example car/house will have to be downgraded while working on income. It can be done but, I think it will be hard.

Reply to this comment

avatar Jonathan

You could live in a mobile home park or trailer park for well under $1,200 a month just about anywhere. In Southern California you could live in a trailer park for around $700 per month. That would add a ton of breathing room to that budget. I think my wife and I could do it, but I’m sure glad we don’t have to!

Reply to this comment

avatar YFS

I found a few places on Craigslist for dirt cheap in the Charlotesville area. I’m not sure if it’s close to employement or not but it definitely was around the 500-700 range. Aside from housing what else would you cut back on?

Reply to this comment

avatar Jenna, Adaptu Community Manager

I guess saving for your children’s college education is out of the picture. Scary / sad break down. Thanks for sharing.

Reply to this comment

avatar YFS

Unless something else is sacrificed or more income comes in the equation the little guys are not going to college without taking out a loan. I think if I was living at the poverty level I would start identifying grants and scholarships as soon as possible. Also, there are a few schools who will pay for people of certain races and economic status to go for free. I would look into that.

Reply to this comment

avatar Sun

If you have good credit, you can apply for a lot of credit cards to get sign-up bonuses. There was a NPR story about a woman in New York who was in poverty, but managed to supplement income with sign-up bonuses to go on a trip with her son.

As for medical, you can always go county healthcare if you qualify income wise. The lines are awful and the care is questionable at times. If you are desperate for healthcare, it is an option. I’ve done it before, but I wouldn’t recommend it as a first chance.

As for bills, you take care of food, shelter, utilities, and clothing. Other bills, you will have to learn below your means, barter, or forego paying unsecured debt. It amazes me that some people are struggling to pay their mortgage, but they pay their credit card bill every month. Get your priorities straight.

Reply to this comment

avatar YFS

The problem with people who operate at the poverty level is that a majority of them do not have good credit. I own real estate in an economically depressed area of upstate New York. These are hard working people who just do not have the education to maintain good credit or good credit isn’t a priority.

Also sign up bonuses won’t keep you afloat for longer than a year. Your credit will be hit very with the addition of new credit since you will be cutting the length of your credit history.

Good find on the healthcare. I would rather wait in line than go without.

I agree with you on your statement about bills. Especially, the wants vs needs statement. I think people pay their credit card bill before their mortgage b/c of the mindset and knowledge of the eviction/foreclosure process. If you’re living paycheck to paycheck and face an emergency the credit card can help you. Also, it takes time to evict. Some states it could take up to 1 year or longer. With that knowledge people often place their credit cards above their rents/mortgage payment.

Reply to this comment

avatar B

Why would you have a car payment of 300/month? I have driven cars for many years that I bought for near $300. Also the house payment/rent average is also out of line for this scenario. I certainly don’t want to go back to that income level, but I know for a fact I could do it.

Reply to this comment

avatar YFS

You’re absolutely right about the car. No reason to have a 300 dollar car payment. But, it happens. I’ve counseled people who have similar finances to this couple. When going through their finances to help them I often identify housing / car that is way out of line compared to income. Most people are jaded from past used cars or auction cars that were unreliable that they opt for a brand new car or newish car. From my research the perceived reliability of the car is put before calculating the total cost of vehicle or the impact on their finances. You’re also correct on housing. I did a quick search on Craigslist and identified a few places that were 500-700 bucks and even cheaper. I’m sure this family can lower both of those costs.

So you will cut the car and find cheaper housing. Is there anything else you would do? If you were counseling this family what are some suggestions you would provide?

Reply to this comment

avatar Luke Landes ♦127,435 (Platinum)

Part of the problem with a car is that in order to buy something inexpensive but half-way reliable, you’d need to spend $1,000 to $2,000 or maybe even $3,000 these days… in cash. There may not be access to credit for this family. There is a certain kind of dealership that specialized in offering beaters with their own financing, replacing them when they break down with the next beater, but the operation just ensures they keep coming back to the dealer. It’s like payday loans… or drugs, even. There was an article about these outfits making the rounds several months ago, but now I can’t find it.

Reply to this comment

avatar jim

I’ve been in poverty growing up. But it was transitional, short term poverty due to my father being unemployed off and on. It would be hard to live at the poverty line for sure. I think I could do it, but of course I certainly don’t WANT to try.

You have to live cheaper. For example you absolutely can’t be buying a new car if you’re living in poverty.

I’m not sure that Charolottesville is really average as far as cost of living. One site put them at 138% of average for housing costs and 108% total costs. While average national rents are closer to $900, that is certainly more than someone at the poverty level should be spending. I also wouldn’t figure on an family in poverty buying a house with $1500 payments which is relatively high.

Reply to this comment

avatar YFS

According to Kiplinger’s latest article on “best value cities” Charlottesville, Virginia has a cost of living index of 100 so I used that city for my example. As for rents, I agree some adjustment could be made here. What other areas would you adjust if you had to live on 22k like this family?

Reply to this comment

avatar Ceecee ♦53 (Newbie)

I probably could but only because I like living in small spaces and cook a lot from scratch. It would not be easy but I think it could be done……

Reply to this comment

avatar YFS

Hmm… I definitely see a few members of my family sharing rooms, clothes, and the like. Bulk cooking would also be on the list.

Reply to this comment

avatar olivia

Agree that, while not pleasant in the long term, you could make this work. Goodwill, Thrift Stores, for all clothes. Free samples, dollar store for toiletries. Over the Air TV is fine, no cable necessary. Internet is near necessity though and I would probably spring for it (helps with job search). No reason that family couldn’t sublet a bedroom to a roommate or otherwise room up with two adults in one room and two kids in the other bedroom. 1200 for housing is nuts. I’d actually literally move to another state/town if I couldn’t find cheaper housing. 1 prepaid cell phone only and you barely use it, use Google Voice for at home, non-business calls (free since you have internet at home!) $300 car payment is ridiculous; you can buy used cars in decent shape for $1500-$2000. Yes it might be an early 90s Buick but it gets you from A to B, does it not? Food stamps make a serious dent in food and if you stay away from processed foods it shouldn’t cost you too much more over that; if you are poverty level then you have one person staying at home who is able and not working. If they are not able they need to apply for SSI. ugh the more I type the more annoyed I get.

Reply to this comment

avatar YFS

Why are you getting annoyed? You did a great job of breaking down how you would try to live in this situation. So with your savings of cheaper housing and no car payment. What would you do next?

How much emergency fund would you have?
Would you use the extra money to further education/skills to get a better job?
What is your next move?

Reply to this comment

avatar Robert @ The College Investor

It would be so tough to do it. There is a lot of assistance out there, and I think I would need to take it.

Reply to this comment

avatar YFS

There is a ton of assistance but what I found is the assistance is temporary and doesn’t address the underlying issues of not making enough money.

Reply to this comment

avatar Yana

I don’t know, because we’ve never had a family of four. We’ve never had a high income, though, and I like thrift and value. There was a time when our income was not *high* enough to qualify for low income government subsidized apartments. And currently, we pay less for rent (full price, unsubsidized) than those in government subsidized apartments not far away. Last I heard they were paying close to $200 more a month. Personally, I don’t feel that we could afford health care at any income level or asset level that we would achieve, and in fact think that one very important benefit of renting is that you cannot lose your home to America’s health care system. But I can’t really say whether we could live at that income level for 4 people.

Reply to this comment

avatar YFS

You just hit on a great point about the silliness of government assistance for housing. I own 2 properties with tenants who receive partial government assistance and full government assistance and I can tell you it’s ridiculous how much over market one can get for rent. I don’t quiet understand how one can not make enough income to qualify for low income governement subsidized apartments. What? Why? seems silly.

Healthcare is the big hot topic for everyone but especially for people with low incomes

What is your opinion on healthcare? Should the government subsidies healthcare or provide healthcare for all? Some? poor? old?

Reply to this comment

avatar Yana

I was surprised as well that there was a minimum income level for low-income subsidized apartments, and I don’t know the basis for that.

I think the health care system in the USA is a big protected scam, with the major players being the health insurance industry and the pharmaceutical companies that are allowed to advertise their products and market diseases on TV. I have observed that people with health insurance must sign a form at the doctor’s office stating that they and not the health insurance company bear full responsibility for all charges. That is because the health insurance companies can and do deny claims, and their first responsibility is to maintain their own existence and CEO salaries. Simply, they do not have to pay. But the insured must pay and maintain a position of faith.

I think health insurance should be outlawed. We should have health care for all, or health care for none. Either socialized medicine – cradle to grave medical, dental, vision, burial – or each pays for his own. The medical insurance industry is a middleman that none of us can afford or sustain, and to throw money at it is to throw money away. Funny how I hear people say, “I don’t want to pay for someone else’s health care!”, but they don’t usually complain about paying the health insurance company CEO salaries. I suspect they don’t want to pay for their own, because they conveniently make that disappear by pointing the finger at other people who are poor and sick.

Reply to this comment

avatar YFS

Good point. I honestly think the health of a human being shouldn’t be a business. We know the nothing option isn’t going to happen. I don’t think any presidential candidate would go for that option. I’m all for the cradle to the grave health care. But, something has to give. I say end the “war on drugs” to fund health care.

Reply to this comment

avatar Yana

An especially good thing about abolishing health insurance companies and having health care for none, where each pays for his own, is that prices would come down. Many health care costs could be reduced by 90%, which sounds as outrageous as the prices now are, and I can’t think of anything that would more fairly bring those prices down than requiring individuals to either pay for their health care or not have it. The market would decide. If such a thing were to happen first, for long enough that everyone got used to their new incomes, realities and benefits of truly market-driven health care, our government could step in as though we are a compassionate top quality country and provide socialized medicine at 150% of the cost determined by the market. While I would celebrate even single-payer socialized medicine being enacted, I know well that it would be far from ideal because of current costs. Government regulation of costs would not be as efficient or well-received.

avatar Chris Jordan

Great questions for thought. My”free and clear” home was red tagged as unsafe in March of 2010, and since then I went from an owner of a large condo to a renter of a little tiny dorm. Being disabled and retired keeps me way below the poverty level. But a little common sense and frugality helps me live like a king! Excellent credit, thrift store clothes and merchandise (even paintings and artwork), little use of my old ‘paid for’ car, not really needing a thing; are a few of the reasons why I am not struggling. I am not too pleased with becoming a home-renter, but then again- I am no longer tied down to one location!

Reply to this comment

avatar YFS

Your home was condemned by the city? Did they pay you for it? or did they take your home without pay?

You have a great attitude despite your situation. Being disabled, retired and low income do you receive any government or state assistance?

Reply to this comment

avatar Chris Jordan

Yes, condemned and torn down, no- the city did not assist me. Since that was an emergency, I am getting family help with this college dorm until my condo is rebuilt (maybe December 2012). I get assistance with SSI and California Medi-Cal, so food, clothing, and shelter are paid. I was going to replace my 1995 car in 2009; but when this housing problem occured- I have saved a fortune on an old and rarely driven car. That condo rebuild is being handled by family now so all I can do is cross my fingers that it will be rebuilt- and “make believe” that I am living like a king ;-) .

Reply to this comment

avatar YFS

I find this utter B.S. I understand their are saftey issues and blight issues at hand but, to not pay you a dime for your property? That’s crazy to me!

Can you share what issues were sited by they city? How long did you know of the problems?

How are the SSI and California Medi-Cal benefits calculated?

Reply to this comment

avatar Chris Jordan

Roof problems only. Brought the whole 50 year old building down. In 2005 we spent $1.3 million (divided 18 condos in 1 building) to a questionable company in Texas; since California does not have so-called “experts” repairing concrete roofs. That slap-dash repair was gauranteed 5 years, and in March of 2010 the city red-tagged the building right before red-tagging was judged illegal later in 2010. Out in 5 minutes! Chain link fence, locks, chains, etc

SSI is very confusing. I do not qualify for food stamps and was cut off receiving family assistance. Re-applied, was accepted. It is somehow adjusted to how long you worked before disability, I think. Medi-Cal is handled by another business which has only certain medical groups. I have no idea how that works, but I made the mistake of having going to the wrong ear-nose-throat doctor; and they were very unprofessional in telling me they refuse Medi-Cal.

avatar jim

To be clear… the city did not TAKE your property. They declared in uninhabitable. Right?

Not that having it shut and being kicked out isn’t a major inconvenience, but its very different then having the government illegally seize your land.
The government is not going to pay people money after having to shut down an unsafe property.

Reply to this comment

avatar World of Finance

Great article! That sounds like a tough situation. Not sure where you could cut back on expenses here…. IMO, the best thing would be to try to make more money, take one or more of the families talents to generate more money (such as tutoring other kids, teaching piano, acting as a personal fitness instructor…. whatever services they can offer to others to increase the bottomline!!!!) They need to find an entrepreneur spirit to help turn things around.

Reply to this comment

avatar B

Flexo,

You may be right that to get a reliable car, one may spend 2k to 3k. However, if your are that broke, you can still buy a wrench. I was not exagerating when I said I have owned and driven $300 cars. In this situation, you don’t pay blue book value at the used car lot for a used 90s buick, you scour for a deal. If it breaks or is broke, you fix it. You bust your butt in every manner possible because this is not where you want to be. You don’t try to maintain a lifestyle at this income level. This income level, and the tough times that come with it, are incentive to move, to work, and to learn everything you can to get $1000 raise- to save $1000 dollars by fixing your own furnace- to find transportation for $1000 cheaper. This is where you learn the value of a dollar. If you can combine that with a drive and desire to improve, there is no limit to financial succcess.

Reply to this comment

avatar qixx ♦1,880 (Half-Dollar)

This expands to most of the categories. You are the bottom of the range. You are in the low cost range on everything and you find ways to make it work. The hardest part of this is getting a job to move out of the situation not surviving while there. You find ways to make it work.

Reply to this comment

avatar CAChick

The phone (land line) and cable could certainly be cut out of the budget! These are not necessities with the advent of cell phones, and cable certainly is not (!) a necessity. Rabbit ears can be gotten and a converter box costs less than $40 total. When on a low budget like this, the library is a staple for entertainment, as books, CDs, and DVDs can be borrowed from your local public library at no cost!

I can empathize with living on or around the poverty line — have been doing so for almost four years now. If you are disciplined and cut back on everything except for the basics – food, shelter, utilities – and find public subsidies for housing, you would be amazed at how much you can actually put in savings for an emergency fund, and NOT rely on credit.

My husband and I have gone from being $30k in credit card debt with an unaffordable mortgage, to debt free except for the mortgage since December of 2010. The extra money is going to our emergency fund, and we now have several months’ worth of potential expenses in the bank. By shopping around online for high yield savings accounts, we are furthering our emergency fund, and look forward to reaching our goal of one year’s expenses in savings. From there, we plan to start putting money away for retirement, and paying ahead on our mortgage.

If you believe you can achieve! And kids can start working in grocery stores in their teenage years, and therefore can learn the Power of the Paycheck when they are young. Discipline and hard work will pay off every time.

Reply to this comment

avatar YFS

Great job! When you say you have been living in or around the poverty line can you specify where? Also, how did you handle emergencies prior to having a few months saved?

Reply to this comment

avatar Cachick

Southern California, and pre emergency fund, we used credit or went without.

Reply to this comment

avatar Jackie

I have lived below the poverty level for a family of 2 before. It’s doable if you don’t have payments, and have a roommate or live in low-cost housing. It’s just not a lot of fun. When you’re living at or below the poverty level, $170 left would never go for a new jacket or a new pair of shoes. (A new pair of shoes might be $3 fake Keds found on sale, and a new jacket might be a $7 coat from Goodwill.) $170 is a fortune.

Reply to this comment

avatar YFS

Low cost housing and a cheap car is a definite must. The only time I ever had roomates was a brief stint after college. It wasn’t bad but I couldn’t imagine having roomates while having 4 kids.

Reply to this comment

avatar LL

Good suggestions! Not everything is possible when you’re living at poverty level. If you live in an apartment, you’re usually not allowed to fix your car there. The cheapest housing is sometimes in bad neighborhoods, where your car might be vandalized or stolen. Your other possessions might be stolen.

I guess the biggest problem is that when you’re so close to the edge, it’s really hard to absorb mistakes, bad luck or circumstances. A small mistake can end up throwing everything into chaos – an overdraft fee of $30 is more than 10% of your monthly food budget; or it’s three months of your clothing budget. Someone just got a new job and it requires purchasing a uniform that costs $40, someone got sick and can’t work for a few days…those things can be major issues at the poverty level.

Reply to this comment

avatar YFS

If you’re at the poverty level you’re most likely working at a job that does not give you sick time, holidays or paid time off. You’re right, since the budget is so tight one slip up will definitely hurt you. Now factor in 4 kids! Someone is bound to get sick. How will they pay for it?

Reply to this comment

avatar Financial God

I was living below the poverty line when I was a student working part-time & full-time. It wasn’t always fun, but the poverty line isn’t so bad if you don’t have dependants. I was by myself, so I had a pretty good standard of living in spite of my low income.

I think it can be done even with dependants so long as you trim the unnecessary expenses and economize as far as you can. I agree with Jackie’s point on expenses like $170 for a jacket being a fortune when you’re at that level.

Reply to this comment

avatar YFS

Hmm It definitely can be done, but knowing what I know now about finances. I would go crazy living on the edge. When you specify “When I was a student” What level of education are you referring to?

Reply to this comment

avatar Financial God

This was at the undergraduate level while doing a bachelor’s.

Reply to this comment

avatar Shaun

If it was just me, I could make do on a minimal amount of money. With kids, I highly doubt it. While they don’t cost the earth, they certainly cost more. I’d be doing everything I could to find other sources of income to make sure I could provide for my family.

Reply to this comment

avatar YFS

Life is always easier when you’re solo. Less emotions, less expenses and in this case less people to get sick.

Reply to this comment

avatar lynn ♦155 (Cent)

When children are in the picture, there’s more to the poverty line than figures on paper. Parents have to contribute to the well being of a child. Having 2.00 for the class trip to the local skating rink or 10.00 for a class picture is important to a child’s self image. (Just examples) With this in mind, the figures become askew. It’s never cut and paste when children are involved.

Reply to this comment

avatar YFS

Great point. Kids can definitely damage a budget. But, if you’re living on the edge like our example family you really do not have much money to put towards the child’s self image. What would your solution be if you had to abide by the budget of the example family?

Reply to this comment

avatar lynn ♦155 (Cent)

There was a time our income was low with four children. Grave medical expenses too. So I’ve been there. What I did was (don’t laugh) in addition to a PT job on the weekends, I sold Avon. The Avon money went in an envelope and doled out very carefully to the children for such small treats. They (the children) were in the ‘calculations’. If I were proficient at writing I would write a book to outline what is important in life and the relationship of money to life and the end result.

I’m sharing more than I should.

4 children 32000 income
75000 medical bills (We paid this off with my PT job.)
Clothes from “Sally Ann”
Cooking from scratch and snacks like carrot sticks and celery with peanut butter.
A gazillion other things. Fun was game night and popcorn. We all looked forward to it. Walks and investigating nature and crafts and reading (library).
Bills paid on time.

I am now much better off financially and I want to say that our children are successful and great, compassionate and strong people- each college educated. I see our tough times as a blessing. No one whined or complained about it either. We made lemonade out of lemons. And no government help. The kids are well adjusted, too. These are some of the things I would do.

Reply to this comment

avatar Yana

There’s nothing wrong with selling Avon, if you can make money doing so. I think you did great with the whole scenario you were in, especially since you paid off the medical bills and thus did without money you really could have used. Glad it worked out as well as it did!

Reply to this comment

avatar lynn ♦155 (Cent)

Thank you, Yana, for your kind words.

avatar YFS

Nothing wrong with selling Avon. I admire you for taking a sales job. Selling Avon is tough!. I think it’s very impressive that you over came your situation with such a small income. A lot of people do not have the discipline to pull this off.

Reply to this comment

avatar KNS Financial ♦404 (Nickel)

Where I’m from (Newark, NJ), there are many people who live below the poverty line with more than 2 kids. Many of them receive government assistance and pay NOTHING for housing. They feed their family on food stamps, and even sell their surplus for cash (sometimes at 2 food stamps for $1)!

I think that most of the costs that we deem necessary for living are simply wants/luxuries that have spoiled us and put us in debt. I’m not saying it would be easy to live on a small income like that, but if we only went after the basics in life, we’d have a much better chance.

I hate seeing and counseling people who are “poor” and in debt, but they have a new car, expensive clothes, cable, smartphones for the adults and teens, and many other things that I can’t afford!

Reply to this comment

avatar Yana

I’m not sure, KNS Financial, but if poor people can have things that you (assuming you are not poor) can’t afford, you might be doing it wrong. Expensive clothes can be had very cheaply from thrift stores. Certain smartphones (I have a Droid) can be bought new or used on eBay and activated on a prepaid plan. My husband and I spend around $15 monthly together for cell phone usage. Not to say that poor people know how to handle money – because many people at any income level do not know how to handle money, so it depends upon the people. We like value for the dollar regardless of our income, and it will probably never stop bothering me that we pay so much for cable TV and internet from the same company – over $100/mo.

A good friend of mine, who has a good heart and sometimes gives to panhandlers, will not give if the panhandler has a visible cell phone. She gets the idea that they must be able to “afford” more than she thinks they ought to if they have a cell phone.

I think people should do as they wish with their money, but it is probably better not to make assumptions about others. I mean, we pay very little for phone service (no home phone), buy top of the line thrift store items for $3-$4, and also buy filet mignon and very expensive wild-caught salmon filets from an overpriced meat market when we feel like it. None of that really tells the story of our financial reality to an outsider. Our car was new when I bought it outright. I strongly got the feeling from the car salesman that he assumed I was the 1%.

Reply to this comment

avatar lynn ♦155 (Cent)

Yana: You’re absolutely on the mark here. I certainly didn’t want my children feeling we were broke. I did everything I could to make sure they felt like they were on an even footing. They did not have the latest and greatest, but that was because I’m stubborn and feel self worth should not be wrapped up in owning things. Because we were well spoken, clean and gave to the community, no one knew our financial hardships.

Reply to this comment

avatar YFS

I agree.. making assumptions is not a good thing. I am also a firm believer in being cheap on things you don’t care about and spending lavishly on things you love/want. There is nothing like a well cooked filet mignon :-)

Reply to this comment

avatar lynn ♦155 (Cent)

Or Lobster tail MMMMMM

Reply to this comment

avatar shellye ♦107 (Cent)

Great posts from everyone; about 15 years ago, we were a family of four living in Oklahoma on $30k a year. I didn’t work, had a toddler and a newborn and we had just purchased a fairly new home. Granted, things were much cheaper than they are now, but even then, I was using coupons, never paid retail for anything, drove used cars with high mileage (but kept up the maintenance to keep them running) and didn’t travel much, if at all. On the flip side, we didn’t have yet have cell phones, internet, or 250 TV channels, so I guess you have to factor in those luxuries/necessities (depending on your viewpoint).

Reply to this comment

avatar YFS

30k 15 years ago in Oklahoma is quite a bit of money. 30k in 1995 is equivalent to 42k today. Also the cost of living in Oklahoma is much cheaper than other parts of the country.

Reply to this comment

avatar Shona

I make just under $30K for two people. We do get food stamps ($200/mo); but that’s it.
Finances are VERY tight! Even with my lower housing payment ($500/mo in rent) and no children. The big issue is that I lose over $250 per paycheck to taxes and deductions. After that, I basically pay my rent with one paycheck, pay all my other bills with the other. I spend a crazy amount of money on my car (the payment, the gas and the insurance), but the public transportation is so horrible here; even though I live in a metro area.

I am working diligently to search for a better job and improve my income. In the interim, I struggle.

Reply to this comment

avatar YFS

Shona thank you for sharing your story. The crazy part is according to the government with 30k between two people you won’t be considered in poverty. For 2 people your income would have to be $14,710. I’m not sure why the federal guidelines are so low but that’s what they are. Also, what do you consider a crazy amount for your car? Do you have any cheaper options?

You lose 250 per check? If I assume a bi-weekly payment that make 26 paychecks a year. totaling your tax outlay to 6500 dollars. If you only make 30k annually that’s 21% in taxes. That’s seems very high for your income level. Are you getting a big refund check?

Reply to this comment

avatar Shona

No problem! Well my car was $7,500; however with taxes, fees and inspection costs, it ballooned up to almost $9K. I put $4,000 and financed the rest. Because I have bad credit, my auto loan is at 20% and only a 24 month term (although I plan to pay it off before that).

The deductions from my paycheck are not all taxes (which for me, are federal, state, and municipal), but also retirement, union dues, short & long-term disability, life insurance and a health flex spending account. Yes, I actually do get to use the money ($500/year) tax free from the flex spending account. But we also have to deal with increasing health care premiums (as a single person, I pay $38/month…which is not bad, but we use to not have to pay anything!). Oh, and I also have to pay $400 a year for parking at my job (which is also automatically deducted).

I do get a tax refund check…usually in the $2K range.

Reply to this comment

avatar YFS

That car payment interest rate made me cringe. Ok, have you tried to refinance the car? Have you tried various credit unions? Credit Unions typically offer favorable rates even for people with not the best credit. You could probably get a personal loan for 9% to cover the cost of the car if you cannot refinance. Lending club and prosper could also offer better rates. How long until it’s paid off?

Now the taxes are making sense to me. It doesn’t look like much you can do there.

What’s your plan for making more money?

Reply to this comment

avatar Shona

I just joined a credit union this month. I may talk to them about refinancing. Hopefully, there are some answers on that front, because I get declined for any and all types of credit it seems!

I really hope to pay it off by next summer (The payoff amount is still $6K) – by using all of my tax refund and a chunk of both mine and my boyfriend’s student loan refunds (yep…using debt to pay off debt…but the alternative is defaulting). I just hope that no bills get thrown out of wack between now and then. However I’m not so sure about that…with winter here and the heat being on all the time.

I need to find another job. I’m a college graduate (with tons of student loans…of course) with a BA and I should be done with my MBA in the summer. Ironically back in 2005, I made $14K more per year than I do now. It was nice while it lasted. I took the job that I have now to survive…but it looks bad on my resume, and it’s getting harder and harder to justify to hiring managers that I’m worth at least $40K (given my skills and experience). But I’m not going to give up! But in the meantime, I have to juggle my finances the best I can!

Oh also, to be fair, my BF does work. However his net from his job is so ridiculous…it’s hard for me to even consider his income. He’s making minimum wage at a grocery store that gives him 8-10 hours a week. Out of that, he pays for child support and the gas for his 1986 Chevy (I pay the insurance…but it’s only $13/month — probably because the car is so decrepit!). After those two things, he’s usually left with anywhere between $10-$20/week. However he does buy food for both of us with his food stamps. So bonus there! The ironic thing is though, he’s in college only part-time, because if he goes to school full-time he’ll become ineligible for them. Also if we ever get married, he would also lose his food stamps (because my income would be considered…and that would push us waaay over the income limit). These type of rules make you almost afraid to try to push ahead….because you really need a push of tens of thousands of dollars….not just a few thousand…to really be on sound financial footing.

avatar Jonathan

Not to beat a dead horse here on the numbers not adding up, but…If you make $30k and get 2 paychecks a month, that’s $1,250 gross per paycheck . If $250 is withheld for all your taxes, union dues, etc., you should still get $1,000 per paycheck. But you say your $500 housing payment takes one paycheck?

I don’t have any advice for you here other than, perhaps you could find a friend or family member that could loan you the $5k (or whatever’s left) of your car loan at an interest rate of 5% or even 10%? You’re currently paying $80 or more per month in interest right now simply for having bad credit, when you could potentially pay half that or 1/4th that if you have a willing friend.

Reply to this comment

avatar Shona

Not a problem…I logged into my online pay statement to get the exact figures. Here they are:

Earnings: $1,177
Pre-Tax deductions (retirement, health insurance): $110.48
Taxes (federal, local, state): $249.11
Post-tax deductions (union dues, parking, life insurance, LT & ST disability): $37.27
NET: $780.14

So apparently I was right when I said $250 was for taxes (forgive me…I posted before I had access to my paystub). The breakdown of that is: $131.59 – Federal, $47.90 – SS, $16.54 – Medicare, $35.02 – PA State, $0.95 – Unemployment, – $17.11 – Clairton (city tax). Are these numbers still unnaturally high or abnormal? I am a single person…so that would put me into a high tax bracket.

So yeah, usually I take my first paycheck and pay my rent, which leaves me with $280 for two weeks. My gas is at least $40 week, so that knocks it down to $200. I leave whatever can remain in the bank to “help” my next check cover all of my other bills.

Reply to this comment

avatar Sun

Here’s a crazy thought… what about selling the car you have payments for? Buy a used car with that money. Then if you can get liability insurance only, you will not have a car payment and maybe reduced car insurance liability. You can also get rebates by purchasing Shell Gas Cards at Ralphs (Kroger). 2x quarterly rewards at Ralphs (we got back $40 last quarter to buy groceries with) and you get $0.10 off if you use your Ralphs Rewards number at Shell.

Reply to this comment

avatar Shona

Hi Sun. My car IS used. It’s a 2001 Mitsubishi. The thing about cars is that they almost always lose value. Have you shopped for used cars recently? I drive 50 miles every day to work…so I need something dependable. Nothing I saw under $5K was without significant wear and tear. Also I don’t want to be buyiing a car every 3 years, so I wanted something with less than 100K miles.

Trust me….as much as I like driving, cars are a black hole for money. I know this. But I can’t do without one where I live.

Reply to this comment

avatar YFS

The car is a bit expensive relative to your income but you said it will be paid off in 12 months. If you can get this done I would not sell the car. The issue isn’t an expense problem you have a income problem. I think you’re doing fine with managing expense. If you can make more money and maintain your current lifestyle without incurring lifestyle inflation you will build a nice buffer

Reply to this comment

avatar Yana

I’m inspired to put in my two cents. You should get the best car you can get, and get the best car insurance you can get, as well. Cars are a major burden when one is poor. There is nothing better about making payments on a piece of junk versus something better – in fact the better the car is, the more you can justify being so screwed that you have to make payments on something. I hear you, Shona, and think you are working well with what you have. Though I don’t understand why you are spending money to drive 50 miles to work, since I don’t know your circumstances. If you live in a remote area with no employment, that would be a reason – however, in that case, I’d be thinking about moving to where I could regularly work. Work is supposed to pay you, and that gets corrupted when you, the worker, are paying for your employment.

Reply to this comment

avatar Shona

Thank you Yana for your insight. I live in the Pittsburgh, PA area. Anyone who has ever been here know that commuting here is tough because of the topography and the fact that we have 3 main rivers (and 2 other smaller rivers) that cut through the region. Most of the roads here follow the rivers and hills and do not take you directly to your destination. I use to live in South Florida, and while there was much more traffic there, commuting was much easier in that both the highways and the city sort of developed at the same time (as opposed to Pittsburgh, where the interstate where laid into an existing infrastructure of roads).

I actually split my time between two different offices; one is 27 miles away from my home, the other is 32 miles away from my home. Moving closer to one puts me further away from the other (one is northwest of me, the other is southeast of me). Yes, it’s a bad situation. I definitely need another job; but I have to hold off on moving until I get into a more stable situation.

Reply to this comment

avatar Yana

No doubt that moving can be a very expensive burden, as well. Good luck getting through the harder times to better times. The great thing about this blog is that you can get good, useful information and easily interact with others who might set off a lightbulb in your head. I know I can use that on a frequent basis ;)

Reply to this comment

avatar Mike

This article made me cry.

Reply to this comment

Leave a Comment

Connect with Facebook

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.

Notify me of followup comments via e-mail. You can also subscribe without commenting.

Previous post:

Next post: