The True Poverty Level
By Josh Tolley
NOTE: What you are about to read is so shocking that I myself had to take a couple days to grasp the magnitude of the situation. I strongly urge you to pass this along to everyone you know as soon as possible!
Officially, the poverty level in America (according to HHS) for a single person is $10,830/yr, but for awhile now I have found that number a little suspicious, as I know people who make much more than that and they are struggling all the time. What I have outlined below is what I am calling “Practical Poverty Level.” What is Practical Poverty? It is the amount of money the average American would need to make in order to have NO money left for basic living expenses after paying the foundational expenses.
I have listed the twelve foundational expenses that most people have in their lives as single individuals with a college education. Obviously, there are areas in this list that may be lower for you personally and others which are drastically higher; all that means is that your personal poverty level would need to be adjusted to fit your life. However, do not let the fact that your bills are higher/lower distract you from the power of what you are about to read, because this IS what most people are facing and exactly why the world is in the financial situation it currently finds itself. This article should alarm and shock every reader!
The Monthly Basics
Rent – $1,000
Car Insurance – $144.66
Cell Phone – $73
Utilities – $264.33
Cable/Internet – $100.63
Food – $332
Gas – $220
Car Payment – $466
10% savings for retirement – $385
College loan payment – $575
Life Insurance – $33
Health Insurance – $402
As you can see, there is nothing “excessive” on the above list and I know we can all agree that is looks pretty basic and sound. Do you know what this means? It means you need to make, as a single adult, $69,600 a year ($70 grand) to have NO money left over! Let me say it again:
THE PRACTICAL POVERTY LEVEL IN AMERICA IS $70,000
If we were to look at this in terms of per hour pay, a new college graduate would have to be making $33.46/hr in order to be broke.
Notice what is NOT on this list! We did not list any clothes; I hope you live someplace warm. We didn’t list furniture, so you are sitting on the floor. We didn’t list dishes, so you are eating with your hands. No Netflix…sad. Stamps, toilet paper, a flashlight, parking ticket or even a tulip for your window are all just examples of what you cannot have at $70,000 a year.
Stop for a second and think about what you just read! Yes, you can get 5 roommates and cut that rent payment down, yes, you can go without cable to save some cash, but even if we cut this list in HALF you still would have a practical poverty level of $35,000/yr and remember, that is still going to be with no furniture, no books and no batteries for your remote. Forget ever going on a date (which would be hard since you can’t afford a toothbrush) or owning a pet. Matter of fact, you cannot buy a mirror to hang in your room without; a) not paying one of your bills, or b) going into debt.
Now that we have discovered that the practical poverty level for a single individual living on their own is $70,000 (higher for most, slightly lower for others), it should scare you half to death to realize the average TWO income home makes only $57,000. Don’t forget, two people would increase your practical poverty level as there would be a higher food bill, more insurance, a second car, and remember at $70,000 you can’t even afford rubber bands so how did you ever afford to get married?! To take this a bit further, I have a report on my desk showing how if you have one child it will cost $300,000 to raise the child from birth to 18 years of age. Sounds high? That’s only $1,300 a month! You will need more space, more food, insurance costs go up, and don’t forget clothes and school. $1,300 is actually cheap when you think about it. So that puts a small family at a practical poverty level of $101,608 (48.85/hr).
I know what you are thinking: “NO WAY! This can’t be right. Is this right? The math makes sense but NO WAY! Can this be right?!”
You have just been awakened to one of the biggest secrets in the world! Obviously, there are those around us who have pets, they may own a rake, so this means this article has to be incorrect, right? No. What it means is, if they make below the practical poverty level they either are not meeting their bills, have debt, or lessened their life experience (i.e. 3 roommates).
This means that a middle class family should be defined as starting at $101,608 and that is why, from a political perspective, why no political party can “fix the middle class”, because they are using figures for the middle class as being in the mid $50k a year bracket. Below poverty is the same as below the water line. If you take someone from $50k to $58K they are still going to drown aren’t they?!
I am fully aware that a reader’s natural instinct is to fight this article in their mind. I have heard it all about how “I make $30,000 and am doing just fine”, and good for you. But don’t let your ability of manage crumbs distract you from seeing the truth, and the truth is that the above is accurate and sound. That means we need to re-adjust our compass in terms of how we approach our financial lives. Again, I will remind you, I didn’t even begin to touch upon things such as the need to take care of an aging parent, a disabled child, or saving for a down payment on a home. You can fight this article all you want, but all one needs to do is take a look around and see that what we once classified as “enough” is no longer cutting it. The faster a reader comes to that reality, the faster adjustments can be made in order to make “more than enough.”
Bottom line, if we continue to teach our children to go to school and get a job (with a starting salary under $80,000/yr), and if we continue to focus our economy on “creating jobs”, we will continue to harm our children and our nation. The focal shift needs to be made toward reaching our individual potential and that is never done through employment. Wealth is unlimited and available to everyone. From a political/social standpoint we need to encourage our leaders to shift the focus as well. Instead of “creating jobs”, focus on creating an environment which encourages small business, which will in turn, create more jobs AND more wealth.
Josh Tolley is a business and behavioral strategist. His latest book, “Quit Your Job or Die: Discover the Importance of Self-Employment” has been a top ten best seller for over 12 weeks. His teachings have been implemented by hundreds of people and dozens of businesses around the globe. He is ranked as one of the top 100 business and personal growth trainers in the world and the developer of many human interaction technologies. To book Josh for a seminar in your area contact Mike with The Annex Group at 626-893-4917 or mike@annexprojekt.com
5 comments
Lonnie Olson says:
Aug 22, 2011
Your article seems to assume that living on less than the practical poverty level has “lessened their life experience”. This is the point that I wholly disagree. One does not require a $466/mo car payment to live a full life experience. A person need not pay $1000/mo for a single person to rent a place. With careful planning and working through college it is not hard to avoid a $575/mo student loan payment.
These are not required for a full “life experience”. I agree many people are trying to live your version of a “life experience” on less than what is truly required and are hence below a personal poverty level. Your article seems to advocate that living with less is negative. I certainly disagree, and additionally living with less is even more fulfilling and positive.
However I do agree that the numbers for middle class definitions should be raised a portion. Also, teaching children to understand their full potential, and possibilities of creating jobs themselves is a wonderful idea. Just don’t teach them that they have to have an expensive car, a fancy house, large student loan, and all the amenities to be happy in life.
Christine Barton says:
Aug 23, 2011
You didn’t list monthly taxes which is significant. You mention yearly salaries several times and we typically talk about our yearly salaries in pre-tax terms. What yearly salary will suffice after payroll taxes are deducted? There are other taxes, but payroll taxes would be the most significant add to this article.
admin says:
Aug 23, 2011
This article was hard enough for the public to grasp as it, we didn’t want to list all the additional taxes because then it would be well over $70k. We did account for income tax in the sinario though. Good looking out Christine!
admin says:
Aug 23, 2011
Lonnie – The point of the article is not to make is seem like living on less means less of a life. The point of the article is to wake people up to the fact that if people are going to work in exchange for money, then they better wake up to the facts of what is going on in the financial arena. We are not saying you should have a car payment, we are not saying you need to pay $1,000 a month for rent. Matter of fact, we are not advocating a life style at all…period.
The fact is that those are the national averages of the lifestyle MOST Americans are living. Should they? NO. Are they? Yes. Since that is what most people are living, then they need to wake up that what they think is working really isn’t. If anything, this article supports your points, not goes against them.
People tend to choose one of two options; the life described in the article which leads to debt, divorce, suicide, etc. Or a life of little where you live off the land, grow your own food, and leave the system. Nothing wrong with the latter! However, most people who are sick of debt and the problems it causes tend to leave the “system” because they don’t understand that they have alternatives, one of whih is become financially wealthy.
People should have not debt, no drive to keep up with the Jones’ and no employment that takes them away from their family and life’s calling 30-40 hours a week.
Ths says:
Sep 27, 2011
If we want to discuss poverty and not the expensive aspirations for a middle class life, I’d give this figure for a single person, partly based on my experiences as a graduate student:
Rent $600
Car $200 (yeah so say you have a car payment but not on a NEW car)
Car Ins. $50
Food $200
Util. $250
Gas $100
HlthIns $400
_____________
$1800/mo., which means $21.6k/year, adjusted for income tax and FICA probably means $26-7k income. This is bad enough as the average salary is what, $35-40k? So a third of single people live in poverty.