The Real Costs of Living
Ruby Payne defines poverty as “the extent to which an individual does without resources.” Those resources are more than financial resources. They include emotional, mental, spiritual, physical, support systems, relationships/role models, and knowledge of hidden roles in society.
The federal poverty guideline was established in 1964 by the Social Security Administration and was based on the Department of Agriculture’s economy food plan. The Agriculture Department’s 1955 Household Food Consumption Survey found that the average dollar value of all food used during the week accounted for one third of a person’s total money income after taxes. Therefore, the federal poverty guideline does *not* take into account housing costs, transportation, child care, energy costs, insurance or healthcare or indeed, any of the other factors that contribute to poverty.
The federal government defines poverty in 2008 as a family of four earning $21,200 per year. However, research suggests that families actually need almost twice the federal guideline in order to meet basic needs. Families of four who fall below this 200% of the federal guideline are referred to as low-income.
- People in poverty are less likely to have bank accounts and often resort to alternative banking options such as pay day loan and check cashing businesses. The typical payday loan borrower pays $793 for a $325 loan, although fees can range as high as 400%. (Center for Responsible Lending)
- 4.2 million lower income homeowners (earning less than $30,000 annually) pay higher than average prices for mortgages, auto loans and excessive fees for furniture, appliances and electronics. They also tend to pay more for basic financial services, groceries and insurance. These extra costs add up to hundreds (sometimes thousands) of dollars per family. (Center for Responsible Lending)
- On average, Americans spend 5% of their income on paying energy bills. However, for lower income households the costs average 18-20% or more. These costs include heating, cooling, appliances, lighting, etc. The difference between 5% and 18% for a family of four in poverty is $88 per month to $318 per month for utility costs. (U.S. Department of Energy)
- Housing costs for low income families who receive no subsidy or assistance (such as Section 8 vouchers) spend as much as 50 to 75% of their annual income on rent. (“Connecting the Dots” by David K. Shipler)