You Can Live Happily Below The Poverty Line – But There’s A Caveat

As with all these statements, you cannot take it at face value. And the glaring anomaly here is that this lady bought her house outright with cash. Yes, it was a fixer upper, but she still bought it outright. If you are paying rent or a mortgage anywhere in the world (which most of us are) you might as well throw these figures out the window because you will not be living happily below the poverty line if you are paying for accommodation.

The US Government calculates the poverty threshold for a single person as $12600 (at the time of filming in 2021). That’s a UK equivalent of £10274 or thereabouts.

The UK’s definition of the poverty line, not surprisingly, is more complicated and not as clear-cut. To quote:

‘Households are considered to be below the UK poverty line if their income is 60% below the median household income after housing costs for that year.’

Housing costs, I presume, means rent or mortgage. But what is the median household income? Well, that isn’t entirely clear either. Get your calculators out. To continue:

‘Median household disposable income in the UK was £31,400 in 2021.’

I don’t know what the difference is between a ‘median household income’ and a ‘median disposable household income’, but either way 60% of it is £18840, which leaves a poverty line income of about £12,560 which is a bit more than the US calculates theirs at.

Now, this lady has a yearly expenses list which comes to $10650 per year and granted the US has a whole different set of expenses to us that can’t be avoided such as medical insurance (there is no NHS equivalent in the US). In pounds her outgoings are £8684. If you added rent, then it’s going to be a lot more and that is why she can make her claim, but it’s not realistic. My rent is cheap compared to most people. I pay £5940 a year. Add that to her no mortgage expenses, and you would be looking at an additional $4843 – a total of about $15493, which means she is no longer living comfortably below the poverty line.

Last year all my expenses across my personal and business costs came to £12703. Minus rent that’s £7644. My income last year was £9629 including benefits. Without benefits that’s an income of £6462 by last year’s figures, but last year’s benefits were higher because of self-employed Covid payments. This year by my calculations, and given that anything can and probably will change, I’m on a gross income of £7432 with benefits which have yet to be calculated for this year. Expenses have the potential to be about £10,723, but we are still early in the year and I have every expectation that will go up to last year’s level of £12703.

This year overall, I expect things to be about the same, but I think I am being optimistic. For a start, my energy supplier hasn’t raised my Direct Debit yet. I have cut back on some things, which means prices that have gone up are (I hope) evened out. I have the possibility of saving about £140 on food this year if I stick to my £25 pm budget, but it looks like fuel is going to be up about £100 on trips I am already committed to. I could save about £1300 on the ‘anything else’ category, but that’s really hard to do as it means no birthdays, no anniversaries, no eating out, no supermarket costs outside of food (i.e. no toilet paper or cleaning products) and no additional travel costs. That’s not doable for a year. It just isn’t. You have to look after yourself.

You might be wondering how I manage the £3000 deficit in my income vs my outgoings. Well, I have saved hard over the last 14 years. I have squirrelled away every available penny from work and small inheritances and I invest for interest returns which means I am able to top up my short falls each month, so I break even. I am looking for more ways to increase my income, so I don’t keep dipping into those emergency savings, but each year the amount I have put away is getting lower and lower, and I don’t have a retirement plan in place beyond the state pension and just to keep on working, so I can’t afford to just blow money on anything unnecessary.

This is going to be a hard year. I’m up for it, because I already have plans and coping mechanisms in place. Plus it’s unavoidable. I have spreadsheets and I always keep an eye on what’s going on. Never ignore financial problems. It only makes them worse.

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