This article was written in the Lancaster Newspapers by Tom Murse this past week. It is based on a study by the University of Washington’s School of Social Work, which measures how much money families need across Pennsylvania to meet their basic needs. (Emphasis, obviously, added). According to the report, a family in Lancaster County needs to earn $54,821 just to make ends meet. While I’m not going to flat out dismiss their studies, this number needs some further explanation. Or maybe more accurately, the idea of survival needs some further explanation.
First off, I believe that a slight conflict of interest should be disclaimed, namely, that a school of social work has a vested interest in a report that shows that poverty levels should be raised (whether or not they should raised is another issue, even if I am in agreement that they should be).
Regardless of any conflict of interest, however, these numbers still seem high. Numerous times in the article, the clarifying terminology includes “to survive,” “to meet basic needs,” “to get by”, “can’t survive,” “meet costs of basic necessities,” and to “make ends meet.” These are pretty bottom line expressions. And it calls into question, what does it mean to “survive”?
For me, I think of my own financial situation. A wife and one-year old at home, with me being the sole income earner in a profession that has an extremely sloped earning curve, with that curve not necessarily being lucrative in the beginning. We earn significantly less than the $55,000 in question, and, at the risk of sacrificing more eternal rewards, we give a significant portion of our income away. And we’re surviving. I would even argue that we live a pretty good life. Sure, we live in a house that we’ll eventually outgrow (maybe), and we don’t take those flashy vacations three times a year, we drive cars that are more than five years old, we don’t buy designer clothes, and we don’t dine out twice a week – but we’re sure making ends meet.
What do these “basic necessities” include? Tom Murse listed some: housing, child care, food, transportation, and health care. But lets unpack those a bit.
- Housing. What do people “need” to live in? Do families just starting out really need that $250,000 house in the suburbs, the type that their parents live in (and the kids just forget that it took 30 years to “earn” that type of house)? I think a lot of families who have seen an increase in income over the years have suffered from lifestyle inflation, which is simply increasing our expenses as our income goes up, which never increases cash flow margin and leaves you never getting ahead in the game of life. What is “needed” and what is just extra?
- Child care. Personally, we opted out of this one – but this topic raises the issue of just how much value is there in a second spouse working? At work, we encourage our clients to look past the second income’s gross amount. How much will child care cost? How much more do you pay in transportation? Non-reimbursed work expenses? Upgraded wardrobe? These all assume a family with two parents, and so the single-parent families may be limited in options with this expense.
- Food. This figure is given in the article. It says that the cost of feeding a family of four in Lancaster is $695 a month. If you break this cost down per family member ($695 / 4 = $173.75), it is three times the amount that we spend on groceries in a month per member… and our groceries budget line includes toiletries. How much food, and what types of food, do you need to survive?
- Transportation. This is a personal pain point with me. College graduates do not need to reward themselves with a $25,000 car (and a crippling $350 monthly payment) after they land their new job. I’m not against having nice cars – not in the least. What I am against is buying cars that you can’t afford … which, according to some of my friends in the car business, just about everybody does. Does it really make sense to pay interest on a depreciating asset? And so again, I call into question how much car is necessary to survive? Both of our cars are pushing the 200k mark – and we’re more than surviving with them that way.
- Health care. This is a pretty non-negotiable item, unfortunately. I work for a smaller employer, and so we don’t have the greatest benefits of larger employers that can pool from a larger employee base – but again, we still survive. I think the biggest key is to understand exactly what options you have with insurance, and to maximize those options. So in contrast to the other listed items, with the possible addition of child care, this cost is truly necessary to survive, and there is little we can do to control it.
This article was enlightening to me – but I just have to call into question the underlying premise of the argument. What does it mean to survive? It pushes my buttons of contentment, which should be regardless of income, and the biblical command to live beneath our means – two topics that I deal with daily with my profession. $55,000 to survive? I don’t think so. I know of people who have never earned that much in a year and who are on track for a lifetime of financial independence, not just today, but for tomorrow’s retirement.
I’ll wrap up with an admonishment to you, Jack, to as I’ve said time and time again, seek contentment and live beneath your means. Till next time, Jack.