What’s Your Poverty Threshold?


What is the minimum amount of money you need to live comfortably? This is a personal decision, so there isn’t a right or wrong answer. One person might say that they wouldn’t be able to live comfortably on less than $70,000 per year. Another person might be fine with less than $10,000.

Why is this number important? I think your poverty threshold is a measure of your flexibility in pursuing your dreams.

Let’s say you have an inkling of a dream career you would like to pursue. But in order to work at that career you would have to start earning about $20,000 each year. Could you make the switch?

If your threshold was $10,000, this might not seem like such a bad trade. You would still be able to live comfortably, and if you worked hard, you could probably earn more income with that career later. Especially if your dream career was running a business where you might be able to earn $100,000 or more each year if you focused on growing your earnings.

But what if your poverty threshold was $40,000. Would you be able to make the trade? Probably not. Living a few years on $20,000 would seem like too large a sacrifice, even if you loved the work.

My Financial Threshold

As a 19-year old University student, I can’t claim financial independence from my parents. I pay for most of my expenses, but my family has always agreed to help while I go to school. I’ve marked out my poverty threshold at $20,000. And while I’m not earning that amount from this blog yet, I’m planning to become financially independent before my 21st birthday.

When I finish my degree, I expect that I could live as I do now on about $15,000 per year. Depending on what part of the world you live in, this threshold may seem incredibly low or incredibly high.

My poverty threshold is the level of income I would need to earn in order to not get a second job. I love writing, so if I can earn above my threshold, it means I can devote all my energies to work I’m passionate about.

I’m not writing this article to criticize people with a high threshold. Having kids, a spouse, car payments, mortgage payments or living in an expensive city can all increase your threshold. But hopefully if you become conscious about what your threshold is, you can see how it will affect any changes you want to make in your life.

Lowing Your Poverty Threshold

The purpose of this article isn’t to compare thresholds, but possibly get you thinking about ways you might be able to lower your own threshold. Since having a low-threshold gives you more options, lowering your current threshold gives you the ability to make changes in your life that others might not be willing to make.

Here are a few decisions where poverty threshold might play a role:

  • Quitting a job you hate to find a new job.
  • Going back to school to further your education.
  • Starting your own business.
  • Scaling down the hours you work to spend more time with family.
  • Going on a sabbatical to travel the world, learn or experience new aspects of life.
  • Developing a skill which you later hope to turn into an income-generator.

In each of these questions, the lower your threshold, the more flexibility you have.

How can you lower your threshold? Since I’m not above my threshold from this blog at the moment, I’ve been thinking a lot about ways I can lower my threshold. Here are a few I came up with:

  1. Be Frugal. Cut expenses ruthlessly. I started keeping much tighter control over my expenses by putting in place a monthly budgeting system and recording everything I spend money on. Already this has helped me avoid unnecessary expenses.
  2. Find Work You’re Passionate For. Your poverty threshold might be higher, simply because you haven’t found any work worth sacrificing for. If you absolutely loved waking up in the morning to do your job, you might be happy even if you have to live on baked beans and brown rice for a year or two.
  3. Find a Cheaper City to Live in. I once knew a guy who sold games online, while he lived in a South American country. Since his earnings were in US dollars, but his expenses were much lower, he could pursue his dream full-time. Someone living in New York City or Tokyo might not be able to do that.
  4. Shift Your Focus. If your view of life is mostly focused on material wealth, it will be hard to have a lower threshold. If your life is focused on taking on challenges and doing meaningful work, you can be comfortable living on less.
  5. Change Your Habits. What you eat, how you commute and where you get your entertainment are all based on habits. If you’ve conditioned yourself to live on a high income, your threshold is going to be shifted upwards. So if you want to become more comfortable on less income to make a big decision in the future, you might want to start changing your habits today.
  6. Pick More Diverse Friends. If most your friends are in the same tax-bracket, it will be harder to push to a lower income level. I think picking a diverse group of friends ranging from janitors to CEO’s reduces the peer pressure to stay in a job you hate if the money is good.
  7. Make Gradual Steps. Going from $100,000 per year to $10,000 each year is a severe step. While drastic steps might be necessary, try gradually shifting your work and income. Do a bit of consulting work on the side until you can finally open your business. Slowly reduce your expenses and increase your savings until you can make the jump. If you can’t take the plunge, lower yourself in slowly.

Tell me what you feel your poverty threshold is. What are you earning right now and what is the level of income you could live on? Try to include what part of the world you live in and what financial commitments you have (kids, spouse, house, etc.). I’m curious to see what the number is that would help you pursue your dreams.

Read This Next
Is Getting Rich Worth It?
  • http://www.adamspeace.com/blog Adam Alexander

    Currently, my earning threshold is holding steady just under my income… The threshold is $38k, and the income is $41k.

    This includes caring for my spouse, rent/utilities, transportation costs, and some entertainment. In 4 months, that threshold will go down, as my transportation costs will drop suddenly as I pay off my car.

    I do have to argue about point number 3 on how to lower your threshold… The primary reason why your friend was able to have an incredibly low threshold, relative to his income, is because he worked across regional and international borders. The vast, vast majority of people don’t have the experience, knowledge, or dumb luck required to be able to do this, and from my personal experiences, if your cost of living is low because of where you live, then your standard of living is also very low, as is your income.

    When I moved from Logan, UT to Phoenix, AZ (the opposite of point number 3), I increased my income 4-fold in a matter of two months. The cost of living is only twice as high, compared between the two locations, which means that the standard of living is also twice as high. While living in Logan, despite the low cost of living, I lost all of my money to the slow creep of bills… Now, with a higher cost of living, I’m rebuilding my savings and will be able to invest soon.

  • http://michael.tyas@gmail.com Michael

    I’m a university student and mine is around 13,000 per year. I live here in Winnipeg, and my commitments are tuition; bank loan; living and; entertainment expenses. I don’t own a car, but I’m still paying off a bad car purchase in a previous loan.

    I attach myself to people who enjoy board games. They’re a good investment, free to play, and if you are into quality time they fill that need.

  • Jonathan B

    I am an expat who lives in Eastern Europe. My wife and I together comfortably got on with 20,000 USD for many years. However, inflation in the past 2 years has brought the prices here almost to par with Western Europe (food, electronics, clothing, furniture, gas is definitely more expensive than in the States and housing now is out of this world). However, it is amazing how much one can save by being thrifty. We make 45,000 but donate about 25% percent of our wage and save 25% (for retirement investments) and i still think we are living quite comfortable. So here for us here the poverty level would be around 17,000 for both of us. I do need to add that we have no debt and own our condo outright (we got our Soviet made apartment for around 12,000 4 year ago but now it is worth 60,000 USD).

  • http://www.davidsafar.com David Safar

    I estimate my threshold at about $42,000 a year based on where I live (Silicon Valley) and the minimum lifestyle I want to have.

    I have experienced the difference in moving from one city to another, but like Adam Alexander mentioned in his comment, I was going from a less-expensive to a more-expensive city. In Portland, OR, I estimate that my poverty threshold was around $32,000 a year. But while moving here raised my poverty threshold by approximately 33%, it raised my income by approximately 50%, so I’m much better off here despite the higher threshold. I think this is not uncommon — sometimes a higher poverty threshold due to the local cost of living comes with benefits that outweigh the drawbacks.

  • lothar

    I would include a budget for the later retirement below the threshold for a sustainable decision base.

  • http://www.entrepreneurjoe.com ejoe

    I would say my poverty threshold is around 40K, that includes mortgage and taking are of famly. I make around 100K but plan to reduce hours worked so I can focus on on finding my passion.

    I have a safe cushion but feel that i need it for savings and possible business ventures when the opportunities arise. Also need money for future famly, kids, wife, another house, transportation etc…

  • Iair

    Another good~great article. Left me thinking about it.
    Thank you.

  • http://www.scotthyoung.com Scott Young

    Interesting comments.

    Does anyone mind posting their gap? (i.e. the difference between their poverty threshold and current earnings)

    I expect it to be positive in most cases or it could be negative if you’re in debt/dependent on another person.


    Does that 13000 include rent, or do you live at home? My original figure included rent/food/utilities, I’m also in Winnipeg so I’m curious to see how our numbers compare.

  • Diego

    There is also an maximum earning threshold. Read Maxwell Maltz’s Psycho-Cybernetics. It is far easier to fall below a poverty threshold than pass above your maximum earning threshold. I think what you are talking about is a “comfort” threshold. That is related much more closely to where people believe they lose control of their lives.

  • http://www.successmakingmachine.com Summy

    i like the concept. I would distinguish the poverty threshold, the comfort threshold and the luxury threshold.
    Poverty- cutting below this point you feel (or are) homeless.
    comfort- this is the point where you feel comfortable. going below this and you start to feel uncomfortable. Though you can live below it for a while.
    Luxury- at this level you feel like you’re living large. You can get almost all the things you want.

    I think this sparked a blog post. Thanks.

  • http://www.davidsafar.com/ David Safar

    Regarding Summy’s three thresholds (poverty, comfort, and luxury), it would be interesting to look into the relationship between happiness/contentedness and the proximity of these thresholds to each other. It occurs to me that my poverty and comfort thresholds are relatively close together (though likely higher than many other people’s), whereas my luxury threshold is quite a bit higher.

  • Pingback: Scott H Young » How Much Stuff Do You Need?()

  • Pingback: A Life That Fits Into a Backpack | The Marketer Who Went Off Consumption()

  • http://tinyurl.com/65dptv cheritycall

    Hello, Do something for help those hungry people from Africa or India,
    I created this blog about this subject:
    on http://tinyurl.com/6bz6t7

  • Robert Rugambwa

    I’d agree that there is a case in point for the 3 thresh-holds, the Poverty Thresh-hold, the comfort thresh-hold and the luxury thresh-hold. Wouldn’t it be right to state that the ‘poverty’ thresh-hold cuts across all boards and would be a roof over your head, food on the table and clothes on your back? The ballpoint figure would depend on area, cost of living etc and would include the bills etc and as well, the ‘digital life’ concept. Above that, we’d start to consider comfort, and that becomes subjective, giving the comfort thresh-hold.
    Luxury is at yet another level.

  • Pingback: Scott H Young » The Time to Start a Business is in Your Twenties()

  • Tina

    My thereshold is about 13,000 I am dependent on my exboxfriend who owns a co-op and had a drinking problem.
    So I devote alot of my time tending to him in various way.
    But, I would like to leave him and one day soon and find my dream job/relationship/home. right now I stay home alot with max our Begal.
    It’s a bummer to have to depend on someone to live with because the rents are so high in New York. I hope things get better for everyone.
    Keep writing you are Good!…..is that you on the bench?

  • http://realsimplepeople.com John Sherry

    I’m not a fan of the money making industry as a priority in life but what does interest me is those on the opposite scale who have a poverty consciousness. People who chose to hide their worth and what value they bring. Ones who never amount to what they could be. You can’t realise yourself and what you contribute to life if you don’t let life contribute to you first. What’s the least you are worth and why is that?

  • Pingback: A Life That Fits Into a Backpack | Gauravonomics Blog For Marketers, Entrepreneurs and Activists()

  • Jessica

    I would say our poverty threshold is right about where we are now, so $NZ30,000p.a. – paying mortgage, AND rent (don’t ask – bad situation, climbing out of it), 2 adults+2 kids household. I earn $NZ31k a year, and this allows us to have everything we need and a little of what we want, but it isn’t enough to allow us to save anything.

    Once the useless mortgage is paid off, I would say our poverty threshold would go down to $NZ25k. :) yay!

  • Pingback: Could You Walk Away From $8 Million in Easy Money? « Scott H Young()

  • http://amanofnonation.com Kevin Post

    I am married but my wife is in Colombia and I am in Florida waiting for her immigration papers. Although we couldn’t travel as much as we liked, while in Colombia we lived on $800 USD a month (food, rent, utilities, internet, transportation, literally everything); if we had made an extra $200 a month we could have taken lovely vacations every weekend. Due to lack of employment (wife lost her job a few months ago and I wasn’t regularly employed) I had to move back to my hometown of Orlando to support the both of us. I currently make roughly $1300 USD a month working in Orlando which has been enough to send money home to my wife (roughly $450 a month), pay my rent, eat and put some money aside for my studies.

    Now, if I were to make $1300 USD a month in Colombia I would have a significantly higher quality of life than I have ever had. My goal is to achieve location independence in order to one day move back to Colombia with my wife, live on a self sustained farm in the mountains and start a family. I’m sure that it can be done.

    I am sure that I could live off of $1500 a month while raising a family and traveling frequently to go rock-climbing.

    I very happy I found this site Scott. Thank you!

  • http://amanofnonation.com Kevin Post

    Correction, I meant to say $400 USD a month (roughly 800 thousand Colombian pesos).

  • http://teafortwoplease.blogspot.com alissa

    Great idea! I travelled a lot when I was in college and people often asked me how I could afford it. Answer: I had a low poverty threshold. I shared a room in an apartment and cut my rent way down, I worked a lot and I didn’t spend money on expensive thing such as handbags, shoes or gas. When you cut down on your living expenses, you can afford those big things – like a trip to South America or an iPad. Does one need a $100 phone bill each month? Can you live on a cheaper phone and cell phone plan? Do you really need to live in a nice part of town? Can you sell your car and ditch the car payments? If you do, you will have way more money in your pocket. And more money in your pocket means spending it on things that you enjoy. If you’re not enjoying your money – then you’re not spending it right.

  • Rob

    With all due respect to the author, I hate this post.

    Frugality and finding the minimum is one step above poverty. It is also a sure fire plan to poverty.

    I prefer to live life and do my best to max out. To find the most I can do, the most I can make and really go for it.

  • http://www.blackgirlinchina.com Nikki

    I think this is a very valuable exercise, and one I have used often. I know that my poverty threshold in the US is $1,000 a month if I live in Memphis, TN (actually it may be a bit lower, but I like going out with friends!). In Oakland, CA, it was $2,000 per month. Knowing this enabled me to save money, walk away from jobs that were not fulfilling, travel, and accept a job in China where I make $1,200 a month, but only spend $500-700 of it per month (and could spend less if I learned how to cook here!).

    I agree, knowing your three numbers (poverty threshold, comfort threshold, and luxury threshold) is even more useful. By using these numbers, I know how much I would need to earn at my own business and not need to work for anyone else, and what I can do at each income level. If for no other reason, that information is priceless!

  • http://www.POORandy.com Randy Colbert

    I’ve been frugal since I was young. My poverty threshold for 2013 turned out to be $15,869.35 (I love debit banking and digital downloading ALL transaction into Excel).

    My income has stair stepped upwards from $15,000 a year to cranking out $125,000 in 2013 (a 20 yr climb, a large part due to realised capital gains on investments in the last few years).

    I like to imagine all I need to live in is a well insulated cardboard box with great internet service and a sink, toilet and shower. I don’t see the point of paying high property taxes to live in a McMansion. In reality, I live in something in between the two but leaning more toward the cardboard box than the McMansion.

    I have friends living across the financial spectrum: some penniless to others very well off. We’re all more or less HAPPY, the internet keeps me an optimist pushing for an ever better future.

    I love working my imagination to think of projects that will help the “lower” end of society keeping in mind we must all truly motivate ourselves to help ourselves.

  • Nancyeonard

    Hello i am Clarisa Steve from Florida USA,when i was in need of a loan of $230,000 to transit a business my friend introduced Miss Nancy Leonard loan firm to me because she got a loan from them sometime ago, so I was so scared because of the scams in the internet but my friend encouraged me to give them a try and i gave them a try and i got my loan within 4hrs and their ways was very easy no credit check,no cosigner,no collateral and their interest rate is just 2%, so i will advice anyone out there that need a loan to contact them via their Email:(ptlenders@yahoo.com).

  • danielgrant

    We offer a truly cost-effective SEO support for only $129 monthly and shift you up online ranking positions each 30 days or you don’t pay. We even business 100 % free SEO in come returning for percentage on web revenue with certain companies. Just contact to see if you are eligible. armodafinil online