A recent PBS Need to Know episode paints a vivid portrait of what it means to be “Living on the Financial Edge.” Watching it was wrenching. I was seeing how a working-but-poor family makes difficult tradeoffs every day and month, living on $35,000 a year – well above the federal poverty line of less than $20,000 a year for a family of 3. The mother spreads out her medication rather than taking it as prescribed, the older son works all day without lunch, with a paycheck spoken for before it’s even earned. He went to college to be a teacher, but dropped out because he couldn’t afford it. They have no savings and can’t look to the future, needing to devote all their energies to daily juggling.

This summer, I’ve been a Fellow at Women’s Initiative for Self-Employment. Women’s Initiative seeks to help low-income women achieve financial “self-sufficiency,” but what exactly does that mean? Here’s a definition from the Insight Center for Community Economic Development:

“To be truly economically secure, and leave poverty behind for good, people need enough money to be able to pay for the basics like rent, food, child care, health care, transportation, and taxes, and enough money to develop savings and assets.”

In considering the situation portrayed on Need to Know, the family income wasn’t enough to cover all its food or health care costs, much less the ability to save – and that’s at an income level nearly double that of the federal poverty guidelines. As the Insight Center describes, the federal poverty guidelines don’t reflect a meaningful measure of what it actually costs to live. The calculations don’t consider the costs of rent, child care, transportation or health care. The calculation is based only on the cost of food, which is assumed to be 1/3 of a family’s total cost of living, with no variation by region. Do you think milk, bread and eggs cost the same at a grocery store in San Francisco and Indianapolis? Neither do I.

The Insight Center has an online Self Sufficiency Calculator for California on its website, which paints a better picture of what income would be required for economic self-sufficiency. For San Francisco County, the annual income is around $48,000 for a family of 3 adults – more than $13,000 more than the family in Newark, NJ. And food costs are estimated at less than 1/5 of monthly income, unlike in the federal guidelines.

According to the US Census Bureau there were 46.2 million Americans living below the federal poverty line in 2010. Imagine how many people live below the much higher standard of true economic self-sufficiency. The Insight Center is working with other states and policy makers to expand the calculator, and to use this more robust view of economic need in planning, particularly for the needs of our aging population.

I recently took a hard look at my personal financial situation, in considering what I need to earn as I complete my MBA and look for work. I hope that I won’t be required to do the sorts of juggling I saw on Need to Know – I want to continue to be able to live in the present and keep my aspirations for the future.

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