Do You Know the Poverty Line?
Updated: Sep 16, 2021
The Canadian government does annual studies on the poverty levels in Canada, but these values can vary province to province, and city to city. Understandably, the amount of income you require to stay above the poverty lines will depend wholey on the expense levels in your specific locale. Though, as a point of reference, you can find many ballpark numbers if you do a couple internet searches.
In my province, British Columbia, the poverty level in 2019 for a family of four was ~$40,000. This is the level of income it takes to maintain the basic necessities of life including shelter, food, clothing, medical expenses, and transportation. ~$21,000 was the poverty level in BC in 2019 for a single person. In Canada, you are considered to be living at the poverty level if your income is at 60% of the average income, which was $35,000 for a single person in BC in 2019. Shelter is considered the highest cost in BC at 30% (or more) of your income. In some major centers, like Vancouver, it can be significantly more. Having these breakdowns of the numbers can give you insight into base costs and your ability to save against them.
In Canada, in general, in urban areas with populations of 500,000 or more, the LICO (low income cut-off) respresents the average poverty line. In 2020, for a single person it’s ~$26k, for two people it’s ~$33k, for 3 people it’s ~$41k, and for four people it’s ~$49k. These numbers can also tell you if you are living in areas that are costing you more than the average costs for housing, food, clothing, medical, and transportation.
These are average figures, and as you move out from large urban centers into smaller rural centers with smaller populations the poverty levels tend to go down in line with the lower costs associated with these smaller areas. The lower the poverty line and the higher your income is above it, the more potential you have to save. If you are a single person making the average CAD income of $35,000 annually and are very frugal, you can see, the savings potential will be $35k (average income for single person) minus $26k (LICO for single person), or ~$9000/year. This is considering you don’t spend a dime on unnecessary expenses like vacations, gifts, or those impulse purchases.
I think it’s important to check in on the poverty level numbers once in awhile, and by no means am I suggesting that everyone should try to live at the poverty lines. However, they should tell you how you are doing in general. If you are making $80k net per year but only saving $10k per year, when there is an opportunity to save $54k ($80k minus the $26k LICO for a single person), you might be asking yourself where it’s all going, and if you need to change or adjust anything? It can also be a motivator to improve your earning power through upgrading or progressing your career. This increases your ability to earn more money towards your financial goals. Perhaps living in a high cost city is dragging you down financially, and a move to a smaller center will help? Periodic reviews to analyze any expense creep and your opportunities are good habits.
I’ve always told the kids life is a helluva lot easier with the right, loving, compatible, supportive, lifetime partner. If you have two incomes the power of two kicks in, At the average of $36k per year, you will be bringing in $72k per year combined. Considering the poverty line for 2 people is $33k, you should theoretically be able to save more than one years’ salary, or at minimum have the opportunity to. This is providing you are not servicing huge debt or spending money irrationally, of course.
Everyone’s situation is different, but having a general idea of the poverty level is a good check against your own expenses.