in honor of Blog Action Day, i’d like to reflect a bit on the manifestation of poverty and debt in the developed world, such as in the united states.

definition of poverty

from wikipedia, i learned:

Poverty (also called penury) is deprivation of common necessities that determine the quality of life, including food, clothing, shelter and safe drinking water, and may also include the deprivation of opportunities to learn, to obtain better employment to escape poverty, and/or to enjoy the respect of fellow citizens.

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Poverty may affect individuals or groups, and is not confined to the developing nations. Poverty in developed countries is manifest in a set of social problems including homelessness and the persistence of "ghetto" housing clusters.

so it is possible, then, for even those of us in developed countries such as ourselves, to experience poverty.

americans in debt, and then poverty

the other week the SO told me a story about someone he met recently -- we'll call him Fred.  Fred lived with his wife, three children, and 2 chihuahuas.  in their car.

but Fred was employed full-time, and had been for quite a while.

apparently he was in a lot of debt, with creditors having taken over his paychecks.  a couple in their thirties, the wife was not working.  the family was unable to pay the rent for a while.

i found Fred's situation shocking.

these days, i believe that a home -- whether it be an apartment or a house -- is considered a common necessity.  living in one's car can be considered 'homelessness'.  it seems then, that Fred was experiencing some level of 'poverty.'

here are some interesting tidbits i found from an article, consumer debt and poverty:

"In a new working paper, two economists from Monmouth University in New Jersey argue that poverty levels are actually higher than government statistics indicate.

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So, thanks to these rising debt levels over the past decade, increasingly more income must be used to make interest payments. But since incomes have largely stagnated over the past 20 to 30 years, that means there’s less money available to spend on other things. The end result is a decline in living standards.

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The number of these “debt poor” has been on the rise since the early 1980’s, growing from 0.5 percent of the population to 1.4 percent in 2006. During the same period, the government’s poverty rate fell from 15 percent to 12.3 percent.”

might we be in poverty too?

as we know, many americans are in debt.  if we dipped into our IRAs or 401ks or more of our savings, some of us might be able to pay off all of our debts, and still stay in the positive net worth.
but what about if you are of negative net worth?

let’s imagine: if you had to give up all of your assets in order to pay off some creditors and ended up in the negative, unless you are only upside down by a thousand dollars or so, you might not be able to make subsequent rent/mortgage payments along with other obligations.  then what happens?  what if you get kicked out of house and home, just like Fred?  you’d then be homeless also, and the definition of ‘poverty’ for the developed world could apply to you.

yikes!  then being in severe negative net worth (huge debt) can lead to poverty?

this is a scary thought.

causes of poverty

also from wikipedia, there are many causes, but unemployment has been cited as one of the economic reasons:

Unemployed individuals are unable to earn money to meet financial obligations. Failure to pay mortgage payments or to pay rent may lead to homelessness through foreclosure or eviction.

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Because unemployment insurance in the U.S. typically does not replace 50% of the income one received on the job (and one cannot receive it forever), the unemployed often end up tapping welfare programs such as Food Stamps or accumulating debt.

during these times of recession and high debt, this is disconcerting.  admittedly, i am becoming more appreciative of the full-time job that i do have, despite recent discontent.

preventing poverty for ourselves

how might we help ourselves from falling into poverty, so that we don’t end up having to give up proper shelter ?  or at least, minimize the possibility ?

perhaps it is imperative that we achieve control of each of our own financial situations, and put everything we have into becoming debt-free as soon as possible.  whatever it takes now, to minimize possible problematic situations as described above in the future.

perhaps consider,

• attack your debt purposefully
• plan for the unexpected
• be aware of your employment
• live within your means

what do you think?