Published: 2025-12-15
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Incorrect: 7
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The estimated poverty line for an average American household is closer to $140,000 per year, based on current spending on essentials.
"Instead, it would be closer to $140,000."
Incorrect
Applying the original poverty line methodology but with today's spending ratios for essentials would result in a poverty line closer to $140,000, not the official $31,000.
"And what that has done is it has created the illusion that poverty has barely grown. But Michael Green says if we apply the same original method and the same logic except we use the share of income Americans spend on essentials today, we would not get a poverty line of $31,000. Instead, it would be closer to $140,000."
Incorrect
The current cost of housing and childcare requires a second income, making it difficult for many households to participate in the modern economy.
"The simple reality is in a world in which in order to afford to rent or buy a home, you need a second income, child care becomes a very real component of it. We're actually seeing more and more households who are incapable of clearing that threshold for participation in the modern economy."
Correct
In 1963, the poverty line was approximately $3,000 per year.
"So, if you made less than $3,000 in 1963, that meant you were at the poverty line. And that's what archives from the '60s show the poverty line actually was."
Correct
If food constitutes 10% of a budget, and the multiplier is 10 (meaning the total budget is 10 times the food cost), then an income of $100,000 would be needed to be above the poverty line.
"So, for example, let's say you spend $10,000 a year on food. And food happens to be 10% of your yearly budget. So 10% compared to everything else you spend money on. So 10 multiplied by 10 gets us to 100. Your full budget. Make sense? That's why the multiplier is 10. Okay? So $10,000 multiplied by 10 gets us to $100,000. That's what this person has to make more than to be considered above the poverty line according to Michael Green."
Incorrect
Using rent as the essential item and applying the original multiplier of three, the poverty line would be $72,000 per year.
"So, let's say you pay the national average of $2,000 a month for your rent. That's $24,000 a year. Multiplied by three, that would get us $72,000 a year to be above the poverty line."
Incorrect
The modern-day poverty line for a family of four, accounting for essential costs like housing, childcare, transportation, and food, plus taxes, is estimated to be around $136,500 gross income in 2024.
"And once you add up conservative national average numbers for those categories, the way that Michael Green does this, you do not get $75,000. you end up needing a net income of around $118,000 just to cover the basics for a family of four. After you add in roughly $18.5,000 in federal, state, and FICA taxes, that brings you to a required gross income of around $1365,000 a year. That is the modern-day version of Molly Orchansky's too little threshold, the minimum needed to keep a family of four afloat in 2024."
Incorrect
The US median household income is about $80,000, but the cost of childcare for a two-earner household can be as high as $32,000 annually.
"The household median in the US today is about $80,000 a year. That's with two earners. But the moment both parents have to go to work, they trigger the $32,000 child care bill because somebody has to watch the kids."
Correct
The $140,000 poverty line calculation is based solely on modest housing, basic healthcare, and minimal childcare for two-earner households, excluding any luxuries.
"The calculation includes three things. Modest housing, basic health care, and bare minimum child care if both parents work. That's it. There's no luxuries. There's no extras."
Incorrect
In the 1960s, childcare was typically provided by a stay-at-home parent, whereas today, it can cost $10,000 to $15,000 annually.
"And child care back then was covered by a parent that stayed at home because they did not need a second income. Today, that role costs anywhere between $10 to $15,000 a year conservatively."
Correct
Even in the cheapest states, the housing-to-income ratio is historically high due to a national shortage of affordable housing.
"Even the cheapest states in the country now have a housing to income ratio that is historically very high. There's a national shortage of affordable housing."
Correct
Healthcare costs now consume 15-20% of income due to premiums, deductibles, and out-of-pocket expenses, and it is a mandatory expense.
"Today, between premiums and deductibles and out-of-pocket costs, it can take up to 15 to 20% of your income. And it's not an optional thing. You have to have healthcare."
Incorrect
Despite slowing inflation, current economic metrics like low unemployment and falling inflation do not reflect the actual cost of living in 2025, as housing and other essential costs remain high.
"But none of these metrics describe the real cost of life in 2025. Like inflation, for example, yes, it is slowing down, but that doesn't make housing cheaper. It doesn't erase the price increases over the last few years."
Correct
Low unemployment rates do not guarantee financial security if incomes have not kept pace with the rising costs of housing, healthcare, and education, leading to people working multiple jobs and still struggling.
"And when their incomes have not kept up with the cost of housing or healthcare or college, then full employment, as economists like to describe it, doesn't translate to feeling like financial security. It just means people are working sometimes multiple jobs even and still struggling."
Correct
Wealth accumulation is driven by time and compounding, not just income. Consistent investing from a younger age can lead to greater wealth than a higher income with no investments.
"Wealth does not come from income alone. Wealth comes from time. It comes from compounding. And that has nothing to do with the poverty line. You could have a household making 40, 50, $60,000 a year, and if they invest consistently from age 25 to 65, they will end up with more wealth than a household making 150,000 that never invests at all."
Correct
The outdated poverty formula fails to account for factors like discipline, financial literacy, and consistent long-term investing, which are crucial for building wealth.
"The old poverty formula can't measure that. It can't measure discipline. It can't measure financial literacy. It cannot measure what happens when someone decides to invest consistently for decades and decades."
Pending
Financial success is determined by habits rather than external factors or income level. Developing the right habits can lead to outperforming those with higher incomes through better saving, investing, and compounding.
"Your financial future is not decided by any of this. It's decided by your habits. If you can build the right habits today, you can outperform people who make more than you. You can outsave them. You can out invest them. You can out compound them."
Correct