In 2005, I watched an Australian film called Three Dollars. It horrified me.

It’s not a horror film. I just found it confronting, depressing and plausible.

The main character, Eddie, is a successful chemical engineer living in a beautiful home in Melbourne with his lovely wife and daughter… until he gets the chop from his job.

In a matter of weeks, Eddie’s life unravels. He cannot find a job but cannot bring himself to tell the family. He can’t afford his car or the mortgage. Eventually, even paying for food becomes a challenge.

It still affects me, nearly two decades later. It brings into focus that we tend to live life blissfully unaware of how close we probably are to financial ruin.

Side note: Being a recently graduated chemical engineer probably didn’t help. It was the first time I’d seen a chemical engineer as the main character in a film, and what happens? He ends up eating from a bin. Wonderful.

Every year the Australian Council of Social Services (ACOSS) releases a report on poverty in this country. Every year, when the report is released, I am reminded of that film. I wonder, how many of the millions living on or below the poverty line in Australia are there because of pure bad luck and timing like Eddie?

The Poverty in Australia report remains a depressing read, though there has been gradual improvement over time.

When I first read it in 2014, one in every seven Australians was living below the poverty line (2.5 million people back then).

In 2023’s report, it’s one in eight, so the ratio is better. But with our current population, it’s more in total: 3,319,000 people. 761,000 of them are children.

Given these numbers are based on FY20 data, they don’t reflect the full COVID experience and the high inflation that has marked 2023. They’re as close as we can get with the data we’ve got.

What is the Australian poverty line?

The ACOSS report uses 50% of median income:

• after tax.

• including any social security payments (i.e. from Centrelink).

• excluding housing costs: mortgage, rent, rates.

This obviously distorts the impact as people with cheaper accommodation, for example that own their own home or who share-house, will have lower housing costs and therefore lower total costs.

Ignoring that, the report offers four poverty lines by family type. I’ve included the 2014 and 2023 report numbers for four of the six categories:

• Single adult:

  • 2014: $400.30 per week ($20.8k per year).

  • 2023: $489 per week ($25.4k per year).

• Couple, no kids:

  • 2014: $600.40 per week ($31.2k per year).

  • 2023: $734 per week ($38.2k per year).

• Single parent, two kids:

  • 2014: $640.40 per week ($33.3k per year).

  • 2023: $783 per week ($40.7k per year).

• Couple, two kids:

  • 2014: $840.60 per week ($43.7k per year).

  • 2023: $1,027 per week ($53.4k per year).

You don’t have to be a genius to work out that $1,027 per week is not much to keep two adults and two children clothed, fed, healthy, and transported wherever they need to be for school and work.

There’s potential for a lot of baked-beans-on-toast for dinner there, if not skipping meals entirely.

But what does poverty really mean?

Quoting from the 2014 report:

‘Poverty is defined as the pronounced deprivation of well-being,
or the inability to satisfy one’s basic needs.’
 – Dr David Morawetz, Director, Social Justice Fund

One person in every eight is unable to satisfy basic needs – food, shelter, warmth, medical treatment – in Australia?

Please say it ain’t so…

Further:

 ‘Poverty is not just about income, it is about the lack of opportunities
and social participation that most of us take for granted.’
– Major Kelvin Alley, National Secretariat, The Salvation Army

It means that in the next year, a household living in poverty will likely experience at least three of the following ‘financial stress’ measures quoted in the 2014 report:

• Cannot afford to heat their home

• Cannot pay gas/electricity/telephone bill on time

• Cannot pay registration/insurance on time

• Will buy second hand clothes most of the time (cannot afford new clothes)

• Will go without meals

• Will not spend time on leisure or hobby activities

• Cannot afford a special meal once a week

• Cannot afford a night out once a fortnight

• Cannot afford to have friends or family over for a meal once a month

• Cannot afford a holiday away from home for at least one week a year

• Will pawn or sell something

• Will seek financial help from friends/family

• Will seek assistance from welfare/community organisations

Sounds downright horrid, yet over three million people in this country live under these conditions.

Who is most vulnerable?

This is where the ovarian lottery can really suck.

There are a number of factors that make a person more likely to live below the poverty line in Australia. Some are completely beyond your control. For example, in 2019-20 (from the 2023 report):

• Being female (13.9% of all women vs. 12.9% of all men)

• Being young (16.6% of people under 15 years old live in poverty)

• Being oldand renting (49.7% of people over 65 years old who rent)

• Being born in a country where English is not the primary language (18% of all people meeting this criteria)

• Having a disability (17% of all people with disabilities)

There are a number of additional higher-risk categories.

While not 100% in your control, these categories are not determined at birth and therefore can be influenced. They include:

• Being single under 65 (25.6% of singles under 65 years old)

• Family type (34% of adults and children in single-parent households)

• Being unemployed (62% of all unemployed)

• Relying on social security (i.e. Centrelink) for main source of income (35.1% of all people receiving welfare)

None of these categories surprised me.

If I was going to come up with a list of demographics that might be more common among those living below the poverty line, it probably would have included at least half of these.

Notably, Aboriginal and Torres Strait Islander (ATSI) demographics weren’t collected in the FY20 data, so that category isn’t represented in the data. ACOSS references a separate report that estimates 31% of all ATSI people live on or below the poverty line.

But NOT being in these categories does not preclude you from ever being in poverty. Among the 3.3 million Australians living below the poverty line, there are probably Australian-born white males who live with their wife and children and are employed.

So, no one has any excuse to think it can’t happen to them.

What can you do about it?

If you’re financially secure, poverty can seem a bit academic.

Perhaps you only notice it when you’re walking past people begging on the streets or sleeping rough. Maybe it’s only when the train you catch to work is passing through one of the suburbs of lower socio-economic status. It could be something you only see in the news, or in articles like this.

You might not even understand why it’s doing you harm too. So let’s go there for a minute:

• The less equal a society, the less happy everyone in that society. Yes, even at the very top of the socio-economic ladder, you are not experiencing your maximum possible happiness. Lifting people out of poverty will even make Gina Rinehart happier apparently.

• Poverty costs the nation more. People living in poverty experience higher rates of health problems, for example. A sensible capitalist would realise that keeping people out of poverty means less taxes having to be spent on dealing with the inevitable downsides.

After several years in personal finance, I’d say your most powerful tools are:

• How and where you spend your money. Every dollar is a vote of the future you want, so spend with organisations that further your aims.

• How and where you invest your money. If every dollar spent is a vote, every dollar invested in an exponential vote because of compounding.

• Your vote in elections. Take note of party policies on welfare rates, which are disgracefully low in Australia.

For some people, their toolkit includes their voice. Those with clout, an online following and/or powerful connections can advocate for fixing this appalling state of affairs.

Note that these fixes can be many and varied. As I wrote for Women’s Agenda in 2020, I would like to see a trial of universal basic income (UBI). I reckon it should take place in Western Australia, given we’re got an enormous royalties-driven budget surplus.

What is clear is that financially secure people should not be telling those living in poverty that they just need to work harder or learn to budget.

You cannot budget your way out of poverty.

Foisting responsibility back on them is like tying a 50kg barbell plate to their waist, throwing them in the deep end and screaming at them to swim harder to save themselves while you stand on the edge of the pool, safe and dry.

Further, I’d encourage us all to have compassion for people operating in those circumstances.

Financial stress lowers IQ by 13 points. The flow-on effect of this cognitive capacity decline is worse decision making in all areas of life. So, when you feel poor, you’ll make worse choices than you would otherwise.

And yes, I do mean you. It affects all of us.

The upshot: reform and policy change can lift our nation’s poorest out of poverty. There are plenty of reasons to do it, and models to achieve it.

Unfortunately, such solutions won’t make a jot of difference to the people living like this right now.

Tomorrow morning, they’ll still be living in poverty.

Sadly too, systemic change may never happen - at least not of a magnitude to make a significant dent in those stats. Governments are nothing if not vote-hungry. They’re torn between doing the objectively right thing and doing what’s popular on many issues. This included.

Where health and well-being are at risk, individuals have to do everything they can to help themselves while we wait for the people in charge to do the right thing.

Here’s my suggestions:

If you are living near, on or below the poverty line

My #1 recommendation to anyone in this circumstance is: talk to a financial counsellor. Now.

Financial counsellors are the unsung heroes of Australia. There are only 750 of them in 2023, though more to come hopefully. The federal government has finally implemented the Sylvan Report recommendations for industry funding - hooray!

You can speak to a financial counsellor on the phone via National Debt Helpline, or find one local to you for a face-to-face appointment on the same page.

Why is financial counselling my #1 recommendation?

Because you’re already at risk of that IQ-damaging financial stress I mentioned above. You will likely be operating sub-par versus what’s normal for you.

Having an unbiased, compassionate and qualified third party help you find relief and next steps is invaluable. Financial counsellors cannot sell you anything, so there is no potential for conflict of interest from commissions.

They’re also up to date with what’s available to assist you, and can help you find the quickest route to support.

You’ve probably already done everything else I can suggest.

Here’s the list in case it helps. Please remember that some trade-offs, such as tax implications or added childcare cost to cover working hours, might not make them good ideas in your personal circumstances:

Boost income:

• Ask your workplace for a raise. That could be by giving you more shifts, an higher hourly rate or a benefit/allowance that reduces your spend elsewhere.

• Add another job. For example, a seasonable job you can do when you’re not working in your main role.

• Sell some stuff. If there are things you’re not using and won’t need again, pop them on a marketplace like Facebook or Gumtree and get a few bucks for them.

• Rent out a room. If you have a spare room, can you take on a boarder to supplement your housing costs?

• Superannuation hardship access. It’s hard to get, but if you’re in a really tenuous situation and have some superannuation, you may be able to access up to $10k.

Cut spending:

• Cut as much non-essential spending as you can without putting a major dent in mental health.

• Contact services providers (banks, electricity, gas, insurance) and ask for financial hardship options to spread or defer payments.

• Check your entitlements. Are you getting the rebates you qualify for, like the child care subsidy? You can also talk to the Financial Information Service at Centrelink for broader help.

For those not already living in poverty

if you’re not already living below the poverty line… try to avoid it!

How? My suggestions aren’t necessarily easy, but they are straightforward:

1. Save, save, save

Having a buffer of savings in cash is not just a good idea, it’s downright essential.

Being able to lay your hands on some cash to cover a tight period – between jobs, recovering from a marriage break-up, healing from illness or injury – will mean you don’t have to live without the basics for at least a period of time. It also helps you avoid a bad debt spiral.

How much to save? That’s up to you.

I don’t feel comfortable with less than one year’s living costs in the bank. If that’s simply impossible for you, aim for one month of living costs at first and build from there.

The best time to save is of course when you have more money than you need. Make hay while the sun shines and all that. So don’t wait till disaster strikes to start hoarding cash. Do it NOW!

2. Seek employment

I’ll preface this with: work doesn’t guarantee you’ll avoid poverty. You can still slave away for hours to earn a pittance in some menial jobs. But still, it’s a start.

Almost any job is better than a gap on your resume if you’re struggling to make ends meet. Having a job shows you’re reliable, that you can contribute and that you want to work.

Even if it’s not your dream job, don’t fall into the trap of ‘I’ll just have six months on the dole for a break, then I’ll get the job of my dreams.’

The downward spiral of social security dependency is quick and relentless. It takes more effort to get out of that particular spiral than it did to get into it. Not to mention the negative effects dependency can have on your self-esteem and mental well-being.

3. Share housing

Living alone is expensive.

Do you have any friends or family who would be willing to share a house with you?

Sacrificing some privacy and reduced decision-making power over what’s streaming on the lounge TV may be worth it to spend less on your living costs.

4. Plan your spending. In detail.

Why is there so much month left
at the end of the money?
 – John Barrymore

If you’re a bit short on cash, now is the time to avoid any frivolous or unnecessary spending.

It may be heart-wrenching to say ‘no’ to the kids every time they ask for an ice-cream. But, if getting that ice-cream means you can’t afford veggies, it may not be a good choice every week (once in a while? Sure. But not all the time).

Once you’ve listed all the items you’re planning to spend money on, start working out which items you can live without and whether there are any you can get cheaper.

Common places to find cheaper substitutes or cut out:

• Energy providers

• Insurance

• Food shopping (Aldi and some farmers markets still trump Coles and Woolies on the ‘basket’ test)

• Phone and internet

• Banks (fees and interest rates on debt)

• Transport (car rego + fuel + insurance vs public transport and/or a bike)

• Streaming subscriptions

Money School resources to help people struggling financially

One of the biggest hurdles that people living in poverty face is the need for short-term debt.

Credit cards, Buy Now Pay Later, pay advance, pay-day loans… they all put pressure on Future You to cut spending to afford the things you bought today.

When you have to use debt for things like food and rent, that’s when you need a financial counsellor, stat.

If you’re using it for discretionary spending - things that aren’t essential to sustain life - it might be time to stop using it and start getting out of debt.

We offer a free course on how to get out of debt. We favour the avalanche method, but you can use the snowball if you prefer.

Find our free debt course on Money School’s Searchie course platform.

If you want to learn how to budget, we have a Budgeting 101 course, designed for teens but equally beneficial for older folks. It’s on our Searchie platform too.

And for everyone, no matter what your financial situation, we’ve got a risk management workbook for you to download. It helps you get those money worries out of your head. You can download your fillable PDF for free and without subscribing.

One final note for parents:

The easiest way for your children to learn about money is for you not to have any.
– Katharine Whitehorn

If you can find a way to help your kids learn from your situation without exposing them to an overdose of worry or stress, they will learn an invaluable lesson about to how manage money in tight spots.

Remember: kids just need to feel safe and loved. Plenty of those who grew up in poverty have thrived as adults thanks to the lessons they’ve learned from that period. Yours can too.

Thanks for reading! This article was originally published on Money School’s blog on 22 October, 2014. It has been revised and updated for publication here.

About Money School

If you’re new here, welcome! Delighted to have you 😁

This is the blog for Money School, an Australian financial education company.

The main site is at https://www.moneyschool.org.au, but I keep our articles over here on beehiiv.

Everything on the main site and this blog is for educational purposes only. I’m not a financial adviser, nor do I play one on Netflix. I aim to help you learn about money so you can ‘choose your own adventure’.

Money School was co-founded in 2010 by me (Lacey Filipich) and my mother, Fran White. Money School offers workshops, online courses and have an international award-winning book, published with Penguin Life in 2020.

I’m also a regular media commentator on all things personal finance. If you’ve got 16 minutes to spare, you might like to check out my TEDx talk (over 1m views!) on financial independence and mini-retirements.