Could Your Family Live on $500 a Month?
Lately I’ve been giving a lot of thought to how people view money differently. Some view it based on their net worth, others on their salary, and others view it based on comparing themselves to their peers. Traditionally, we focus on the United States when thinking about our own financial situation, but since the U.S. only accounts for 4% of the world’s population, I thought we would take a look at the rest of the globe for a complete “financial story”.
First, let’s look at some benchmarks.
1. In 2020, the median household income in the U.S. is $43,585. As a reminder, this means that half of the U.S. households earn more than this, and half earn less. Median is typically a more accurate measurement than using average.
2. Based on our population, this equates to a median per-capita income of $15,480.
3. The poverty level in the U.S. for an individual is $12,760, and $26,200 for a household
When we look at how we compare to the world, the U.S. is ranked 6th in median household income. But what does that really mean? Well, it’s all relative. Compared to a household in Luxembourg, we may feel poor since they earn roughly 20% more per year. On the other hand, we may feel rich compared to a household in Japan, since we earn about 22% more than they do.
Here are the ranks for some other developed countries you may find interesting:
#2 Norway: $51,489
#4 Australia: $46,555
#15 Germany: $33,333
#18 United Kingdom: $31,617
#31 Italy: $20,085
As I explored the numbers even further, I noticed a few more things.
· Several countries have much larger “households” than the U.S. These countries tend to be in the Middle East, Asia, South America and Africa. That means they need to stretch their household income farther than smaller families. Many times, there are elderly individuals and children in these households that are unable to contribute financially, so this puts even more of a burden on the income generating individuals.
· While we consider $26,200 to be the household poverty level in the U.S., it’s actually higher than the median income in all but 21 countries in the world!
· Although there are people in the United States that are struggling financially, overall, Americans are very fortunate to have the opportunity to generate the money we need.
As I went further down the list, the median household income for some additional countries is hard to comprehend.
#46 Mexico: $11,680
#78 Dominican Republic: $6,302
#89 Guatemala: $4,516
#104 Egypt: $3,111
#122 Kenya: $1,870
After reading these statistics, I actually stopped for a minute to double check other sources to confirm they were accurate. Per year? YES. Per household, not individual? Correct. Then I thought about what this represented. It’s MEDIAN HOUSEHOLD ANNUAL INCOME. That means half the households in these countries actually earn LESS than this amount!
In an attempt to wrap my head around this, I tried to think of some examples to put it into perspective.
· A family in Indonesia would have to earn 12X more than they do today just to hit the poverty level in the U.S.
· If a family in the Philippines was the equivalent to what a millionaire is in the U.S., they would still only be earning $55,000 per year.
· The Median family in the U.S. earns more in 1 month ($3,632) than an Indian family earns in an entire year!
· When we go out for a “night on the town”, and spend $200, that is equivalent to 1 month’s income for a family in Tanzania.
· The newest iPhone you just bought is equivalent to an entire year’s income for a family in Rwanda.
· The median family in Togo, a country in West Africa with a population the size of Virginia, survives on $600 per year!
Let some of these statements sink in for a minute. What emotions are you feeling right now?
· The first thing I felt was extreme gratitude for my family and our lifestyle. It made me feel so humble and so fortunate that we have the opportunity to control our own financial situation.
· I’ll be honest, the next emotion I felt was some guilt. My family, along with many of you reading this, would be considered multi-millionaires if we lived in another country. I don’t really know how to process that except to say again, how fortunate and blessed many of us are to live in the United States.
· Finally, I couldn’t help but think about the standard of living that exists in many other countries. That is a situation I cannot relate to, and I would imagine it’s safe to assume most Americans can’t relate either. What I do know is that I, and many of you, have been provided with one of the greatest gifts in life, opportunity.
So what is the point of this article? Well, I think it shows that the way a person views money depends a lot on both internal and external factors. Environment, upbringing, mindset, geography, and more can all affect someone’s views about money. I believe these statistics can also serve as a humbling reminder that if we are able, we owe it to ourselves and others, to increase our financial literacy. And then even more importantly, turn that knowledge into action. Many of us have the skills and abilities to create wealth, and then use that wealth to do amazing things. To take care of our family. Take care of others. And to make a meaningful, and lasting impact on the world. Don’t let this opportunity slip away.
Hard Work and Opportunity are a lethal combination!