Balancing Budgets with Assets

How can we help the poor in our communities?

Like you, I’ve attended my fair share of classes and read books about financial management and how to live on a budget. If people could just tell the difference between needs and wants, they advise, then we could balance our budgets. But, for many, this simply doesn’t work; especially for the poor and destitute in our communities. No matter how many wants, and sometimes needs, they eliminate, there isn’t enough money to make ends meet. Some advisors continue to refer to the poor choices these folk make, but is it possible that there is more we need to understand?


Low-income households experience a number of negative impacts, including:

  • Poor Health Outcomes: A number of factors contribute to health outcomes in low-income neighborhoods including limited access to healthcare, higher stress rates and low-income neighborhoods tendency to be a food desert – lacking stores that stock affordable food items.
  • Lower educational achievements: Children of low-income households change schools more frequently and are not able to afford extracurricular activities.
  • Low-income households are typically experiencing higher rates of unemployment or underemployment which is also linked to higher divorce rates, depression, alcohol use and anger.

The Bible is clear that we are to care for the well-being of the poor, Leviticus 25:35 says: “If one of your brethren becomes poor, and falls into poverty among you, then you shall help him…” (NKJV). But sometimes frustration sets in when our ‘help’ does not seem to make a difference. Is there something in our understanding of poverty that makes us miss the mark when we are helping those in need?


In recent years, another factor has come to the forefront of discussions, and that is assets. In 1991, Michael Sherraden’s book Assets and the Poor shone a light on the role that assets play in stabilizing household finances. He asserted that household financial stability is influenced by three variables: income, liabilities, and assets, giving us this simple formula:

Income + AssetsLiabilities

When these three elements are in balance, the household has the means and resources to:

  • meet basic needs
  • absorb financial shocks
  • take advantage of opportunities

Sources of income come from labor wages, assets, and transfers of income—labor being the most important and most liquid. For the most part, income supports the consumption of goods and therefore doesn’t bring long-term stability.

Liabilities refer to outstanding financial obligations for the household including regular obligations such as utilities or child support as well as debt repayments such as mortgage or student loans – “the bills”.

While related to income, assets hold a unique place in a household’s financial balance sheet. Assets represent the stock of wealth in a household. Assets are often the missing part of the equation; wealth in a household is the value of what you own and retain month after month such as a house or savings account.

If these three are in balance, then a household is financially stable, leading Sherraden to state:

You don’t spend your way out of poverty, you have to save your way out.”

However, most poverty policies and services are focused on “income.” Whether government assistance through SNAP or WIC, or nonprofit food banks or clothing banks, help is offered in the form of relief that will balance against monthly purchases. Not only does help not come in the form of assets, but most recipients of help are restricted on how much they can accumulate in assets. Government programs don’t help people who have “large” savings in their bank accounts. The result is not only keeping emergency funds very low, or non-existent, but also instilling the habit of not saving.


Sherraden illustrates the difference by describing income as a spring of water and assets as a pond. The spring forms a stream or river which flows through and off your property. The amount of water available from the stream can fluctuate or even dry up quickly if the spring dries up.

Likewise, income enters the household then leaves as needed items are purchased (food, clothing, shelter). If employment hours are reduced or a job is lost, the spring of funds also dries up, leaving the household vulnerable to financial drought.  

Ponds, on the other hand, are more stable sources of water. If some of the water from the stream can be diverted to form a pond, then a reservoir is created to hold this precious resource for times of drought.

The pond represents assets. The savings account that can be pulled from when the car breaks down or an unexpected medical expense occurs. They sustain our households in case of income loss, emergencies or even to take advantage of opportunities such as education or job changes. Assets may also include things such as property, business ownership or retirement accounts. These are not as easily used in an emergency, but they contribute substantially to the overall wealth of the household.


Assets not only provide financial stability, they also change the way people think about and interact with the world.

Research has uncovered evidence that assets seem to contribute to a number of positive outcomes including:

  • Increased planning for the future.
  • Economic mobility (Butler, Beach and Winfree, 2008).
  • Improved educational outcomes (Zhan and Sherraden, 2009. Elliott and Beverly, 2011).
  • An increased sense of control over one’s life (Skinner, Wellborn, & Conely, 1990 in Beverly, 2010).

In fact, one notable study found that among high school students who intended to pursue a four-year degree, those who had a savings account in their own name were seven times more likely to complete their four-year degree than those lacking accounts (Elliot & Beverly, 2011). The size of the funds did not have to be significant but having control over an asset shifted their mindset to be able to plan for the future and achieve their goal.


Prosperity Now is a nonprofit organization committed to understanding the wealth divide in the United States and finding solutions to narrow that gap. They believe that government poverty measurements are insufficient because they do not include a measurement of household assets. According to their annual Scorecard, a household is “asset poor” if they do not have the ability to cover three months of expenses at the poverty level (including durable assets such as home or business equipment). We might say these households are living paycheck to paycheck.

Using this definition, the Scorecard released in 2022 identifies just over 24% of United States households as asset poor. This is in contrast to a government statistic of 13% being income poor. Of course, if the assets are a car or home, then the household still couldn’t cover emergency expenses, so the accessibility of resources is also important to note.

Liquid Asset Poverty uses the same threshold of being able to cover three months of expenses at the poverty level, but only considering assets that can be accessed quickly, such as savings accounts. Measured in this way, almost 37% of United States households are Liquid Asset Poor.

The inclusion of assets when measuring and addressing household financial stability gives a clearer picture of why some are struggling and how they may be helped.


Supporting low-income households to begin building assets can mean new ministry opportunities and there are also ways to incorporate support into existing activities. Consider some simple ideas like these:

  • Invite a bank or credit union representative to set up a table during your service days to invite attendees to open accounts on the spot. Having a savings account has been shown to increase savings rates for low-income households, however many do not use the banking system.
  • Host a Financial Fitness Fair, inviting a variety of local providers to host a table and share information and services to those who come. Topics could include credit counseling, scholarship options for college, veteran and other government benefits, and seminars on microenterprise, resume writing or first-time home-buying.
  • Sign up with the IRS VITA program to offer free income tax return help, ensuring low-income folk receive all the benefits they are allowed while avoiding tax preparation fees and early return loans.

Many regions have an active Financial Empowerment Coalition where organizations concerned about the financial well-being of our neighbors discuss the issues and develop new strategies for lifting people out of poverty. You can find great ideas and local partners in these forums.

Of course, low-income households are not the only ones who can use help and an understanding of assets. Many households with middle and even upper income levels are living paycheck to paycheck because they are not diverting resources from their income stream into an asset pond.

An understanding of the role assets play can re-shape how we think about financial management and be more effective in how we help our neighbors. We can bless our neighbors by creating pathways to financially stable households. Doing this will allow individuals and families to focus on their personal development and fully realize the gifts God has planted in their lives. 

By Colette Newer


Elliott III, William and Beverly, Sondra (2011). The Role of Savings and Wealth in Reducing “Wilt” between Expectations and College Attendance. [Electronic Version]. Journal of Children & Poverty, 17(2), 165-185.

Butler, Stuart M., Beach, William and Winfree, Paul L.. (2008). Pathways to Economic Mobility: Key Indicators. Economic Mobility Project. The Pew Charitable Trust. Retrieved February 21, 2013 from

Elliott III, William and Beverly, Sondra (2011). The Role of Savings and Wealth in Reducing “Wilt” between Expectations and College Attendance. [Electronic Version]. Journal of Children & Poverty, 17(2), 165-185.

Prosperity Now:

Sherraden, Michael (1991). Assets and the Poor: A New American Welfare Policy. Armonk, New York: M.E. Sharpe Inc.

Zhan, Min and Sherraden, Michael (2009). Assets and Liabilities, Educational Expectations, and Children’s College Degree Attainment. [Electronic Version] Center for Social Development Publication No. 09-63.