In the absence of a universally accepted method of calculating poverty, household expenditure can be used to provide an indication of inequality of wealth and serve as an indicator of poverty. Household expenditure comprises expenditure of private households on goods and services, irrespective of their durability. The portion of household budgets allocated to different types of goods and services provides an indication of the material standard of living of a population. The article discusses different definitions of poverty and compares the state of poverty according to these definitions in selected countries. This is followed by an analysis of South Africa's economic position in the world and a comparison of the household budgets and demographic profile of South African households that fall into different income groups in order to identify the differences between the poorest and the wealthiest households in South Africa. Income inequality in South Africa is further elucidated by means of the Gini coefficient. A comparison is also made between the household budgets of the poorest households with the minimum financial living level requirements in South Africa to maintain their health and have acceptable standards of hygiene and sufficient clothing for their needs.