That depends (is how I play it). In my campaign I rather use the descriptions. If the player feels the description for wretched is correct for him - fine. But he won't get into inns, nicer part of town etc. On the other end - living expensive, do get you into the better places.
The expenses and lifestyles described in this chapter assume that you are spending your time between adventures in town, availing yourself of whatever services you can afford — paying for food and shelter, paying townspeople to sharpen your sword and repair your armor, and so on. Some characters, though, might prefer to spend their time away from civilization, sustaining themselves in the wild by hunting, foraging, and repairing their own gear.
Maintaining this kind of lifestyle doesn't require you to spend any coin, but it is time-consuming. If you spend your time between adventures practicing a profession as described in chapter 8, you can eke out the equivalent of a poor lifestyle. Proficiency in the Survival skill lets you live at the equivalent of a comfortable lifestyle.
Chapter 8 provides that "Practicing a Profession" normally provides you a Modest lifestyle without paying 1 gp/day.
So:
if you're proficient in Survival, and spend downtime "practicing a profession", then living in the woods is comfortable (2 gp/day equivalent)
If you're hanging out in town, anyone can "practice a profession" to maintain a Modest lifestyle (1 gp/day)
if you're not proficient in Survival, and/or you don't use your downtime for that purpose, then living in the woods is Poor (2 sp/day equivalent)
if you're adventuring and not using downtime, then lifestyle is not relevant
Would living in the woods count as squalid or wretched?
Depends. Living in a tree trunk hollow, on the ground, or in the branches? Wretched. Leaky shack, tent, or other semi-permanent structure in the woods? Squalid. Small cottage with a little garden? Poor (comfortably poor or even close to modest).
Would living in the woods count as squalid or wretched?
It could, but not necessarily. I imagine some rangers and druids live quite well in the forest.
"Not all those who wander are lost"
That depends (is how I play it). In my campaign I rather use the descriptions. If the player feels the description for wretched is correct for him - fine. But he won't get into inns, nicer part of town etc. On the other end - living expensive, do get you into the better places.
Ludo ergo sum!
Chapter 8: Adventuring - Lifestyle Expenses provides that there is a "cost" associated with lifestyles, which is laid out in Chapter 5: Equipment - Lifestyle Expenses. In that section, there is a sidebar:
Chapter 8 provides that "Practicing a Profession" normally provides you a Modest lifestyle without paying 1 gp/day.
So:
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I'm going to make this way harder than it needs to be.
when an enemy is in front of a character. Would the character have advantage or disadvantage when trying to shoot the enemy with a bow
Chapter 9: Combat - Making an Attack - Ranged Attacks in Close Combat has your answer. If you are within 5 feet of enemy, and if that enemy can see you, and if that enemy is not incapacitated, then your ranged attacks (against that enemy, or any other enemy too) have disadvantage while you stay close to them.
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I'm going to make this way harder than it needs to be.
Depends. Living in a tree trunk hollow, on the ground, or in the branches? Wretched. Leaky shack, tent, or other semi-permanent structure in the woods? Squalid. Small cottage with a little garden? Poor (comfortably poor or even close to modest).