How Americans Spend Their Money
Data indicates that the average American spent $8,169 on food and $20,679 on housing in 2019. Housing accounts for about 25% of the average American’s income. This figure is within the appropriate range for housing costs, as many say you should not spend more than 30% of your income on this expense.
Data from the Bureau of Labor Statistics also found that:
– the average person spends $1,833 annually on clothing and related services.
– $10,742 is spent on transportation, including fuel and vehicle purchases.
– $5,193 is spent annually on healthcare.
– the average spending on entertainment is $3,050 annually.
– education costs amount to $1,443 per year.
– personal insurance and pensions cost $7,165.
Income and Spending Trends
From 2017 to 2018, the Bureau of Labor Statistics reported an increase in average annual income and spending, although income increased at a greater rate. This trend continued from 2018 to 2019. The median pre-tax income rose by 5.4% annually, while spending increased by only 3%.
The most notable changes in spending from 2017 and 2018 to 2018 and 2019 were increases in new vehicle purchases (10.5%) and healthcare (4.5%), which were somewhat offset by decreases in entertainment (-4.2%) and miscellaneous spending (-6.8%). Education costs rose slightly (2.6%) after the decline in the previous year.
Note: According to previous years, Americans spend a significant portion of their budgets on housing, transportation, food, personal insurance, and healthcare. These expenses together account for 62.7% of the average household income.
Assessing Your Own Spending
These averages are not precise targets for you, but it may be helpful to have a benchmark to evaluate your current spending. If you see a specific category where you are spending significantly more than the average, that may be a good place to start for deeper analysis.
Here are some examples of adjustments you might make in some common areas of overspending:
– Education: Consider enrolling in a more cost-effective college or university; apply for grants and scholarships or even a college with no loans.
– Entertainment: While many Americans spent less here in 2018 and 2019, it is still typically one of the easiest areas to make changes. Think about cutting the cable and relying solely on a streaming service like Netflix, Hulu, or Amazon Prime (or cutting one or two streaming services if you have many subscriptions).
– Food: Cut down on dining out to once a week or a month, and start cooking most of your meals at home. You might also consider joining a wholesale store like Costco or Sam’s Club, which can save you money. Instead of those weekly happy hours with friends, try hosting a rotating potluck gathering instead. This way, you can socialize and “dine out,” but at a lower cost.
– Transportation: Vehicle purchases increased significantly in 2018 and 2019, according to the data, but if you still need a car, consider buying a used vehicle instead of a new one, or driving a more cost-efficient vehicle, or even giving up the car altogether and relying on public transportation. If you decide that buying a new car is essential, try to get a monthly payment that fits your budget (including insurance, maintenance, and fuel costs).
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Healthcare: Look for affordable health care plans, such as a high-deductible health plan (HDHP), which will have much lower premiums. Just make sure to set aside some money in case of a medical emergency.
– Clothing: Save money on clothes by buying second-hand clothing or selling unused clothes at resale shops and websites like Tradesy or eBay.
– Childcare: Reduce childcare costs by sharing a nanny with a friend who also has kids or by swapping childcare with a friend who has children.
Conclusion
If you feel like you’re spending more each month without knowing why, these averages may be a useful starting point to see where you stand and what might be going wrong. These figures change every year as the consumer price index shifts and consumer behaviors change, so get used to checking regularly so you can adjust your own budget.
Frequently Asked Questions (FAQs)
How much does it cost to raise a child?
According to a report from the U.S. Department of Agriculture in 2015, the cost to raise a child for a middle-income family in the United States will be approximately $284,570 over 18 years after adjusting for inflation. This cost includes housing, clothing, food, education, childcare, transportation, personal care, and miscellaneous items. After adjusting for 2021, the cost will be about $318,500.
How can I better track my spending?
The first step in effectively tracking your spending is to create a budget based on your current spending habits. This will allow you to compare how you are actually spending with how you want to be spending and identify any undiscovered financial leaks. If you only use one method for transactions, everything will be lumped together, making it easy to track how much you spend and where.
Source: U.S. Bureau of Labor Statistics, U.S. Department of Agriculture
Source: https://www.thebalancemoney.com/breakdown-of-average-monthly-household-expenses-4687519
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