How Do Americans Spend Their Money?

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The Bureau of Labor Statistics put out the results of their Consumer Expenditure Survey for 2014 this month.  I thought I’d look at the range of spending in the fourteen categories they use, based on household situation, and how our spending compares.  I decided to look at spending based on age, income, city size, employment, and household composition.

The spending percentages are based on the total spent, including money withheld for pensions, Social Security, and personal insurance, which includes life insurance and disability insurance.  It does not include income taxes.  Our monthly pension after taxes plus our withdrawal from savings is $6,036.22, which I mentioned in yesterday’s post about our budget.  To calculate percentages as the Bureau of Labor Statistics does, I also need to add in our early retirement incentive, which is paid once a year, but comes out to $1,472.08 per month, so our total monthly income after income taxes is $7,508.30.

Personal Insurance (life and disability), Pensions, and Social Security

The average household pays between 1.3% and 16.8% of their after after tax income for this category.  It correlates with income, with the lower number being paid by households with less than $11,165 in income and the higher number paid by households with more than $140,196 in income.  If you are working, you are paying 6.2% of you salary into Social Security, up to the income cap of $118,500.

We currently pay .95 cents a month each for $10,000 life insurance policies.  We also pay the equivalent of $692.95 per month into a retirement account out of our early retirement incentives.  We don’t pay Social Security because our pension and early retirement incentive aren’t earned income.  That means we pay a total of $694.85, which is 9.3% of our total income.  That is below average for our age, income, city size, and household composition, but above average for retirees.  I included a condensed table of BLS data at the end of this post so you can do your own comparisons.  Remember, that this is what people spend, not what they should spend on these categories.

Food

The average household pays between 10.5% and 15.7% of their after tax income for food.  This category inversely correlates with income, with the lower number being paid by households with more than $140,196 in income and the higher number paid by households with less than $11,165 in income.

We combine our food and alcohol budgets, so I will look at these categories combined.

Alcohol

The average household pays between .6% and 1.1% of their after tax income for alcohol.  This category correlates with household composition, with parents with children at home having the lower percentage and couples without children at home having the higher percentage.

Our education budget includes $412 a month for our daughter’s dining plan at college (I didn’t include what we budget for our daughter for the summer because that is savings, rather than an expenditure).  That, on top of our food and alcohol budget of $540 is a total of $952.  That is 12.7% of our income for food and alcohol.  That is a little below the average based on our age, income, city size, employment, and household composition.

Housing

The average household pays between 30.2% and 41.3% of their after tax income for housing.  This correlates with city size and income, with the low number being for people who live in rural areas or towns of less than 2,500 population and the high number being for households that earn less than $11,165 per year.

Our Housing expenses:

$515 daughter’s dorm room

$187 house repairs

$186 property tax

$84 natural gas

$79 homeowners insurance

$56 electricity

$21 garbage

$70 water and sewer (out of our miscellaneous budget)

$209 telephone

$1,407 total

That means we paid 18.7% in housing, which is way below average.  That is because our house is paid off.  I know that the Consumer Price Index includes owner’s equivalent rent, but I did not see that owner’s equivalent rent was included in income and expenditures in the Consumer Expenditures Survey.  If I found out that it is, I will re-calculate.

Clothing

The average household spends between 1.9% and 4.4% of their after tax income on clothing.  This correlates with age and household composition.  People over 75 had the lower rate, while households with one parent and a child over 18 had the higher rate.

Half of our clothing and personal budget is clothing, so it is $200.  That is 2.7% of our after tax income.  Our daughter in college pays for her own clothes.  Our clothing budget is low for our age and income.  However, it is average, based on our city size, which is between 100,000 and 250,000.  It is above the average for retirees.

Transportation

The average household spends between 13.6% and 20.6% of after-tax income on transportation.  This correlates with city size and occupation, with the lower rate for people in cities over five million people, and the higher rate being for operators, fabricators, and laborers.

Our monthly transportation budget is $800 which is 10.7%, which is below all averages.  We drive used cars and pay for them with cash.  We don’t provide our daughter in college a car.

Healthcare

The average household spends between 3.4% and 15.6% of their income for healthcare.  This correlates with age with the lower rate being for people under 25, and the higher rate being for people over 75.

Of our combined budget for entertainment and medical expenses, $250 of it was originally designated as medical.  We pay $160 a month for our daughters health insurance.  We each pay $466.53 a month for individual health policies from our early retirement incentives.  We also pay $40 a month for Weight Watchers Online for each of us.  That is a total of $1,383.06 for healthcare, which is 18.4% of our after-tax income.  This is high compared to all groups.  This is because we pay the entire cost of our medical insurance, although our early retirement incentives help us pay for this.

Entertainment

The average household spends between 4.1% and 6.2% of their after-tax income on entertainment.  This correlates with age and city size, with the lower rate being for people under 25 and the higher rate being for households in rural areas or towns under 2,500 people.

Our entertainment budget is $400 a month.  We also spend $90 a month on cable and internet, $9 on Netflix, $167 on vacation, $35 for my wife’s gym membership, and $40 on Christmas for a total of $741 a month.  That is 9.9% of our after-tax income.  That is higher than all groups.  Part of vacation money would technically be housing and food, but our entertainment budget is still high.

Personal Care Products and Services

The average household spends between .9% and 1.4% of their after-tax income on personal expenses.  This correlates with employment and age, with the lower rate being for construction workers, mechanics, operators, fabricators, and laborers.

Our personal budget is $200 a month, which is 2.7% of our after-tax income.  That is high compared to all groups.  However, we don’t really use our personal budget for personal care products.  We can use our personal money however we choose.  I used to use mine for books and audio-visual courses.  I am currently most likely to use it for beer away from home.  I am currently trying to reduce my personal expenses to use the money to pay off what I owe our savings for my MBA.  We pay for personal care products and services out of our miscellaneous budget.

Reading

The average household spends between .1% and .4% of their after-tax income on reading material.  Many groups have the lower rate.  The higher rate is of people over 75.

We don’t have a budget for reading material.  The closest we have is our newspaper, which is $12 a month (online, with Thursday and Sunday delivery).  That is .16% of our after-tax income.  We will use personal money for books.

Education

The average household spends between .3% and 8.5% of after-tax income on education.  This correlates with age with people over 75 having the lowest rate and people under 25 having the highest rate.

We pay $962.22 a month on educational expenses for our daughter in college.  That is 12.8% of our after-tax income.  That is higher than any group.  Our rate is high because we have a daughter in college now.

Tobacco

The average household spends between .2% and 1.2% of after-tax income on tobacco.  This inversely correlates with income, with the lower rate being for households that earn more than $140,196 a year and the higher rate being for households that earn less than $11,165 a year.

We don’t smoke.  My wife used to smoke, but quit long before we got married.  I used to joke that I had a pack a year habit in undergraduate school, when I would occasionally smoke when I drank.  The last time I smoked, I had heart palpitations the next day.  I haven’t smoked at all since then.

Miscellaneous

The average household spends between .6% and 2% of after-tax income on miscellaneous items.  This correlates with age, with the lower rate being for people under 25 and the higher rate being for people over 75.

Miscellaneous includes safety deposit box rental, checking account fees and other bank service charges, credit card memberships, legal fees, accounting fees, funerals, cemetery lots, union dues, occupational expenses, expenses for other properties, and finance charges other than those for mortgages and vehicles.

Our miscellaneous budget is $148.22, after taking out water and sewer.  That is 2% of our after-tax income.  That is high based on our age, income, city size, occupation, or household composition.  We classify cleaning and laundry supplies in this category, rather than housing or laundry.

Cash Contributions

The average household gives between 1% and 8.1% in cash contributions.  This correlates with age, with the lower rate being people under 25, and the higher rate being people over 75.  Cash contributions includes alimony and child support, as well as charitable donations.

Our charitable budget is $564.  That is 7.5% of our after-tax income.  That is high for our age, income, occupation, household composition, or city size.

It Doesn’t Add Up

Our percentages add up to more than 100%.  That is because our daughter’s expenses for room and board at college are incurred over nine months, but we pay in a lump sum and pay ourselves back over twelve months.

Coming Up

Tomorrow I plan to blog about percentage budgeting and what experts say your percentages should be.

Condensed Table of BLS Consumer Expenditure Survey 2014

Food Alcohol Housing Clothing Transport Health Entertain Personal Reading Education Tobacco Misc Contrib Pers Ins/pension
Age
under 25 13.7 0.9 35.6 4.0 19.2 3.4 4.1 1.0 .1 8.5 .8 .6 1.0 7.1
25-34 13.4 1.1 35.1 3.9 18.0 5.4 4.9 1.1 0.2 2.2 .6 1.2 2.2 11.0
35-44 12.9 0.8 33.9 3.6 17.0 6.5 5.4 1.2 0.1 2.0 .5 1.4 2.5 12.2
45-54 12.2 0.9 31.7 3.4 17.1 6.9 4.9 1.2 0.1 3.5 .6 1.7 3.2 12.8
55-64 12.1 0.8 32.0 3.2 16.6 8.8 5.1 1.2 0.2 1.9 .7 1.4 3.4 12.6
65-74 12.9 0.9 32.4 2.9 17.1 12.2 6.1 1.4 0.3 .7 .6 1.7 4.4 6.5
75+ 11.9 0.8 36.5 1.9 13.9 15.6 4.4 1.4 0.4 .3 .3 2.0 8.1 2.8
Income (2014) Food Alcohol Housing Clothing Transport Health Entertain Personal Reading Education Tobacco Misc Contrib Pers ins/pension
<11,165 15.7 .7 41.3 3.5 15.0 6.6 4.7 1.2 .2 5.2 1.2 1.5 2.0 1.3
to 18,362 15.3 .8 40.1 3.2 15.0 9.0 4.6 1.3 .2 2.7 1.1 1.5 2.3 2.9
to 26,874 14.0 .6 38.4 3.1 17.8 9.5 4.4 1.3 .2 1.1 1.0 1.3 3.4 3.9
to 35,682 14.3 .7 36.3 3.6 16.3 9.8 4.9 1.3 .2 1.4 .9 1.4 3.4 5.5
to 46,615 13.5 .7 34.4 3.4 18.7 8.7 5.2 1.2 .2 1.2 .8 1.6 3.1 7.2
to 59,549 12.9 .8 33.7 3.3 18.6 9.1 5.2 1.2 .2 1.4 .7 1.4 3.1 8.4
to 75.977 13.1 .8 32.8 2.9 18.3 8.7 4.9 1.2 .2 1.3 .7 1.6 3.1 10.4
to 99.623 12.7 .9 32.1 3.2 17.6 8.1 4.9 1.2 .2 2.0 .5 1.4 3.3 11.8
to 140,196 12.1 .9 30.7 3.4 17.5 7.4 5.4 1.2 .2 2.3 .4 1.4 3.4 13.7
140,196+ 10.5 1.1 30.4 3.5 15.1 6.6 5.4 1.2 .2 3.6 .2 1.5 4.1 16.8
City Size Food Alcohol Housing Clothing Transport Health Entertain Personal Reading Education Tobacco Misc Contrib Pers ins/pension
<2,500 13.3 .7 30.2 2.9 18.6 9.4 6.2 1.0 .2 1.3 1.0 1.4 3.6 10.2
2,500-100K 13.4 .9 31.0 3.7 17.9 9.1 5.3 1.2 .2 1.9 .8 1.7 3.5 9.4
100K-250K 12.8 .7 33.0 2.7 19.3 7.9 4.7 1.2 .2 2.1 .7 1.2 2.8 10.8
250K -1M 13.0 .8 32.0 3.4 16.9 8.5 5.2 1.3 .2 2.3 .4 1.6 4.0 10.3
1M-2.5M 12.6 1.0 33.2 3.3 17.2 7.4 5.2 1.2 .2 2.1 .6 1.4 3.5 11.0
2.5M-5M 11.6 1.0 34.8 3.3 16.5 7.0 4.6 1.2 .2 2.7 .4 1.4 3.5 11.9
5M+ 11.9 .9 38.4 3.8 13.6 6.8 4.4 1.3 .1 3.8 .4 1.3 2.2 11.1
Employment Food Alcohol Housing Clothing Transport Health Entertain Personal Reading Education Tobacco Misc. Contrib. Pers ins/pension
Self-Employment 11.0 .8 32.1 3.3 14.8 7.6 5.3 1.0 .2 3.0 .5 1.7 2.9 15.7
Mgrs and Profs 11.8 1.0 32.2 3.3 16.5 6.7 5.0 1.2 .2 3.1 .3 1.5 3.2 13.9
Tech, sales, & clerical 13.2 .9 33.1 3.5 18.0 7.0 5.1 1.3 .2 1.7 .7 1.1 2.8 11.6
Services 12.5 .7 34.4 3.7 19.4 6.4 4.4 1.2 .1 2.3 .8 1.2 2.7 10.2
Const and mechanics 13.1 1.0 32.9 3.7 19.8 6.2 4.4 .9 .1 .9 1.0 1.1 3.3 11.6
Operators, fabricators, & laborers 13.0 .8 32.3 3.2 20.6 6.4 5.3 .9 .1 1.3 1.2 1.3 2.8 10.8
Retired 12.6 .8 34.9 2.5 15.9 14.1 5.5 1.4 .3 .5 .5 1.9 5.8 3.3
All Others 15.1 .7 35.1 3.9 15.6 7.7 5.3 1.1 .1 3.5 1.1 1.6 2.4 6.8
Household Composition Food Alcohol Housing Clothing Transport Health Entertain Personal Reading Education Tobacco Misc. Contrib. Pers. Ins/pension
Married Couple Only 11.8 1.1 30.5 3.0 17.5 10.3 5.3 1.3 .3 1.7 .5 1.3 4.4 11.1
Married Couple Oldest Child <6 12.2 .6 36.8 3.9 17.0 6.8 4.4 1.0 .1 1.5 .3 1.2 2.3 11.9
Married Couple Oldest Child 6-17 13.2 .6 32.1 4.0 16.2 7.0 6.0 1.2 .2 2.8 .3 1.5 2.7 12.3
Married Couple Oldest Child 18+ 12.6 .7 28.8 3.1 19.3 8.1 4.7 1.1 .2 4.0 .6 1.3 2.5 13.1
Other Married Couple Consumer Units 14.5 .6 30.5 4.0 18.6 7.8 4.7 1.2 .1 1.7 .8 1.3 2.5 11.6
One Parent with Child <18 14.8 .6 38.0 4.4 17.0 5.1 4.4 1.4 .2 2.2 .6 1.5 2.4 7.5
Single and Other Consumer Units 12.4 1.0 36.7 3.0 15.9 7.3 4.9 1.2 .2 2.3 .9 1.7 3.6 8.9
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