See How the Average American Really Spends Their Paycheck...How Do You Compare?
Truth be told, the average American isn't all that different from his neighbors. We go to work, get paid, and spend our money on the things we need to survive. The US Department of Labor did a survey of the lives of mature adult workers. The average participant was age 49 and 66% of the people surveyed owned their homes outright. The average income was around $62,000 per year. So how did they spend their money? You may be surprised to find that the average American spends about 26.5% of his income on housing. It really sounds like a small number, in comparison to total income, but compared to other expenditures it's a huge chunk of annual spending. We spend about 12.3% of our income on transportation, but that number represents the actual transportation method itself -- a car payment, public transportation costs, or even plane tickets. Gasoline was rated separately, making up an additional 3.4%. Insurance is a huge expense and has been a major topic of conversation. The average American uses about 8% of his income on personal insurance needs, and that's before healthcare. In this instance we're talking about life insurance, pensions, and planning for the future. Healthcare costs, including health insurance and out-of-pocket expenses make up 5% of spending in the average household -- and those are in homes with moderately healthy people. Significant changes can and will occur in households where there are serious or debilitating illnesses requiring ongoing treatment, like cancer. Food is essential to life, so it's not surprising to find the average American spends about 9.8% of his income on eating. Believe it or not, about 40% of that money is spent eating outside the home while the rest is spent on groceries to go inside the home. Imagine how much money we could save if we ate at home just 10-20% more often! Clothing, shoes, and accessories are all grouped together, coming in at 2.7% while a whopping 4% of the average American's salary is spent on entertainment -- going to movies or concerts and participating in other activities. The rest of his income is spent in miscellaneous items, "wants," education, alcohol, and even savings. That is, of course, in the average $62,000/yr household, which is also fortunate to have very little debt. This segment of the population spends less than it earns annually. Unfortunately, the picture for lower income households who struggle, the average income can be as low as $17,500 per year while spending maxes out at around $24,800. These households spend more than they earn and are often struggling to find assistance and to pay off the debt they're creating just to get by. Lower income houses may spend less on food but more on healthcare, partially because of unbalanced diets. They may spend more out-of-pocket on healthcare because they struggle to pay or qualify for insurance. Each scenario will be slightly different. In the wealthiest households, the average income averages around $247,000 annually. Somehow, these households only spend about 49% of their income on housing, food, healthcare, and all of the other expenses we discussed. Take a look at your own expenditures and make a comparison. How do you rank compared to the average American in terms of the amount you spend on each of the items in the initial list? You may find you spend significantly less on food and a lot more on healthcare. Do you spend a significantly higher amount on clothing because you have expensive tastes? Perhaps you drive a fancier car but pass on other miscellaneous expenses to make up for your ride. As consumers, it's important for us to understand exactly where our money is going on a regular basis. If you find you're starting to struggle, take a few minutes to review your budget and look to see if there are any small changes you can make to your spending habits. If you're spending a higher-than-average amount on entertainment but have holes in your shoes and eat noodles every night, you may need to reassess your priorities.
Truth be told, the average American isn't all that different from his neighbors. We go to work, get paid, and spend our money on the things we need to survive. The US Department of Labor did a survey of the lives of mature adult workers. The average participant was age 49 and 66% of the people surveyed owned their homes outright. The average income was around $62,000 per year. So how did they spend their money? You may be surprised to find that the average American spends about 26.5% of his income on housing. It really sounds like a small number, in comparison to total income, but compared to other expenditures it's a huge chunk of annual spending. We spend about 12.3% of our income on transportation, but that number represents the actual transportation method itself -- a car payment, public transportation costs, or even plane tickets. Gasoline was rated separately, making up an additional 3.4%. Insurance is a huge expense and has been a major topic of conversation. The average American uses about 8% of his income on personal insurance needs, and that's before healthcare. In this instance we're talking about life insurance, pensions, and planning for the future. Healthcare costs, including health insurance and out-of-pocket expenses make up 5% of spending in the average household -- and those are in homes with moderately healthy people. Significant changes can and will occur in households where there are serious or debilitating illnesses requiring ongoing treatment, like cancer. Food is essential to life, so it's not surprising to find the average American spends about 9.8% of his income on eating. Believe it or not, about 40% of that money is spent eating outside the home while the rest is spent on groceries to go inside the home. Imagine how much money we could save if we ate at home just 10-20% more often! Clothing, shoes, and accessories are all grouped together, coming in at 2.7% while a whopping 4% of the average American's salary is spent on entertainment -- going to movies or concerts and participating in other activities. The rest of his income is spent in miscellaneous items, "wants," education, alcohol, and even savings. That is, of course, in the average $62,000/yr household, which is also fortunate to have very little debt. This segment of the population spends less than it earns annually. Unfortunately, the picture for lower income households who struggle, the average income can be as low as $17,500 per year while spending maxes out at around $24,800. These households spend more than they earn and are often struggling to find assistance and to pay off the debt they're creating just to get by. Lower income houses may spend less on food but more on healthcare, partially because of unbalanced diets. They may spend more out-of-pocket on healthcare because they struggle to pay or qualify for insurance. Each scenario will be slightly different. In the wealthiest households, the average income averages around $247,000 annually. Somehow, these households only spend about 49% of their income on housing, food, healthcare, and all of the other expenses we discussed. Take a look at your own expenditures and make a comparison. How do you rank compared to the average American in terms of the amount you spend on each of the items in the initial list? You may find you spend significantly less on food and a lot more on healthcare. Do you spend a significantly higher amount on clothing because you have expensive tastes? Perhaps you drive a fancier car but pass on other miscellaneous expenses to make up for your ride. As consumers, it's important for us to understand exactly where our money is going on a regular basis. If you find you're starting to struggle, take a few minutes to review your budget and look to see if there are any small changes you can make to your spending habits. If you're spending a higher-than-average amount on entertainment but have holes in your shoes and eat noodles every night, you may need to reassess your priorities.