Every year the Bureau of Labor Statistics (BLS) releases their survey of US average household expenditures. If you have never glanced at these, prepare yourself for one scary statistical roadtrip.
We’re going to look over some of the information and see what we can learn about the average US household. It should be fun to compare yourself with the government provided stats and see how you are compare to the average household. I’ll also throw in some other scary fun facts from Google.
First of all, lets start with what most inquiring minds want to know…
how much does the average household make?
The answer is $66,877 pre-tax.
Not bad, this puts you in solid middle class territory for a good percentage of the country. High cost of living areas like New York, Washington D.C. or San Francisco would consider this to be on the low-end of middle class though. Bear in mind this is pre-tax.
Now moving to the next and more important number…
how much does the average household spend?
It’s not what you make, it’s what you spend
Hmmm…this figure is a little too close for comfort to the first number for us. Recall that the first number was pre-tax. So out of that has to come Social Security and Medicare payroll taxes, Federal income taxes, and state and/or local taxes unless you live in a state with no income tax. (We never have, but it sounds awesome!)
Social Security and Medicare alone account for a 7.7% tax on income. This would mean $5150 coming right off the top. You haven’t even started on the other taxes and you are down to about an $8,200 difference.
$66.877 pre-tax income minus $5150 minus $53,495 spending=about $8,200. That’s a little too close to the precipice for us.
Breaking down the average spending…
The largest expenditure by far is $17,798 for housing. This equals about 27 percent of pre-tax income.
- The average new construction home has grown to over 2500 square feet.
- In 1960, it was about 1200 square feet.
- The average mortgage balance is $165.892
- 25% of homes with 2 car garages don’t have room to park cars in them
- 32% only have room for 1 car
- The average household has more TV’s than people
Next up is transportation at $9,073
This number is actually worse because it only counts cash outlays and gas is temporarily too cheap. It’s not counting the savage beat down depreciation gives your net worth if you own a car newer than 4 years old.
- The average new car price is $33,543!
- 85% of new cars are financed, including leases
- The average new car loan is $29,551..gulp!
- The average new car payment is $483/mo…double gulp!!
- The average loan duration is 67 months, and 28% of loans are 73 to 84 months
Food-$6,759 which equals $563/mo
$2,787 of the above is eating out, or $232/mo which I’m calling BS on. We know plenty of people who blow past that figure because we used to do it ourselves all the time. We tripled that number before we got it under control.
A few drinks/snacks a week, a quick drive-thru for lunch, a couple of stops every week on the way home from work because you just don’t feel like cooking, not even counting weekend eating out…I just don’t see how that can be so low.
I have a strong suspicion households are underreporting this expense. My evidence includes the drive thrus wrapped around the building at lunchtime of most fast food places, the long lines at Dunkin’ Donuts in the morning, the casual dining places on the weekends where you have to wait for a table.
Before we wrote down exactly what we were spending, we would have guessed a little over $200/mo also. As if!
Apparel clocks in at $1,786 or $149/mo
- It’s estimated you wear 20% of your clothes 80% of the time. Why are you buying new clothes? Best argument ever for cleaning your closets out. At the very least, organize it, then you can shop your closet instead of hitting Kohl’s.
Personal insurance and pensions-$5,726. This is an unusual grouping to lump together. All we’ll say is less stuff equals less insurance needed, and pensions (retirement?) is very, very weak even if the whole amount was retirement savings.
Saving 50% of after-tax income should be your goal. Think you can’t do it? Read this.
Healthcare $4,290 Wow, this seems pretty high to us. I guess we were blessed to work at employers that had really low-cost health insurance. We both had high deductible HSA insurance plans when working. Mine was $36/month, Mrs. Frugalbeachs was about $22/mo.
Of course we pay more since retiring, $311/mo thru the healthcare exchange for 3 people.
Other fun scary facts
- The average person will pay $280,000 in interest over their lifetime! (AARP estimates it as high as $600,000-YIKES!)
- The average cell phone bill is about $73/mo. iPhone users pay the highest bills, with the majority over $100/mo due to higher data usage
- The average consumer spends $830 on Christmas shopping
- According to American Express, the average person spends about $1,150 on vacations ($4,600 for a family of four)
- The average savings rate is 4.4%, which is perfectly fine if your uncle is Bill Gates
Comparing your spending habits to the average household can yield some helpful insights. It looks like the average household pretty much spends every penny they make. Who really wants to be just average? Take pride if you are already below average on certain categories, adjust your spending habits if you happen to be high on others.
Once you are better than average on the majority of the categories, congratulate yourself! You have set the groundwork to rise way above the average American consumer mindset.
What are your strategies for being a smarter manager of your finances?