What Are Americans Really Spending Their Money On?

According to a recent Bureau of Labor Statistics news release, American consumers are spending more across several expense categories. Overall, spending increased from $50,631 per household to $51,408 per household unit over the 12-month period ending June, 2012 to the period ending June, 2013, which represents a 1.5 percent increase.

Source: Bureau of Labor Statistics http://www.bls.gov/news.release/pdf/cesmy.pdf

Source: Bureau of Labor Statistics

The BLS chart above displays how spending varied across each earnings level. Only the third 20th percentile and higher percentiles earned more than they spent. Within the lowest 20th percentile, average annual expenses are more than double income before taxes. The income estimate for consumer units (families, individuals who live alone, or roommates who share expenses, etc.) from the lowest 20th percentile appears shockingly low. However, when you consider the roughly 5 million consumer units with incomes of $192 and the nearly 5.3 million units with incomes of $7,946, the number no longer appears so surprising.

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Spending increased across the board for all income groups. Aside from taxes, where the average household spent $4,653, where did all of this money go?

Basic Needs

A large portion of our spending went to housing, food, clothing, healthcare, and transportation. We spent an average of $17,041 (around $1,400 per month) on housing and utilities, and this represents an increase of .6 percent from the previous year. The lower income groups spent a higher percentage of their income on housing than the did the higher income groups, with the lowest 20th percentile spending 39.6 percent, compared to 30.6 for the highest 20th percentile.

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On grocery and food away from home, we spent an average of $6,598 (around $550 per month), which was a 1 percent increase from the last year. There were a few trends within this category. For instance, many of us spent more of our food budget on beef than on pork or poultry. The lowest income group, those who earned under $5,000, spent more on food away from home than those in the next two highest income groups. Overall, we spent around 40 percent of our food budget on food away from home.

We spent less on clothing and apparel than in the previous year, with each unit averaging $1,706 (about $143 per month.) Women ages 16 and older had the highest clothing budget, far exceeding men ages 16 and older and boys and girls between the ages of 2 and 5.

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One of the highest increases in spending was in the transportation category. With average spending of $8,999, we spent 5.8 percent more than the during year prior. While gasoline and oil prices (average spending of $2,706) did not see any increase from the prior year, spending on new and used cars increased by 6.4 and 19.7 percent, respectively.

Average spending on healthcare was around $3,500. The largest portion of our medical cost was health insurance, where we spent an average of $2,085. The remainder went to items such as medications, where we spent $502; medical services, where we spent around $780; and medical supplies, where spending averaged $135.

Entertainment and Personal Items

We spent an average of $2,586 (around$216 per month) on entertainment, which was a .5 percent increase from the past year. Our largest category of entertainment spending was on our electronics, where we spent nearly 40 percent of our entertainment budget. Another large chunk of this (around 25 percent of spending) money went to pets, toys, hobbies, and playground equipment. We also spent a significant portion on fees and admissions (about 23 percent of our entertainment budget went to this area.)

The average household spent around $635 on personal care products and supplies. On average, we spent more on alcoholic beverages (an average of $449) and tobacco products and smoking supplies (average spending of $335) than we spent on reading (average spending $105.)

Cash Contributions and Pensions

Cash contributions increased by nearly 7 percent from the last year. During the most recent year, the average household gave around $1,950 in cash contributions for alimony, child support, support to college students, or cash to charities or religious organizations. The amount of cash contributions varied dramatically across certain income levels, with the lower levels having an average of around $500 in cash contributions, and the highest income level exceeding $3,500 in such contributions.

Our spending on personal insurance and pensions remained about the same as the past year, with the average household spending $5,573 (this accounts for the $334 we spent on life and other personal insurance, and the $5,293 we spent on pensions and Social Security.) The amount of pension spending also varied drastically from the lowest income level, who spent an average of $204, to the highest income level, who spent an average of $12,285.

Overall

With the highest earners having around the same average food budget ($10,041) as the lowest 20th percentile’s entire income before taxes ($10,174), and many income groups spending more than they earn, it’s intriguing to see where all of our money goes. The BLS spending surveys make it clear that our spending is by no means perfect, textbook, or exactly experts say it should be. By getting an idea of the areas where we may need improvement, this may help us budget better. But, we’ll have to wait and see on the next BLS survey.

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