Breakdown of Average Monthly Household Expenses
Have you wondered what Americans are spending their monthly income on? Or how your income monthly spent sheet measures up? Well, now you can find out.
According to data from the Bureau of Labor Statistics, the average pre-tax household income in the U.S. is $73,573 –– but average household expenditures add up to $60,060. This means that most Americans are spending nearly 82% of their income.
Learn how that number breaks down and how much is allocated to expense categories like rent, healthcare, transportation, childcare, clothing, self-care, even entertainment. Plus, find out how you can save money on some of your big-ticket monthly expenditures.
We know how much the average American earns – and spends – each month. But how do the numbers break down by category? The data shows that $7,729 is spent annually on food ($4,363 on food at home and $3,365 on eating out), while $19,884 is spent annually on housing costs. The latter accounts for 27% of the average American’s income. This number is actually well within the appropriate range for housing costs, as much experts say you should spend no more than 30% of your income this expense.
The Bureau of Labor Statistics data also found that:
- $1,833 was spent annually on clothes and other related services
- $9,576 was spent on transportation, including gas and vehicle purchases
- $4,928 was spent annually on healthcare.
- Entertainment spends averaged out at $3,203 annually
- Education was $1,491
- Personal insurance and pensions cost $6,771
Increases in Spending
One category that saw the biggest jump? Education, ringing in a nearly 12.2% increase from 2016 to 2017, the most recent data available.
This comes as no surprise, as education costs, especially college tuition, has long been a financial strain for most American families.
The numbers can speak to this trend – 44 million Americans owe about $1.5 trillion in student loan debt combined. What’s more, some research estimates that it will take the average college graduate more than 20 years to pay off his or her student loans.
Other major increases included entertainment costs, which shot up 10%, and transportation (more specifically, car purchases), which increased by 11.6%. Spending on food also increased, by 7.3%, while housing expenditures increased by 5.3%. Healthcare costs also saw a 6.9% increase.
Where to Cut
Start off by focusing your budgeting and financial planning efforts on cutting back on education costs. Consider the following:
- A more cost-effective college or university
- Apply to scholarships and grants
- Apply to a no-loan college
For those already in college, get an on-campus job or try living in cheaper, off-campus housing.
Entertainment is another area that saw a large increase in spending, so focusing your budget cuts on this category is a good financial move. Consider cutting cable and relying solely on a streaming service like Netflix, Hulu, or Amazon Prime.
Limit eating out to once a week or month, and start cooking most of your meals at home. You may also consider a membership to a bulk store like Costco or Sam’s Club, which can also save you money. And instead of hitting up weekly happy hours with friends, host a rotating potluck instead. That way, you’ll get to socialize and “eat out,” but you’ll do it on the cheap.
Purchasing a vehicle is also getting a lot more expensive, according to the data. Buying a used car instead of new, driving a more cost-effective car, or even forgoing a car altogether and relying on public transportation are other ways to save. If you do decide that purchasing a car is necessary, work the monthly payment (along with insurance, maintenance, and gas costs). And remember, only purchase a car you can afford.
Other Ways to Save
- Consider eating your meals at home rather than eating out.
- Shop around for affordable healthcare plans, even a high deductible health plan (HDHP) which will have a much lower premium. Just be sure to tuck away some funds in the case of a medical emergency.
- Save money on clothing by buying secondhand or selling unused clothing on resale stores like Tradesy or eBay.
- Cut back on childcare costs by nanny sharing or doing a childcare swap with a friend who also has children.