Each year, The Bureau of Labor Statistics releases the annual consumer expenditure survey (CES). Breaking down the average American monthly expenses, this comprehensive report explains where households spend their money and plays a critical role in assessing where they prioritize their spending.
Seeing how your spending compares to the average household can be a quick reminder of where you might be overspending. I’ve never operated under a budget, and it would be hypocritical for me to say that everyone should. I do believe that it is vital for everyone to understand where their money comes from and where it goes. Keep in mind that the average household may not represent where you want to be.
Savings around the world are in a dire state. Households are more likely to have no savings than they are to have one thousand dollars saved.
From <https://www.inimitablepath.com/yotta-savings/>
This year’s report clocks in at 76 pages and shows a slight decline in household expenditures from 2019. Let’s see what the study can tell us about where the typical household spends their money and how this compares to the common expert recommendations.
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Table of Contents
Reporting Bias in the Consumer Expenditure Survey:
As with any study, the CES is as accurate as those who take part. Many sources cite the report as including 132k responders, but additional investigation points to a much more limited response pool. The survey appears to consist of around 7k phone interviews and 14k diary responses. These last numbers appear to better align with the raw data for 2020. Cross-referencing the report with additional public studies exposes no real reporting bias concerns tied to education, race, or home/vehicle ownership.
It is possible that if we were to break each section down by additional factors, such as race or education, some bias currently hidden beneath the surface might come to light. Still, for what it is, the report appears to represent a fair baseline of the typical American household
A note on comparing Your Expenses to the Average
The average reporting household consists of 2.5 individuals. Since I am single and most of my expenses are my own, I will be dividing the reported average spending by 2.5 whenever compared to my spending.
This is not a perfect solution (some expenses such as housing and taxes may not grow 1:1 for each additional member of the HH while some can be more extreme when your household includes kids or elderly family members), but provides a reasonable frame of reference.
How Much Does the Average American Family Spend in a Year?
In 2020, the average American household spent a total of $61,334.40 as the unprecedented spread of Coronavirus-19 curtailed entire sectors of economic activity. While overall spending fell 2.7 percent from 2019 (note inflation in 2020 feel between 1.25% and 1.4%), many of the savings were tied to this uncertainty and may end up being transitory.
The greatest year-over-year savings stemmed from transportation, apparel & services, and food. Lower spending on transportation and apparel costs seems logical and closely correlated to a year confined in part to our homes and remote work. On the surface, lower food expenses seem counterintuitive in an environment massively disruptive to the supply chain. Companies have deferred passing many of these costs on to the consumer, but those costs are starting to hit everyone. The Wall Street Journal reports that:
General Mills Inc. said it is raising prices across nearly all its grocery categories.
From <https://www.wsj.com/articles/general-mills-warns-of-inflation-readies-for-shifting-consumer-behavior-11625066446>
Major suppliers, including General Mills, have upped their prices in recent months and have warned consumers to expect it to continue.
How Much Does the Average Family Spend on Housing?
$21,409 annually $1,784.08 Monthly
The most burdensome expense American households face continues to be ownership, maintenance, and insurance of their home. Whether paying down a mortgage, maintaining a home they own free and clear, or paying on a rental, housing eats up an average of $21,409 annually. Home furnishings, babysitting, and in-home care for loved ones add upon this expense and combine to make our house our home.
With the majority of housings costs recurring year after year, a home above your means can cripple your financial goals. Finding a home that falls within your budget lays a solid foundation for your path to financial success. Location is critical, with an extra fifteen miles cutting the cost of housing in some high-demand areas.
What Experts Suggest You Spend on Housing
A very simplified baseline is that the average household should spend no more than thirty percent of their gross income on housing. The average household appears to be living within their means as they are spending an average of twenty-five percent of the average reported gross income of $84,352. Hopefully, those households are investing some of the savings.
What I Spend on Housing:
$11,520 annually. $960 a month
Housing is my largest expense consisting mainly of rent towards a 905 sq foot condo. We will explore my reasons for renting and forgoing home equity in a future article.
I invest the majority of what I save from my lower housing costs in my brokerage account.
How Much Does the Average Family Spend on Transportation and Maintenance
$9,826 Annually $818.83 a Month
Despite a year of lockdowns, isolation, and remote work, transportation checks in as the number two expense of 2020. Costs decreased by eight and a half percent year over year, as commutes and travel were drastically cut down for millions across the nation.
If you live in a city built for public transportation or a rare city where the roads and layout are pedestrian-focused, take advantage. For many, their job, city, or familial responsibilities make a car a necessity.
If your life requires a car, strongly consider buying one used. Drive it so long as it is safe and supports the needs of your family.
How Much I Spent on Transportation and Maintenance in 2020
$5,400 annually $475 a Month
In a typical year, I will plan one larger week-long adventure. I will also make shorter weekend trips about once a quarter.
I am fortunate enough to live close to both work and family. Like many, I worked remotely for much of 2020. I have returned to the office, and expenses will grow, but I will often walk to work in place of driving.
How to Save Money Transportation and Maintenance
Gas– For those who don’t mind claiming an offer before filling up at the pump GetUpside can save you up to 25 cents a gallon. Sign up for a Getupside account, and use code 4DR4J to receive an extra 15 cents a gallon on your first fill up!
Check with your local grocery store or warehouse such as Costco and see if they offer discounted gas for members/shoppers. Earning discounts for buying your groceries can save you quite a bit, though be sure to compare prices with nearby stations.
How Much Does the Average Family Spend on Food
$7,316 annually $609.66 monthly
The third pillar expense American households face continues to be feeding themselves and their families. The average household spent $7,316 to ensure they met the nutritional needs of their family. Of this, just under $5000 was spent on food prepared at home, with the remaining $2100 spent on food at work, take out, and dining at restaurants.
Dining out can provide a valuable break in the routine and an opportunity to relax with friends or loved ones. It can also take a toll on our nutritional health, as well as our wallets, with the average meal out costing nearly three times as much as a meal prepared at home. Learning to cook the foods that make you happy can be one of the best investments you can make for yourself and your family.
Indoor dining restrictions and health concerns related to public gatherings caused a transition away from dining out to meals at home. While this continues to have a devastating impact on a core sector of our economy and the livelihoods of many valued workers, this shift contributed to a ten percent reduction in food expenses from 2019.
How Much I Spent on Food
$2,400 annually $200 monthly
Food makes up my second largest monthly expense at two hundred dollars a month. This total is comprised of weekly grocery trips, restaurants, and protein supplements. When measured against the national average of $243.88 per individual, I am able to save an additional $44 a month.
I don’t eat out often. When I do, I will usually split any meal in half. The portion size/nutritional value of meals in restaurants allow me to get two meals out of most nights out. If we are visiting a national chain, I will often leverage the Raise marketplace to find a discounted gift card for my visit.
How to Save Money on Food
Dining out: If you visit popular chain restaurants a discounted gift card can often shave up to ten percent off of your meal. Click here to get started and use code KCRAWFORD7018 during sign up to receive $5 off of your first purchase.
Grocery Bill: If you don’t mind clipping offers and scanning your receipt, the Ibotta app can earn you additional cashback on your grocery trips. I typically receive about 1% of my total back through Ibotta. Those who purchase alcohol are likely to save more.
Download the Ibotta app from the Google Play or Apple App store or sign up online. Use code rynynee to get a $10 bonus once you scan your first receipt!
How Much Does the Average Family Spend on Healthcare
$5,177 annually $431 monthly
Healthcare costs families over 5000 dollars annually, with the majority of this money going towards employer-subsidized health insurance. The rest goes towards prescription and over-the-counter drugs, hospital stays, and in-home medical supplies. Healthcare is expensive, and increases in the cost of premiums continue to outpace salary growth YoY.
While there are no federal tax penalties for not having health insurance, being uninsured carries enormous risks to you and your family. Depending on the state you live in, there may be penalties for being uninsured.
The rising costs of prescription drugs and the staggering out-of-pocket cost for uninsured medical care can quickly accumulate into a debt you cannot easily repay. Premiums are expensive, and the sign-up process can be confusing, but if you can afford health insurance, please make sure you and your family are insured.
If you and your family are younger and blessed with good health, consider a higher deductible plan. These plans will lower your premiums and likely allow you to fund a Health Savings Account (HSA). An HSA can be a great tax-advantaged way to grow your wealth and ensure your medical needs are covered later in life.
How Much Does the Average Family Spend on Entertainment
$2,912 annually $243 monthly
From TV to video games, out-of-town trips to the pets we welcome into our family, entertainment keeps us sane and can provide some of the most memorable experiences of our lives. A critical piece in everyone’s life, entertainment expenses cost an average family just under $3000 a year.
2020 brought a seismic shift to sources of entertainment as the spread of the coronavirus caused most to find sources of entertainment within their home. Spending on popular entertainment options such as amusement parks, concerts, and movie theaters, turned to subscription services, video games, and in-home movie rentals. Entertainment is a core need; when we no longer find it in one place, we will find it in another.
Cable and Satellite subscriptions may be losing ground to streaming services, but they still make up a healthy chunk of the entertainment budget of over half of American households.
Going Forward
The next year should bring interesting shifts is spending, as life slowly finds a new normal. Supply chain issues will hopefully ease, but the cost of bringing them into the current age will be felt for years. Labor shortages should shrink but compensations for those jobs should rise as the past year allowed many to revalue their time.
How does your spending compare to the average household? What changes has the past two years bring for your family? What are you expectations heading into the new year?