On page 52 of the August 2007 issue of Wired, a one-page article entitled “The Price of Technolust” appears. It displays a nifty graphic showing average consumer spending broken down by percentage and displayed with different colors in a grid of 10 by 10 squares, with each small square representing 1% of the annual income of an average American. Here are the percentages:
Transportation – 18%
Shelter – 16%
Food – 13%
Apparel – 4%
Health Insurance – 3%
Entertainment – 3%
Prescription Drugs – 1%
Tech Products – 5%
Other – 37% (this includes personal care products, education, taxes, and gifts)
Note that this is merely spending – it doesn’t include any savings or investments.
Now, even more interesting, the magazine goes on to break down that bolded 5% of “tech product” spending above in great detail, dividing just that slice of the pie into 1,000 equal pieces (0.1%). It reveals several interesting things about our spending.
First of all, the two largest blocks are residential phone service (26%) and cellular phone service (20.7%). Many people have both of these, yet the services often overlap. For us, I know, we have both, but only because the residential phone service is bundled in with our internet and cable and the three are cheaper as a package than internet and cable would be by themselves. If that were not the case, we would likely ditch our residential phone service.
Second, the five largest technology expenditures are cellular and landline phone service, cable and satellite television, internet access, computers, and televisions. Those five pieces alone eat up almost 90% of the technology spending of an average person.
What does that mean? If the average American is looking to trim the fat, the best technology places to look are at phone service, internet and computer use, and television usage. If you can significantly trim one of those three areas, you’re doing good. Look at trimming any of them back to the basics, or perhaps put off that new television or computer purchase for another year.
Of course, if you step back even further, the places to look for making large cuts are in transportation, shelter, and food. Since it’s difficult to reduce transportation costs in a rural area (buy a more efficient car basically is the best option), I often look at options to reduce shelter and food costs.
It’s amazing how often little personal finance lessons show up in the most interesting of places.