Recently, I came across this wonderful graphic over at The Credit Blog that spells out how the average American spends their paycheck:
I actually pointed to a similar graphic a few years ago, but this is a revised one with updated figures.
Let’s pull out the data, shall we?
An average “consumer unit” in this picture consists of 2.5 people, of which 1.3 are wage earners. The average income before taxes is $62,481 and the average annual expenditures is $48,109. Breaking down that $48,109:
Housing – $16,557 (26.5%)
includes rented dwellings – $2,900 (4.6%)
includes mortgage interest and charges – $3,351 (5.4%)
Transportation – $7,677 (12.3%)
includes gasoline and motor oil – $2,132 (3.4%)
Food – $6,129 (9.8%)
includes food at home – $3,624 (5.8%)
includes food away from home – $2,505 (4.1%)
Personal Insurance and Pensions – $5,373 (8.6%)
Healthcare – $3,157 (5.1%)
Entertainment – $2,504 (4.0%)
Apparel and services – $1,700 (2.7%)
Everything else – $5,012 (8.0%)
Here are a few things that stood out to me from those numbers, just at a quick glance.
First, in an average American family budget, 5.4% of the income is spent on mortgage interest. That’s money handed directly to the banks.
Second, in that same budget, 12.3% is spent on transportation, including 3.4% on gasoline and motor oil.
Third, in that same budget, 4.1% is spent on food eaten outside the home.
These three line items together add up to over $10,000 a year. They’re also ones that are easily trimmed down.
If you’re buying more house than you can afford, rent for a while longer and sock away the excess until you reach a point where you’re spending less on mortgage interest than you are on rent.
If you live in a city, use public transportation. Use a bike to get around your local area if that’s physically or logistically possible.
Eat out less. Trim one meal away from the ones you eat out each week and eat something very simple at home instead.
These are very straightforward steps that line up directly with the budget of the average American. There’s nothing weird or unusual about this budget – it’s truly the average budget, and these are normal ways to trim back from that budget.
Everyone’s budget is going to look a little different than this one. My home is paid off, so my sliver for mortgage interest is gone and my overall housing chunk is smaller, too. I work from home, so our fuel costs are lower. I have three children at home, so some other pieces are a bit larger, such as the overall food portion and the “food at home” section in particular.
Overall, though, it’s not that far off of our annual family budget. It likely mirrors your own in some way, too.
A picture like this is valuable because we can pick it apart. We can look at a budget like this and simultaneously see our own budget in it and, at the same time, criticize the choices this average American family is making.
After that, it’s pretty easy to take that finger we’re pointing at that average American family and point it directly back at ourselves, because we’re often going to be guilty of the “flaws” we find in that overall budget.
What do you see in that average American’s budget that they could be changing? Is that a change you can make in your own life?