Updated on 08.27.14

How the Average American Family Spends Their Income – And How to Trim It

Trent Hamm

I’ve often wondered how the typical household budget is spent. Several times in 2009, I came across this thoroughly interesting infographic, originally from VisualEconomics.com:

The link now goes to an updated video of how the average American spends their paycheck.

The picture depicts how the average American family spends their income based on Department of Labor data. For those without the visuals, I’ll break the info on the chart down into a list for you.

Household Budget Breakdown

Housing – shelter – $10,023
Pensions, Social Security – $5,027
Housing – utilities, fuels, public services – $3,477
Food – food at home – $3,465
Transportation – vehicle purchases – $3,244
Transportation – other expenses and transportation – $3,130
Healthcare – $2,853
Entertainment – $2,698
Food – food away from home – $2,668
Transportation – gasoline, motor oil – $2,384
Apparel and Services – $1,881
Cash Contributions (optional retirement and cash savings) – $1,821
Housing – household furnishings, equipment – $1,797
Education – $945
Housing – household operations – $984
Miscellaneous – $808
Housing – housekeeping supplies – $639
Alcoholic Beverages – $457
Personal Care – $588
Life, other personal insurance – $309
Reading – $118

For many people, this describes some form of their annual budget. Yes, some numbers are higher for some of us and other numbers are lower, but this really is a rough approximation of how we all spend our money.

How Is This Useful?
If we step back for a moment and look at this “budget,” it’s clear that there are ways in each category to reduce our spending.

This list is composed of twenty one entries, so each day for the next three weeks, I’ll tackle a single entry on this list, looking at both small and big ways to reduce spending in that area. For each one, I have at least ten ways to trim spending in that area – some big, some small, but all capable of improving your financial state.

Some of the tips will be useful to you – some of them won’t be and will apply better to someone else. The key to making your story successful is to look for the tips within each category that work for you and apply them in your own life and not worry about the rest.

In the comments of each one, I’m charging you with picking one or two of the tips that you think are the most useful for the average American. Once the series is finished, I’ll pick the three most popular tips in each category and make one “mega-post” detailing all of the popular items. It’ll be something of an ultimate “trim your budget” guide.

Trim Your Budget Series: How To Save Money for the Average American Family

Alcoholic Beverages
Buying a Car
Eating Out
Food at Home
Gas and Oil
Home Energy Costs
Household Furnishings
Household Operations
Housekeeping Supplies
Housing and Shelter
Life Insurance
Transportation Expenses
Pension and Social Security
Personal Care and Hygiene

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  1. Molly says:

    My family is SPOT ON for annual food at home consumption!

    (I think that’s really cool.) I’m looking forward to this series.

  2. Kim says:

    $118 for reading describes one visit to a bookstore for me. :)

    Take all of the alcohol budget (we don’t drink) and most of the education budget and maybe you have the reading budget for the year.

    Books are a big part of our lives even though we’ve had to cut back.

  3. Kirk Bond says:

    Uh, where are taxes? Federal, state, local, etc…?

  4. Geoff says:

    Looking forward to this series Trent, good stuff.

  5. Brandon says:

    Excellent start to the new year. I wish that there was a % savings on there. I wonder if the Taxes + money going to savings would be more or less than the gap between pretax earnings and expenditures (does the avg american have debt?)

  6. asithi says:

    If you do the math, the income for this “average family” is approximately $50,000 per year. Housing is the number one spending category at 20%. Besides housing, it seems like the average family is spending way too much on transportation.
    The three categories of transportation adds up to a total of 17.5%! That is more than the average family put into their pension or social security (10%) or even food at home and eating out (12%).
    Sure I want to go from Point A to Point B in comfort and in something that does not look like a trash bucket, but 17.5% is ridiculous. My family spends about 8% of our income on transportation and even then I know we can do better to reduce the cost.

  7. KC says:

    How to cut tobacco cost…ummmm.. quit smoking?! The funny thing with tobacco is it is an all or nothing category – either you use it or you don’t. So many families spend much less than this (like $0). So the families that do use tobacco their costs are much higher than what is reported here. Probably the same with alcohol – although there are way more casual drinkers than casual tobacco users.

    I don’t find the hard numbers useful. I spend way more than average on housing, but percentage of income wise its a smaller percentage than the average household. So the percentages are a better guide than the hard $ amounts.

    Alos where are the taxes? Are the percentages the percentage of take home income or the pre-tax income?

  8. Lisa says:

    What happened to debt repayments? That’d be a nice category to see- do you think they included debt payments into the idividual catergories (education includes student loans, etc)?

  9. George says:

    @Kirk Bond – look in the center of the diagram and you’ll see pre/post-tax income.

  10. Noadi says:

    @Kim: I rarely go to an actual bookstore anymore but that’s easily one Amazon order for me. I do like hitting library book sales, I help out the library and get a bug haul of books for a few dollars.

    Interestingly the average family spends more on housing than I make in a year. Kind of puts my income in perspective there.

    I’m also interested in where the taxes are. I just did a rough calculation of my tax bill this year and got some sticker shock. Self-employment tax really sucks when you don’t make much to start with. Hopefully when I do a more thorough calculation of my business expenses it’ll bring it down a bit.

  11. kristinelevy says:

    Wow. No savings category other than pension.

    Considering that most people have credit card debt, implying they spend more than they earn, the expenses could feasibly add up to more than 100% of income, or as Lisa Said, include a category for debt servicing.

  12. George says:

    @asithi – Center of diagram shows $63,090 for pre-tax income, so 26% higher than your $50,000 estimate.

  13. dagny says:

    As #3 Kirk Bond said, what about taxes? This is my family’s largest expense. Federal and State income tax, SS & medicare tax, property tax (possiby included in the housing category?), sales tax, etc.

  14. George says:


    Pretax income = $63091
    Aftertax income = $49638

    That’s 21.4% going to taxes. SSI is lumped into retirement monies, so technically is not a tax (but is lousy as an investment, so it’s a weird category).

  15. KC says:

    So they only pay 21.3% in taxes?

  16. Mrs. Money says:

    That makes my head spin! When you sit down and look at that it is kinda depressing. :/

  17. Jim says:

    “So they only pay 21.3% in taxes?”


    21% is the difference between total pretax income and what they spend on the specific categories. So that gap is the combination of income taxes, savings, interest payments, and spending out of savings. Property taxes are included in housing costs. Sales taxes are part of every expenditure that has sales tax. Social security tax is included as an expenditure.

    By the way ‘travel’ is a major spending category not shown. THey spread travel costs around the specific things spent on like transportation, eating out and entertainment.

    Keep in mind that these are AVERAGE numbers so they are skewed high by higher income households. So for example, while the average might be $2668 for ‘food away from home’ people in the middle 20% spent $2167.

  18. How would the Dept of Labor know what we spend a month for alcohol? I always paid cash…

    John DeFlumeri Jr

  19. Kris says:

    Really looking forward to this series, and the grand wrap-up at the end. Obviously %’s are more relevant than actual amounts stated, but will be nice to see the picture of an ‘average’ family and their expenditures.

  20. Jim says:

    “How would the Dept of Labor know what we spend a month for alcohol? I always paid cash…”

    Their data is based on surveys. Its the Consumer Expenditure Survey from the BLS. They actually have the Census bureau do the survey. As with any survey there will be a margin of error.

  21. Kathleen says:

    Reading has a category… booze has a category… but charitable giving doesn’t? Wow, that’s a sad state of affairs!

  22. asithi says:

    @George – Sorry I can’t see the numbers on the diagram. I just added the numbers up on the body of the post.

  23. Kevin says:

    @Kathleen: I’m assuming “Cash Contributions” represents charitable giving…

  24. Kirk Bond says:

    I still don’t see how they allocated for taxes. People pointed out the income and then expenditures and implied the difference was taxes. That is really poor math.

    Perhaps the government is not keen on highlighting taxing costs.

    For my family, taxes are by far the highest category. Nothing else comes close…especially when accounting for taxes that we often ignore in our day to day…

    Thus, although I find this chart helpful, I find it hard to equate to how we actually spend our money.

  25. Shevy says:

    @Kevin & Kathleen
    According to the Bureau of Labor Statistics Glossary, the cash contributions category includes: cash contributed to persons or organizations outside the consumer unit, including alimony and child support payments; care of students away from home; and contributions to religious, educational, charitable, or political organizations.

    One of the eye-openers for me was that spending on life and other personal insurance is $309, while spending on tobacco is $323 and on alcohol is $457. That says a fair bit about people’s priorities right there, doesn’t it?

    Also, some things are in rather odd categories. For example, pets and anything to do with them (including vet bills) are classed under entertainment, along with TV purchases, DVD rentals, movies, running shoes, fitness memberships, etc.

    And the miscellaneous category includes, among other things, funerals and union dues!

    This is going to be a *very* interesting series!

  26. Shevy says:

    Oh, and Jim wasn’t quite correct when he said:
    21% is the difference between total pretax income and what they spend on the specific categories. So that gap is the combination of income taxes, savings, interest payments, and spending out of savings.

    Interest payments are included in the miscellaneous category as: “finance charges other than those for mortgages and vehicles”.

    There doesn’t appear to be a separate category for savings, however.

  27. I think what people fail to realize is that if you kick Social Security out of there, that food and transportation are second and third. Well, they may realize it, but they don’t act like it. Cutting your food bill can lead to incredible annual savings, knowing how to maintain and care for your car can save thousands over its life as well.

  28. deRuiter says:

    This is going to be great fun! Eyeballing that budget, there’s A LOAD OF FINANCIAL FAT which can be stripped from so many categories. Used books vs. new, and buying used books and putting some up on ebay or Amazon for sale, books could easily be turned from a cash liability into a cash cow. Thrifting for clothing, household goods, toys, everything would slash a couple of budgets. The folks who are good with coupons and / or vegetable garden could cut loads of money out of this budget. Don’t drink, don’t smoke and your health is better, saving you almost a grand a year. This budget explains why the average American is in debt and always will be. The cause is financial stupidity and an inability to prioritize spending.

  29. JT says:

    Interesting topic, looking forward to the rest of the series.

  30. karyn says:

    So sad how reading compares to the alcholol budget. I would like to think that’s because people are so frugal they are making great use of the library – but that’s probably not the case most of the time…I keep a budget but I would love to have an illustration like this for our family – visuals can be powerful. I guess I need to become more computer savvy.

  31. Ellen says:

    I agree that a discussion of what percentage of your income is going to various categories (with more explanation of what is actually included in the categories)would be more helpful.

    Also, if it’s true that Americans are carrying a heavy debt load & only slowly beginning to increase savings, how is it that the average family depicted reports expenses lower than income (if you assume the difference is all taxes)? I expected to see something summarizing that shows outlay exceeds net income by x amount.

    Am looking forward to many lively discussions on the individual items!

  32. George says:

    For those wondering if the 21% figure is accurate for taxes, I added up my own taxes last year. State & Federal income tax, property tax, SSI, Medicare, automobile tags, fishing license, etc. (no sales tax in Oregon). The total tax bill was 27% for our family of two adults, one income between $80k and $100k.

    Taking out the SSI, it’s not hard to match my figure to the average figure provided in this post.

  33. Henry says:

    Trent (who is better than you or me) acknowledges the expense of alcohol (why not, it’s established that that fine, Nordic Man with his hyperthyroidism swills it down, just like his grandparents drinking the rinse water out of wine bottles) but will not acknowledge tobacco use. Quit? That’s your answer? Trent’s got the attitude of “I don’t do it, so you have no excuse to do it either…”?
    Even if you need to hold onto the holier-than-than-thou attitude, there are still people out there that have to budget and manage finances, and are not responsible for the tobacco expense in their lives (i.e. a wife who budgets with a husband or parent that smokes and it must be taken into consideration).
    Readers, just remember who is better than you.

  34. Margo says:

    Another route to saving on clothing, rather than thrifting, is to focus on buying quality and maintaining your weight so you can wear the same size year over year. There are $20 sweaters that don’t survive a season (without losing shape, fading, or snagging), and some I’ve gotten for $60 that last for 4-6 years without any problems.

  35. Jim says:

    Shevy, you’re right about the other financial interest being in the Misc catgory. Good catch.

  36. Cathy says:

    Wow, where does this average family live? I need to move there! Sounds pretty cheap compared to where I live!

  37. WhirlMind says:

    A suggestion :

    In this post, you could have :

    1. Given the list as a table, for better readability of the list.

    2. Presented an additional column that shows the percentage of each expenditure segment to the total expenditure.

  38. Jeanne says:

    $10,000 a year! they don’t live in NY. my real estate taxes are more than that, and I live in a basic ranch style home. sounds like this budget is a dream…

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