Americans Made More, Spent More in January

Fresh Commerce Department data show that Americans both made and spent more money than usual in January.

Mar 3, 2014 at 2:02PM

The U.S. Commerce Department today released data on personal income and expenses for January.

Personal income rose 0.3% in the first month of 2014, driving a 0.4% increase in disposable income. Consumer expenses also rose 0.4%, in lockstep with disposable dollars.

This is mildly good news. Both disposable income and consumer spending are growing faster than their four-year monthly averages. Data from the St. Louis Federal Reserve Bank show inflation-adjusted disposable income gaining 0.15% in an average month, while adjusted consumer spending generally grows 0.2% a month.

Fredgraph Income Expenses

Source: St. Louis Fed's FRED service.

But it's not all rainbows and unicorns, because the January numbers were boosted by some very unusual events.

A bitterly cold winter forced millions of Americans to pay more on heating bills, adding some artificial strength to the spending stats.

The income box also had several rare factors pulling on it, in every direction:

  • This was the first month for many of the Affordable Care Act, or Obamacare, provisions to take effect. That's a growth driver for personal income since health care benefits count under the "income" heading.

  • January is special because it's the month in which many corporations and the U.S. military execute annual pay raises.

  • On the other hand, federal Emergency Unemployment Compensation expired on Jan. 1, thus reducing income for many jobless consumers.

  • December's personal income data was also unusually strong thanks to lump-sum Social Security payouts, giving January a higher bar to clear.

Excluding all of these special events, personal income only increased in line with the 0.2% long-term average.

At the end of the day, Americans held on to 4.3% of disposable income in January, the same rate as December. These are the 540 billion consumer dollars that were not spent on anything, but are going into savings accounts, buried coffee cans, and long-term investments.

Fredgraph Savings

Source: St. Louis Fed's FRED service.

Investing your leftover cash in the stock market is far healthier than simply sticking your savings in a sock drawer. Sure, stocks can lose value from time to time, but the market bounces back stronger after every crash.

The Dow Jones Industrial Average (DJINDICES:^DJI) has quadrupled in value over the last 20 years, including the 2001 dot-com crash and the 2008 mortgage meltdown. At the same time, inflation-adjusted disposable income only grew by 85%.

^DJI Chart

^DJI data by YCharts.

Investing a little bit every month will beat coffee cans and savings accounts in the long run. Are you in the market yet?

The next step for you
Want to profit on analysis like this? The key for your future is to turn business insights into portfolio gold through smart and steady investing ... starting right now. Those who wait on the sidelines are missing out on huge gains and putting their financial futures in jeopardy. The Motley Fool is offering a new special report, an essential guide to investing, which includes access to top stocks to buy now. Click here to get your copy today -- it's absolutely free.

Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers