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Americans are typically labeled as two things, which more or less play off of one another. First, they're often considered frivolous with their money, which isn't much of a reach considering that roughly 70% of U.S. GDP is based on consumption. Second, Americans are considered to be poor savers (possibly because they like to spend!). Based on a comparison to multiple developed countries around the world, the U.S personal savings rate of 4.8% as of September 2015 is subpar.

It's perceptions like this that make you wonder what exactly the average American is spending their money on. Thanks to data released in September by the Bureau of Labor Statistics, we can get an accurate look at what the typical budget looks like for the average American.

Here's what the average American's budget looks like
According to data from 2014 collected by the BLS, average income before taxes for the typical American totaled $66,877, a nearly 5% increase from 2013, but a minor increase of just 2% since 2012 (average income before taxes fell year-over-year in 2013). Once taxes are factored in, the average American was left with $53,495.

Now let's take a look at precisely where this $53,495 is winding up. All figures in parenthesis are average annual expenditures.

  • Food ($6,759): On average, Americans spend nearly $4,000 on food to eat at home, and nearly $2,800 eating out during the year. Food costs in the home have risen by more than 2% since 2012, while the budget for eating out has edged higher by roughly 1% over that same period.
  • Housing ($17,798): Housing costs include the fees the average American pays for their mortgage or rent, but it also takes into account utilities such as electricity and water, insurance for a home (either homeowner's or renter's), furniture costs, and property taxes. Rental dwelling costs have been the real culprit here, with costs up 14% since 2012.
  • Apparel and services ($1,786): Spending for clothes and other services tends to be a bit volatile depending on the health of the U.S. economy, but since 2012 costs in this category are up less than 3%.
  • Transportation ($9,073): Second only to housing, transportation is a big cost the American budget needs to absorb. Transportation costs include the cost of fuel and motor oil for a car (about $2,500 in 2014 per the BLS), vehicle insurance ($1,112 per year), as well as vehicle maintenance and vehicle purchases. This category also includes airplane and train transportation costs. Thankfully, costs in this category have increased by less than 1% since 2012.
  • Healthcare ($4,290): On the flipside to transportation, healthcare spending is up almost 21% in two years, primarily due to a 39% increase in the average amount Americans spend on health insurance. Obamacare's rollout and the penalty associated with not purchasing insurance could be the cause behind these higher expenditures in healthcare. However, a change in the BLS' healthcare questionnaire means we're not making an apples-to-apples comparison to prior years, so take this big jump with a grain of salt.
  • Entertainment ($2,728): Americans love their free time, and based on the BLS' data the average consumer spends around $225 per month on entertainment. Since 2012 entertainment expenditures are up 4.7%.
  • Cash contributions ($1,788): This oddly named category takes into account money set aside to pay for child support, spousal support, and donations to qualifying organizations. Apparently not in the giving mood, cash contributions have fallen in each of the past two years.
  • Personal insurance and pensions ($5,726): Just as the category describes, the average American does what it takes to preserve their wealth and to ensure that their loved ones are protected in case something happens. Insurance costs are up around 2% overall since 2012.
  • All other expenditures ($3,548): Lastly, this category takes into account education expenses, personal care products and services, tobacco and smoking supply costs, and any money set aside for retirement programs. Rest assured, the amount being put aside for retirement is a very small fraction of the average American's budget.

Combined, these expenditures add up to $53,495.

Ways you can effectively budget your money
The obvious takeaway from the above budget is that the typical American isn't doing enough to save for their retirement. Yet, based on the data, the implication is that there's not much room to save, either, with housing and healthcare costs soaring. Although everyone's personal budget will differ, here are some suggestions on how the typical American can reduce their expenses and hopefully put more money toward their retirement.

The easiest categories to consider tinkering with are entertainment and eating out. Combined, these account for about $5,500 a year for the typical American, or roughly 10% of the typical take-home pay after taxes.

It would be unthinkable to give up on entertainment spending altogether, but looking for ways to reduce your entertainment spending, such as utilizing cheap streaming services like Netflix or playing board games with family and friends (I know, how "old school"), could save you a pretty penny over the course of the year. Likewise, preparing food at home 100% of the time would probably get old. However, cutting your trips to the restaurant by a quarter to a half could have a substantially positive impact on your wallet.

As odd as it might seem, sometimes spending a bit more on a long-term "investment" can be a smart move for consumers. Buying a fuel-efficient car that you'll keep for a decade or longer can reduce your gas and maintenance costs in exchange for the big upfront cost of buying a vehicle. Similarly, adding solar panels to a home you plan to live in for a long time could help substantially lower your electricity costs. It's all about calculating your payback time and thinking long-term.

Three important steps you should take right now
With the understanding that the typical American has done a very poor job of saving for their future, you should consider taking three important steps to secure your own financial future and ensure you hit your retirement goal.

First, sit down and take the time to actually formulate a budget. Just because the BLS has shown us what the budget looks like as of 2014 for the average American doesn't mean the average American is actually keeping track of their cash flow. In fact, according to a Gallup poll from 2013, just a third of Americans prepare a detailed household budget.

This doesn't mean you need to pinch every penny to get a passing grade, but to be true to yourself and your retirement goals you'll need to make a concerted effort to understand your income and where you cash goes. Once you have a good bead on your spending habits you'll be able to optimally save for your retirement.

Secondly, don't wait until 10 years before you retire to start saving. The tried and true rule is that the earlier you start saving, the better chance you'll have of meeting your needs come retirement. This isn't to say you should give up if you're nearing retirement and only recently started saving, but it does mean that the longer you wait to save, the more leverage you'll lose to compound your nest egg over time.

Finally, consider using tax-advantaged retirement accounts in order to preserve your wealth into your golden years. A Roth IRA, for instance, allows a consumer to grow their money completely tax-free for life, which can mean potentially tens of thousands or hundreds of thousands of dollars in capital gains that won't need to be paid to the federal government. There are some income limitations associated with a Roth IRA, which you can read about from the IRS, but most Americans will qualify.

As always, the onus of retiring comfortably is completely up to you, so take this BLS data as a wake-up call to take control of your finances if you haven't done so already.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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