by Christy Bieber | May 8, 2020
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Is your spending way above -- or below -- the average? Find out here.
Every household has different priorities when it comes to what you do with your money. But it's important to make sure your overall total spending isn't so high that it prevents you from accomplishing important financial goals, such as paying off debt or saving for retirement.
When you're stuck in your own particular spending habits, it can be hard to determine if your expenditures are reasonable or if there are areas where you're going overboard. Looking at the household spending of your fellow Americans can help you figure that out. And fortunately, The Ascent has some detailed data related to precisely this topic that we can take a look at.
According to The Ascent's research, the average consumer unit spends $5,102 per month. The Bureau of Labor Statistics defines a consumer unit as a family, a single person responsible for their own expenses, or two or more people living together and sharing expenses.
This $5,102 breaks down into 11 specific categories, plus a category for other spending. Housing is by far the largest monthly cost, coming in at $1,674 per month and accounting for 32.8% of spending on average. Transportation was next, with an average cost of $813 per month and accounting for just under 16% of the typical household's expenses.
Other major expense categories included:
Americans also spent an average of $169 per month on other spending that doesn't fit into one of these specific categories.
Whether your spending is above or below average, the key is to make sure you're not overdoing it in any one particular category. If you're house poor because you've purchased too large a home or if you dine out too often and are finding yourself in credit card debt because of it, you need to make some changes.
Tracking your spending to identify where your money is going is often the first essential step to cutting household expenses. Many people don't really know how much of their cash goes to things like dining out or personal care and are surprised when they find out. Ideally, if you don't already know what your expenses are, you should track your outflows for about 30 days.
After you've tracked your expenses, it's time to add it all up. When you do, you may find you have ample income left over to save and that you're happy with your spending habits. Unfortunately, that's not likely to happen for most people. Instead, it's more likely you'll spot some areas where you're spending way more than you should. If that's the case, this is a great place to cut so you can free up some more cash to save for your financial goals.
If you've identified expenses to cut, it can be helpful to try out an envelope system for those discretionary expenses -- at least until you get used to living on less. Using this system, if you wanted to trim your restaurant spending to $288 per month, you could put that amount in an envelope at the start of the month. Pay cash each time you go to a restaurant, pick up take out, or grab something from the vending machine. Once the money is gone, you're done dining out for the month.
You don't have to do this forever (and doing so would cause you to miss out on credit card rewards). But using this budgeting system for a few months could help you get more used to living with your new spending limit so you don't go over budget.
Use this breakdown of what your fellow Americans spend and take a close look at your own expenditures. If you find you're spending a much larger percentage of your income on a particular category than your peers, this can be the perfect area to make cuts so you can do more important things with your hard-earned cash.
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