How Americans Spend
By Kevin Estes
Source
This article leverages data from the 2022 Consumer Expenditure Surveys Age of Reference Person report published by the U.S Bureau of Labor Statistics available here.
Control Over Spending
Americans generally have control over their spending.
The top seven spending categories accounted for 90% of all expenses:
Housing 33%
Transportation 17%
Food 13%
Pensions and Social Security 11%
Healthcare 8%
Entertainment 5%
Clothing 3%
Lifestyle decisions like homes and vehicles accounted for about half of total expenses:
Healthcare cost may be more predictable than many assume since insurance makes up the majority of household healthcare expenses.
Even contributions to pensions and Social Security can be influenced by how much each person earns.
Spent Nearly $73,000
In 2022, American households spent about $72,967.
The biggest categories were:
$24,298 for Housing
$12,295 for Transportation
$9,343 for Food
$8,223 for Pensions and Social Security
$5,850 for Healthcare
$3,458 for Entertainment
$1,945 for Clothing (“Apparel and services” in the report)
$7,555 for Other
Other includes: cash contributions, education, personal care products and services, alcoholic beverages, life and other personal insurance, tobacco products and smoking supplies, reading, and miscellaneous.
Household Spending by Age
Household expenses peaked at 45-54 years old.
Based on the reference person in the study, spending by age was:
Under 25, $46,359
25 to 34, $67,883
35 to 44, $86,049
45 to 54, $91,074
55 to 64, $78,079
65 to 74, $60,844
75+, $53,481
Spent Most at Age 45-54
Age 45 to 54 is a time of transition.
The number of children under 18 in the household fell:
from 1.4 for those 35-44
to 0.7 for those 45-54
Education expenses more than doubled as children attended college:
from $1,237 for those 35-44
to $2,661 for those 45-54
The number of earners (1.8) and vehicles (2.2) peaked at age 45-54.
Nearly three quarters (73%) of homeowners still had a mortgage.
Expenses may have been heaviest because parents were still footing the bill for their teenage and young adult children:
education expenses
health, dental, and auto insurance
automobiles…
Category Spending by Age
Four of the five biggest categories peaked in middle age.
Category Peaks
Spending peaked at age 45-54 years old for:
Transportation
Food
Pensions and Social Security
Housing peaked a little earlier at age 35-44, likely because new homeowners paid more interest on their high mortgage balances.
Healthcare expenses continued to rise with age.
Deeper Dive
The next sections dive into expenses for the top seven (7) categories:
Housing
Transportation
Food
Pensions and Social Security
Healthcare
Entertainment
Clothing
1. Housing
The average cost of housing ramped up quickly and fell more gradually with age.
Housing expenses were higher later in life than early on:
$16,837 for those under 25
$19,317 for those 75+
It’s likely that owning a paid off home is more expensive than either:
renting an apartment or
living with parents.
Housing Expense
The cost of housing seemed to depend on the number of people in the household.
However, the cost per person grew with age:
from about $8,000 for those under 25
to about $12,000 for those 75+
Buying a Home
Housing expense rose quickly with age, as younger American households purchased homes.
18% of those under 25 owned a home
(which may be inflated by those still living with their parents)62% of those age 35-44 owned at least one home
Mortgage Repayment
These young homeowners had big mortgage balances and high interest expense.
Principal repayment is not an expense. It’s more like moving money:
from one pocket (checking)
to another (home equity).
It took most homeowners until age 65-74 to pay off their homes.
2. Transportation
Transportation expenses grew until age 45-54 and then fell quickly thereafter.
These expenses were lower later in life than they were early on:
$9,583 for those under 25
$6,209 for those 75+
Transportation Expense
The number of vehicles influenced the cost.
However, the average cost per vehicle fell with age:
from $7,986 for those under 25
to $4,139 for those 75+
Vehicle Expense
Most vehicle expenses were for:
vehicle purchases and
fuel/oil.
The costs moved in near lock-step - rising until age 35-44 and falling thereafter. The decrease was much larger after age 65, likely due to driving fewer miles.
3. Food
Food expenses grew steadily until age 45-54 and then declined.
The expense lagged the number of people in the household a bit - possibly because children eat less than adults.
Food at Home and Away
The amount spent on food at home and away tended to rise and fall together.
However, the home percentage of food expense rose with age:
from 57% for those under 25
to 69% for those 75+
This increase may be due to the:
lifelong develop of cooking skills,
fewer public social activities, and
decreased mobility.
It may also have been the result of:
eating less when dining out,
ordering less expensive dishes, and
receiving senior citizen discounts.
4. Pensions and Social Security
The often non-optional cost of contributing to a pension and/or Social Security is the fourth largest expense.
These cost ranged from 10% to 12% of wages and salaries for all age groups except 75+. These costs stop once someone stops working.
5. Healthcare
Healthcare was the only major expense category that rose consistently with age.
Healthcare Expenses
Expenses rose with age, though perhaps not as much as many fear.
There appear to be diminishing costs to healthcare with advanced age. That may be the result of government programs like:
Affordable Care Act (ACA) health plans,
Medicare, and
Medicaid
Health Insurance
Perhaps the best news is that health insurance accounted for the majority of healthcare expenses. Insurance stayed in a tight range of 61% to 71% of total healthcare costs across all age groups.
Since insurance costs are largely predictable, there may be more certainty with healthcare costs than many believe.
6. Entertainment
The annual cost of entertainment varied by age.
It more than doubled:
from $2,075 for those under 25
to $4,481 for those 45-54
It then fell nearly 60%:
to $1,943 for those 75+
Entertainment Expense
The annual cost of entertainment depended on the number of adults (age 18 and over) in the household.
Entertainment cost per household was about:
$2,000 per adult for age 25-74
$1,000 per adult for those under 25 and 75+
Entertainment Type
Spend by age depended on the type of entertainment.
Fees and Admissions
Fees and Admissions peaked at about $1,300 a year for those 35-54 years old.
It dropped to:
$714 for those 55-64
$613 for those 65-74
$414 for those 75+
After all, there aren’t many 75 year-olds going clubbing. More power to those who are!
Audio/Visual
However, Audio/Visual spending peaked at age 55-64 and remained relatively high through end of life.
Even if someone can’t get out as much as they once did, they still value quality entertainment!
7. Clothing
The last of the big expense categories was clothing. It’s listed as “Apparel and services” in the data source.
Clothing Expense
The annual clothing expense seemed to depend on the number of people in the household.
As with Entertainment, the annual expense was lower for the youngest and oldest Americans. The clothing expense per person was:
$700 to $900 a year for those aged 25 through 74
$500 to $600 a year for those under 25 and 75+
Those under 25 years old may:
wear less expensive clothing or
have some of their clothes provided by parents.
Those 75+ may:
already own the clothes they need,
go easier on their clothing, or
prioritize comfort over style.
2-3% of Wages/Salaries
Those aged 64 and younger spend 2-3% of their wages and salaries on clothing:
3% for those 34 years old and younger
2% for those 35-64
The spend may have been slightly higher for younger workers as they built out their professional wardrobes.
Application
Each household’s situation and priorities are unique. However, the information above may be helpful a few ways.
Agency
One use may be to help people realize they have control - or at least influence - over their expenses.
About half of household expenses are for homes and vehicles. Those expenses are lifestyle decisions - as are:
food away from home and
entertainment.
Forecasts
People in their 30’s, 40’s, and 50’s may see their expenses and feel retirement is out of reach.
They might assume they’ll spend what they do today plus:
inflation and
ever-growing healthcare expenses.
While the cost of healthcare did rise with age, it has been tempered by options like:
Affordable Care Act (ACA) health plans and
Medicare.
All other major expenses fell with age.
Older Americans spend less on:
Housing - as their mortgages are paid down
Transportation - as they drive fewer miles
Food - as they eat less, go out less, and get senior discounts
Pensions/Social Security - as they stop working
Entertainment - as they attend fewer events
Clothing - as they no longer need to dress to impress
Guidelines
Finally, someone looking for potential guidelines might consider the following 2022 household averages:
Housing - $8,000 to $12,000 per person, rising with age
Transportation - $4,000 to $8,000 per vehicle
Food - $3,000 to $4,000 per person
Pensions/Social Security - 10-12% of wages/salaries
Health Insurance - $2,000 to $5,000 per household, rising with age
Entertainment - $2,000 to $4,000 per household, depending on age
Clothing - 2% to 3% of wages/salaries
I hope this helps!
If you’re interested in a review of your specific situation…
Disclaimer
In addition to the usual disclaimers, neither this post nor these images include any financial, tax, or legal advice.
