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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:

  1. Housing

  2. Transportation

  3. Food

  4. Pensions and Social Security

  5. Healthcare

  6. Entertainment

  7. 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.