Although spending is up, that doesn’t necessarily mean that households are enjoying a positive cash flow. We’ll get to that in a minute.
For now, let’s take a look at where the average household is spending their dollars (according to the Financial Samurai’s research) …
- Food: $7,729. Expenditures on food/groceries are about $644 a month – which appears to be a sensible amount. Of course, a little more or a little less doesn’t mean you’re purchasing the wrong items (or not enough). Take a look at your monthly grocery bill.
- Housing: $19,884. Housing expenses include five major categories: shelter, utilities, fuels/public services, housekeeping supplies and household furnishings/equipment. The Bureau of Labor Statistics (BLS) shows this number increasing 5.3% per year. Keeping an eye on your costs (and the rise in inflation) can help you determine if it’s better for you to rent or buy a home.
- Transportation: $9,576. These expenses include purchasing and maintaining your vehicle, gasoline/other fuels, motor oil, etc. One of the potential reasons this number is so high is because average car prices have increase to $36,000. Despite a strong economy, auto loan delinquencies have reached a 19-year high. What are your transportation costs? Are you behind on any car payments? If so, it’s probably time to create a budget to help pay off your debt.
- Healthcare: $4,928. The primary spend for healthcare is health insurance. For those who enjoy employer subsidies to help pay their premium, $411 a month is the average spend for healthcare. However, this spend has a 6+% rate of growth. With that kind of increase, it’s possible healthcare expenses can double over the next twelve years.
- Entertainment: $3,203. With the advent of streaming channels, inexpensive Internet and cellphones, plus a lot of free online entertainment, $267 a month on entertainment is an appropriate amount. However, if you think about it, it’s a bit disheartening that we spend so much more money every month on the things we need rather than the things we want.
- Education: $1,491. At first this number might not seem like a lot, but it’s up 12.2% – the largest percentage increase among all the components listed above (and others not mentioned at all, such as personal insurance, pensions and social security). Much of that increase is due to student loans and/or those people returning to school to enhance their education for a better paying job.
So… Are These Numbers Positive or Negative?
Overall, these numbers aren’t as good as they might first appear. Why? Here are some facts to take into consideration:
- The average gross income in America is $73,573
- Tax rates have risen, so more money is being spent on paying them.
- Since the average yearly expenditure is $60,060, the average household is most likely spending all their gross income ($73,573) plus more on other expenses we haven’t even discussed.
In high income tax states, that could mean an average negative cash flow of $5,287 per year.
In no income tax states, that might result in an average negative cash flow of $1,601 per year.
That pretty much answers the question, “Are these numbers positive or negative?”
It’s for these reasons that creating and sticking to a budget is so important. Knowing exactly where your money is going (and where it’s staying) can help you beat the average American by keeping your cash flow positive.
At myFICO forums you can check out how members keep track of their money to help them maintain a positive cash flow. It’s open 24/7, so read til your heart’s content.
Latest posts by Rob Kaufman (see all)
- Where’s Your Money Going? 6 Spending Categories to Look At - June 11, 2019
- What Collection Accounts Are and How to Remove Them - June 4, 2019