How do you spend your hard-earned money?
Whether you are extremely frugal, or you’re known to indulge in the finer things in life, how you allocate your spending is partially a function of how much cash you have coming in the door.
Simply put, the more income a household generates, the higher the portion that can be spent on items other than the usual necessities (housing, food, clothing, etc), and the more that can be saved or invested for the future.
Earning and Spending, by Income Group
Today’s visuals come to us from Engaging Data, and they use Sankey diagrams to display data from the Bureau of Labor Statistics (BLS) that helps to paint a picture of how different household income groups make and spend their money.
We’ll show you three charts below for the following income groups:
- The Average American
- The Lowest Income Quintile (Bottom 20%)
- The Highest Income Quintile (Highest 20%)
Let’s start by taking a look at the flows of the average American household:
The Average American Household – $53,708 in spending (73% of total income)
The average U.S. household has 2.5 people (1.3 income earners, 0.6 children, and 0.4 seniors)
As you can see above the average household generates $73,574 of total inflows, with 84.4% of that coming from salary, and smaller portions coming from social security (11.3%), dividends and property (2.6%), and other income (1.7%).
In terms of money going out, the highest allocation goes to housing (22.1% of spending), while gas and insurance (9.0%), household (7.7%), and vehicles (7.5%) make up the next largest categories.
Interestingly, the average U.S. household also says it is saving just short of $10,000 per year.
The Bottom 20% – $25,525 in spending (100% of total income)
These contain an average of 1.6 people (0.5 income earners, 0.3 children, and 0.4 seniors)
How do the inflows and outflows of the average American household compare to the lowest income quintile?
Here, the top-level statistic tells much of the story, as the poorest income group in America must spend 100% of money coming in to make ends meet. Further, cash comes in from many different sources, showing that there are fewer dependable sources of income for families to rely on.
For expenditures, this group spends the most on housing (24.8% of spending), while other top costs of living include food at home (10.1%), gas and insurance (7.9%), health insurance (6.9%), and household costs (6.9%).
The Highest 20% – $99,639 in spending (53% of total income)
These contain an average of 3.1 people (2.1 income earners, 0.8 children, and 0.2 seniors)
The wealthiest household segment brings in $188,102 in total income on average, with salaries (92.1%) being the top source of inflows.
This group spends just over half of its income, with top expenses being housing (21.6%), vehicles (8.3%), household costs (8.2%), gas and insurance (8.2%), and entertainment (6.9%).
The highest quintile pays just short of $40,000 in federal, state, and local taxes per year, and is also able to contribute roughly $50,000 to savings each year.
Spending Over Time
For a fascinating look at how household spending has changed over time, don’t forget to check out our previous post that charts 75 years of data on how Americans spend money.
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Average household spends $1000/month on mortgage and $300/month on health insurance. Seriously, who makes this shit up?
Choices. The if the bottom 20% cut their eating out and entertainment spending in half, they could save 5% of their income. Really, they should be cutting it much more. Nearly 11% on eating out and entertainment is ridiculous when you are poor!
I grew up in that quintile and made the choice to get out. My mother tells me now that she felt good at the end of the week if income – expenses left an extra $25. Anyone saying there is no hope or opportunity is no better than the people peddling Socialism. Blame whoever you want (politicians, Fed, etc) but mostly blame the person in the mirror if you choose to stay broke.
Another thing I’ve noticed dirt poor people tend to overspend on is pets, particularly multiple dogs. Animals are expensive but somehow the costs never make it into their budget.
Oh please, dirt poor people may have pets but the odds of said pets actually getting vet service is rather nil. The huge population of unwanted animals comes from not spaying said animals. Go to the poor parts of Houston or Detroit to see how well those pets are cared for.
Seems like the numbers are all over the place. The real average wage is around $30-35K per annum for a very large segment of the populace.