Motley fool writes….The average American household’s pretax income is nearly $75,000, but not surprisingly, most of this amount gets spent. In fact, when you add up the money that’s paid for goods and services or taxes, the average household spends more than 90% of their income.
With that in mind, here’s a breakdown of where the average American’s income goes and how much is left to save, invest and pay down debt. How do your spending habits compare?
The average American household income
The average American household brings in a yearly income of $74,664 before taxes, according to the Bureau of Labor Statistics’ (BLS) 2016 Consumer Expenditure Survey, the latest full year for which finalized data is available. This includes wages and salaries, as well as income from self-employment, Social Security and other retirement sources, interest, dividends, rental income and more.
The average American’s expenditures
According to the latest BLS data, this is the breakdown of how the average household’s salary is spent. Some categories, such as “tobacco products and services,” are self-explanatory, but others are broader and include several different subcategories and expense types you may be surprised about, so I’ve added some comments where necessary:
- Food: $7,203, which can be further broken down into $4,049 of food at home and $3,154 on food away from home.
- Alcoholic beverages: $484.
- Housing: $18,886, which includes mortgage payments or rent, property taxes, maintenance, utilities, household services and products, furnishings and appliances. On a monthly basis, this implies that the average household spends $1,573 on all of these expenses combined.
- Apparel and services: $1,803.
- Transportation: $9,049. In addition to the cost of vehicles, this includes gasoline, finance charges, maintenance, insurance and public transportation expenses.
- Health care: $4,612, which includes the cost of health insurance, medical services, prescription drugs as well as other medical supplies.
- Entertainment: $2,913. This includes in-home entertainment costs, as well as outside-the-home entertainment ventures. Certain other expenses, such as your pets, are included here.
- Personal care products and services: $707.
- Reading: $118.
- Education: $1,329.
- Tobacco products and supplies: $337.
- Miscellaneous: $959.
- Cash contributions (charity, for example): $2,081.
- Personal insurance and pensions: $6,831. The largest expense in this category is Social Security payroll tax, but life insurance premiums and pension contributions are also included.
- Personal taxes: $10,489, which includes the average household’s $8,367 federal income tax bill, as well as state and local income taxes.
What’s left?
If we subtract all of these expenditures from the average household’s $74,664 annual pretax income, we find that there’s $6,863 left over. However, keep in mind that this doesn’t include interest on consumer debts such as credit cards or gifts, so this isn’t necessarily the amount of money that the average household saves.