How Much Does Typical American Family Spend A Year?

FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
May 16, 2023

IN THIS ISSUE:

1. What Does The Average US Household Spend?

2. What Do Households Spend Their Money On?

3. Four Largest Categories of Household Spending

4. Title 42 Ended – Border Crisis To Get Even Worse

What Does The Average US Household Spend?

If I asked you how much money does the average American household spend per year or month, what would you say? I’ll bet you would have to guess – I know I did. With many households earning $40,000 or less per year, and with others making hundreds of thousands each year, what would you guess is the average? You might just say, “I have no idea.”

Well, the US Department of Labor studies these kinds of things, among many others, and today I’ll share some interesting facts and figures on how much the average family/household spends each year, including generally what they spend it on.

OK – make your guess on what the average household spends each year, and I’ll share the answers with you below. Let’s see how you do.

Believe it or not, studies show a lot of American families don’t know what they spend every month or pay attention to it. That seems strange to me but I watch what my family spends closely.

It sounds like a no-brainer but identifying your average monthly cost of living can help you create a budget and make good financial decisions. Yet as noted above, a lot of people don’t pay attention to how much they spend, especially those who live paycheck to paycheck. They just spend whatever they have.

But many of us don’t spend everything we make each month, and we try to increase our savings. But even many of us in this category don’t pay that much attention to how much we spend, what we spend it on and whether we could spend less and save more. Let’s look at the numbers.

The average annual income in the US was $84,352 per household in 2020, according to the Consumer Expenditure Survey conducted by the US Bureau of Labor Statistics.

American households spend an average of $69,732 per year on most expenditures, or $5,811 per month. Most households have the same major expenses: housing, transportation, healthcare, taxes and food which make up over 80% of our budgets.

There are a host of other minor monthly expenditures in addition to those listed in the table below which push our monthly average spending above $70,000 a year.

You might be wondering how household spending by Americans compares to that of consumers around the rest of the world. World consumer spending per household for 2021 was $52,991 a 12.59% increase from 2020.

So, American consumers spend over $1,400 per month more than the average consumer around the world. That is a testament to how the United States is the most affluent country in the world by a longshot.

What Do Households Spend Their Money On?

Now let’s take a look at what we spend our money on each month. The table below shows the major expenditures incurred by US households each month.

Chart showing average monthly expenses

Four Largest Categories of Household Spending

The four largest categories of household spending are housing, transportation, taxes and food. Together, these four expenses cost the average American family $3,264 per month. Let’s look at those four largest expenses individually.

Average Monthly Housing Cost – $1,784. The average US household spends $21,409 per year or $1,784 per month on all things related to housing.

Shelter accounts for $1,050 of our monthly budget. That includes rent or mortgage payments, mortgage interest, property taxes, maintenance, repairs and insurance. The remaining $734 each month covers utilities, household expenses, furniture and equipment.

About 66% of Americans own their home. They pay an average of $623 per month on mortgage interest, property taxes and other expenses like maintenance, repairs and homeowners insurance.

The 34% of Americans who rent pay just a little less than homeowners — an average of $607 per month. Expenses include rent, maintenance costs and renters insurance.

Average Transportation Costs Per Month – $819. The second-largest spending category for the typical US family is transportation. The average cost of transportation for a household is $9,826 per year, or $819 per month — 12% of the average household income.

The majority of our transit budgets go toward car payments, which cost around $4,523 per year. In addition, we spend an average of $1,575 per year on car insurance.

Gasoline accounts for 16% of transportation costs — the average amount spent on gas per month is $131. This category also includes vacation transportation like plane, bus and train tickets and even ship fares.

Average Taxes Paid By Households per Month – $784. The typical household pays $9,402 per year or $784 per month in personal taxes — 11% of our total income. This doesn't include property taxes, sales taxes, Social Security or Medicare payments.

In 2020, we paid less in federal taxes than normal because of the stimulus checks many Americans received during the COVID-19 pandemic. The average household received $1,911 in stimulus payments from the government.

Average Spending Paid By Households On Food Per Month – $610. The typical US household spends 9% of its income on food — $7,316 per year or $610 per month.

The average cost of groceries per month is $412, which makes up about 68% of our food budgets. Most of the remaining $198 per month is spent dining out.

Interestingly, while food is a necessity, the amount spent on food varies based on household income. People earning less than $15,000 per year spend $352 per month on food — $272 of which goes toward groceries. Most of the rest goes toward eating out.

In comparison, those earning between $70,000 and $90,000 per year spend nearly twice as much on food at $623 per month.

Here’s what the average family spends on selected food items per month.

Meats, poultry, fish, eggs: $90
Fruits, vegetables: $81
Cereal, baked goods: $53
Dairy products: $40

In case you’re wondering, the average American family spends about 6% of their budget on healthcare. That’s $5,177 annually or $431 monthly. The bulk of that money, $306 per month, goes to pay health insurance premiums.

As an aside, between 1959-2022, the average US savings rate has been 8.96%. Yet the average household savings rate in the US was only 5.1% in the second half of 2022. Economists say this is largely due to much higher inflation. 21% of Americans don't save any of their annual income.

Nearly half of all Americans would face financial hardship if a $400 emergency happened today. 47% of men between 55-66 don’t have any retirement savings. 50% of women have no retirement savings by age 55-66.

Title 42 Ended – Border Crisis May Get Even Worse

The pandemic-era immigration policy known as “Title 42” came to end alongside the nation’s public health emergency last Friday. Its expiration was expected to throw the southern border into further chaos, although that has not happened as this is written.

Title 42 refers to a portion of US code that gives the federal government the authority to curb migration during public health crises. The Trump administration implemented the policy to quickly eject illegal border crossers, including those who claimed asylum, amid the Covid-19 pandemic.

Administration officials at the time warned that border crossers could both spread the virus to American citizens, as well as to each other if held in close quarters in detention facilities – at a time when the US was mostly prohibiting travel from other countries.

“It was a measure that was used at the time to address an emerging problem to try to protect the American people from a public health standpoint and defend our borders at the same time,” said Gene Hamilton, a lawyer and former DOJ and DHS official who helped usher in the policy in 2020.

The Biden administration attempted to lift Title 42 at one point but was blocked by the courts — and instead allowed it to sunset with the ending of the federal government’s declared public health emergency last week.

Migrants were expelled more than 2.8 million times under Title 42, but about an equivalent number of illegal immigrants have been able to enter the country under the Biden administration.

During the Trump administration, the president’s policies effectively ended the border crisis. He expedited removal for asylum seekers who did not present themselves legally at ports of entry or elsewhere. Also, many asylum seekers were subject to Trump’s “Remain in Mexico” policy while their claims were adjudicated.

But the Biden administration reversed many of these asylum-related policies and, outside of Title 42, has mostly refused to utilize expedited removals and deportations to mitigate abuse of the asylum system. And now Title 42 is gone as well.

The most likely outcome now is the border crisis will get even worse in the weeks and months ahead. The Biden administration has made it clear they want more migrants, apparently legal or otherwise, and based on what’s being reported at the border, we’re going to get them – although the expected mass migration has not happened as this is written.

Assuming the border crisis does get worse, there appears no way to stop this, short of a new president. That means sometime in early 2025 – assuming President Biden or some other Democrat is not elected in 2024. In that case, it will likely continue even longer.

In any event, we can expect to see millions more migrants coming into this country over the next couple of years (or longer). Most of these people will seek citizenship as soon as possible and be able to vote as soon as they are able.

The Democrats believe this will be good for their party and their policies, and they are correct. Conservatives who generally oppose such open border policies can only look on in dismay. For now, that’s just the way it is.

I’ll leave it there for today.

Very best regards,

Gary D. Halbert

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