Average American Household Budget 2019 - Elite Personal Finance
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Average American Household Budget 2019

EPF April 27, 2019
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As the cost of living continues to outpace income growth for many Americans, keeping up with the bills has become more difficult than ever. And while leisure and hospitality spending continues to trend upward, basic necessities – like housing, transportation and food – make up the largest portions of the average American household budget.

Using the latest data from the U.S. Bureau of Labor Statistics: 2017 Consumer Expenditure Survey, we analyzed statistics to present the most accurate depiction of average household spending within the United States.

 

Average American Household Budget 2019: Statistics and Key Findings

Average annual household spending increased by a total of 4.8% in 2017, while average income before taxes – coming in at $73,573 – declined by 1.5%.

Average household spending increased in 10 of the 14 categories surveyed by the U.S. Bureau of Labor Statistics, with the three largest household expenses – housing, transportation and food – increasing between 5.3% and 7.3%.

Of the top-5 household expenses, only personal insurance and pensions (– 0.9%) saw a year-over-year decline.

At $19,884, housing remained the largest budgetary expense, with shelter – encompassing rent, mortgage payments, property taxes and insurance – accounting for nearly 60% of the total. Utilities, fuel and public services accounted for just over 19%, while household furnishings and equipment just under 10%.

At $9,576, transportation represented the second largest household expense. New vehicle purchases accounted for just over 42% of the total, other vehicle expenses nearly 30% and gasoline just over 20%.

Two of the three largest year-over-year percentage increases – at 15.3% and 10% respectively – came from the alcoholic beverages and entertainment segments, showing consumers still have a strong appetite for leisure and hospitality.

Isolating three-year growth rates, the miscellaneous segment – made up of household supplies, appliances, equipment, furnishings and other products that don’t fit directly into any one category – saw the largest percentage increase at nearly 30%. Education ranked second at just under 21% and alcoholic beverages ranked third at just under 21% as well.

Absent of a recession, we expect average housing costs to reach the $21,000 to $22,000 range in 2019 and average income before taxes to reach the $78,000 to $79,000 range.

Changes in average housing costs by income displays a linear trend, with spending increasing as income increases.

For those in the lowest income bracket, healthcare – at $336.07 – made up the largest increase in average household spending, however it was partially offset by a $270.17 decline in average transportation spending.

In the second-lowest income bracket, food and housing made up nearly 49% of the total change in average household spending. Combined, consumers here spent $881.83 more than those in the lowest income bracket.

Middle income individuals spent – on average – at least $143.66 more on food than any other income bracket.

When analyzing changes in food expenditures by age, we found as age increases, spending on food at home tends to increase. Conversely, as age decreases, spending on food away from home tends to increase.

 

Average U.S. Household Spending

While inflation increased average annual household spending by a total of 4.8% in 2017, average income before taxes – coming in at $73,573 – declined by 1.5%. If you analyze the table below, you’ll notice average household spending increased in 10 of the 14 categories surveyed by the U.S. Bureau of Labor Statistics, with the three largest household expenses – housing, transportation and food – increasing anywhere from 5.3% to 7.3%.

Furthering the narrative – of the top-5 household expenses – only the personal insurance and pensions segment saw a year-over-year decline. However, with average household expenses rising and average income declining, a decrease in retirement saving is somewhat expected.

 

Category:2017 Average Annual Household Spending (AAHS):Percentage of Average Annual Household Spending:Year-Over-Year Percentage Change:
Housing:$19,88433.1%+ 5.3%
Transportation:$9,57615.9%+ 5.8%
Food:$7,72912.9%+ 7.3%
Personal Insurance and Pensions:$6,77111.3%– 0.9%
Healthcare:$4,9288.2%+ 6.9%
Entertainment:$3,2035.3%+ 10.0%
Cash Contributions:$1,8733.1%– 10.0%
Apparel and Services:$1,8333.1%+ 1.7%
Education:$1,4912.5%+ 12.2%
Miscellaneous:$1,0101.7%+ 5.3%
Personal Care Products/Services:$7621.3%+ 7.8%
Alcoholic Beverages:$5580.9%+ 15.3%
Tobacco/Smoking Products:$3320.6% – 1.5%
Reading:$1100.2%– 6.8%
Total:$60,060100%

 

Average U.S. Household Spending

Analyzing the numbers by segment – at $19,884 – housing remained the largest budgetary expense. Shelter – encompassing rent, mortgage payments, property taxes and insurance – accounted for nearly 60% of the total, while utilities, fuel and public services accounted for just over 19%. As well, household furnishings and equipment contributed just under 10%.

At $9,576, transportation represented the second largest household expense. New vehicle purchases accounted for just over 42% of the total, other vehicle expenses nearly 30% and gasoline just over 20%.

Interestingly enough, the alcoholic beverages and entertainment segments accounted for two of the three largest percentage increases – at 15.3% and 10% respectively – showing consumers still have a strong appetite for leisure and hospitality.

 

Historical and 2019 Forecasted Average U.S. Household Spending

Isolating the last four years of recorded data, the miscellaneous segment – made up of household supplies, appliances, equipment, furnishings and other products that don’t fit directly into any one category – saw the largest three-year growth rate at nearly 30%. Education ranked second at just under 21% and alcoholic beverages ranked third at just under 21% as well.

Considering 2017 offers the latest official data, we used trend analysis to help extrapolate the 2018 and 2019 columns. Appling a geometric average growth rate – using the last four years of data – we forecasted future values for each segment. While the sample is short-term in nature, the geometric average helps smooth out volatility in the numbers and provides a baseline for underlying trends.

 

Category:2014:2015:2016:2017: *2018: *2019:
Housing:$17,798$18,409$18,886$19,884$20,632$21,409
Transportation:$9,073$9,503$9,049$9,576$9,750$9,927
Food:$6,759$7,023$7,203$7,729$8,082$8,452
Personal Insurance and Pensions:$5,726$6,349$6,831$6,771$7,160$7,572
Healthcare:$4,290$4,342$4,612$4,928$5,161$5,405
Entertainment:$2,728$2,842$2,913$3,203$3,379$3,565
Cash Contributions:$1,788$1,819$2,081$1,873$1,902$1,932
Apparel and Services:$1,786$1,846$1,803$1,833$1,849$1,865
Education:$1,236$1,315$1,329$1,491$1,587$1,690
Miscellaneous:$782$871$959$1,010$1,100$1,198
Personal Care Products/Services:$645$683$707$762$806$852
Alcoholic Beverages:$463$515$484$558$594$632
Tobacco/Smoking Products:$319$349$337$332$336$341
Reading:$103$114$118$110$112$115

Based on our calculations, we believe 2019 household spending will increase across all segments. With U.S. Q4 GDP coming in at 2.2% (annualized) and unemployment near historic lows, both are strong indicators of future price inflation. Absent of a recession, we also expect income to bounce back in 2019. It wouldn’t be surprising to see average income in the $78,000 to $79,000 range.

 

Changes in Average U.S. Household Spending by Income

When decomposing the numbers by income, those in the lowest income bracket saw healthcare – at $336.07 – make up the largest increase in average household spending. However the increase was partially offset by a $270.17 decline in average transportation spending.

In the second-lowest income bracket, food and housing made up nearly 49% of the total change in average household spending. Combined, consumers here spent $881.83 more than those in the lowest income bracket.

For middle income consumers, the largest increase occurred in the housing segment, which was slightly offset by a decline in apparel and services spending. Representing men’s, women’s and children’s clothing and accessories, apparel was the only negative segment within the bracket. What really stands out though, is average food spending. Middle income individuals spent – on average – at least $143.66 more on food than any other income bracket.

 

Category:Lowest:Second:Third:Fourth: High:
Food:$208.75$692.93$836.59$320.98$565.73
Housing:$145.91$543.56$1,146.41$1,557.03$1,580.84
Apparel and Services:$17.30$88.44– $171.31$92.91$121.95

 

Transportation:– $270.17$579.46$68.41$168.10$2,076.22
Healthcare:$336.07$361.10$375.76$322.67$180.28
Entertainment:$123.96$89.47$172.51$60.64$1,001.00
Cash Contributions:$91.86– $238.70$183.97– $17.83– $1,062.99
Personal Insurance and Pensions:$9.94$37.1$108.89– $46.89– $1,049.53
Other:$216.94– $241.38$84.49$236.04$1,352.64

* Positive numbers indicate year-over-year dollar increases, while negative numbers indicate year-over-year dollar decreases

 

In the fourth income bracket, changes in average housing costs remained the largest outflow, with cash contributions – representing alimony, child support, charitable and political contributions – and personal insurance and pensions showing minimal declines.

Last is high-income earners.

As a significant outlier, changes in transportation costs accounted for a whopping $2,076.22 change in average household expenses. Personal insurance and pensions also saw a steep decline of $1,049.63. Under normal circumstances, high-income earners usually prioritize investing over excess spending. However, in 2017, this wasn’t the case.

 

Changes in Food Expenditures by Age

When analyzing changes in food expenditures by age, insights are what you would expect. As age increases, spending on food at home tends to increase. Individual’s age-38 or less increased their at-home spending by $53.31, while individual’s age-74 to 91 increased their at-home spending by $61.34.

 

Category:≤ 3839 – 54 55 – 73 74 – 91 ≥ 92
Food At Home:$53.31$55.04$58.41$61.34$57.99
Food Away From Home:$46.69$44.96$41.59$38.66$42.01

 

Conversely, spending away from home – at fast-food, full-service or any other external source – tends to increase the younger the demographic. Consumers age 74 to 91 increased their away-from-home spending by $38.66, while consumer’s age-38 or less increased their away-from-home spending by $46.69.

 

How We Conducted the Study

To present the most accurate assessment of the average household budget within the United States, we analyzed data from the U.S. Bureau of Labor Statistics. Its 2017 Consumer Expenditures Survey – the latest annual report – provides analytical information related to the labor force, consumer spending and developments regarding the cost of living.

As well, our study uses the most up-to-date statistics as of April 27, 2019.

 

Conclusion

With inflation continuing to increase the cost of living, average income before taxes didn’t ease the burden, declining for the first time in five years. While year-over-year declines also occurred in 2013, 2010 and 2009, we found average income has a strong ability to bounce back. In fact, the two consecutive declines in 2009 and 2010 can be labelled as outliers – considering they proceeded the 2008 financial crisis. Moreover, history shows that when average income declines, it’s often followed by an increase the very next year.

With that – and absent of a recession – we expect average income to trend higher in 2019. With U.S. GDP holding steady and unemployment near historic lows – both should be supportive of future wage growth.

 

Sources

U.S. Bureau of Labor Statistics: 2017 Consumer Expenditure Survey

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