What is the Average Household Budget?

How much of my monthly budget should I be spending on food? Am I eating out too much?

What about rent? Am I spending too much on rent or maybe utilities?

These are all difficult questions. It's hard to know if we're spending too much or too little unless we're constantly in the red, but that's hardly the best approach.

For many of these questions, we often rely on rules of thumb. But rules of thumb are funny.

Some make sense, others don't. And most can't be “confirmed” or “proven” in any meaningful way.

That said, rules of thumb are really guidelines (but guidelines of thumb sounds even sillier). With so many situations and scenarios, it's impossible to believe there exists a rule that works in all cases.

One budgeting rule of thumb is that you should limit your housing expenses (total of your mortgage/rent plus utilities) to 30% of your take-home income. That's a solid rule of thumb that I include in my post about important money ratios to remember.

While your specific situation will have a huge influence on how much you spend in any budget category, it's good to have guidelines as a sanity check.

But absent any rules of thumb for spending, how much should you be spending on various items?

While we can't build a rule for everyone, reviewing how the average American spends their money can be very useful.

Average “Expenditures”

The best data set for this type of inforamtion is the Bureau of Labor Statistics' 2017 Consumer Expenditure Survey.

The BLS collects this type of data through the use of surveys and it's one of the most comprehensive surveys on consumer spending and income. You can read their overview for the methodology. If you look at the spreadsheets, there is a tremendous amount of granular detail. For our purposes, we'll be looking at the most general figures.

Here are the expenditures of all consumer units in 2017:

  • Food: $7,729. They break this down into Food at home ($4,363) and Food away from home ($3,365).
  • Alcoholic beverages: $558
  • Housing: $19,884
  • Apparel and services: $1,833
  • Transportation: $9,576 (of which gasoline and fuel accounts for $1,968)
  • Healthcare: $4,928
  • Entertainment: $3,203
  • Personal care products and services: $762
  • Reading: $110
  • Education: $1,491
  • Tobacco products and smoking supplies: $332
  • Miscellaneous: $1,010
  • Cash contributions: $1,873
  • Personal insurance and pensions: $6,771

If you were to add up all the spending, the total expenditure is $60,060.

It's important to note that this is the average for all households. This includes single-person households to multi-children families. It also includes households across the country from areas with significantly different costs of living.

We recognize the limitations of using such a general number so I would focus less on the specific number and more on the relationships.

Individual Budget Categories & Percentages

To that end, let's see how much people spend on what as a percentage of their total spending budget and of their income.

Many of the personal expenditure categories match up with what regular folks put as budget categories in their budget spreadsheets or apps.

Food is food, housing is rent or your mortgage, etc. Here are those categories, with their calculated percentage of your total budget as well as the percentage of income before taxes. Utilities is specifically mentioned, but here is info about the average utility bill

For this table, the total expenditure is $60,060 and total income before taxes is $73,573.

Category Amount % of Spending % of Income
Food $7,729 12.87% 10.5%
– Food at home $4363 7.26% 5.93%
– Food away from home $3365 5.6% 4.57%
Housing $19884 33.1% 27%
– Shelter $11895 19.8$ 16.17%
Apparel & services $1833 3.05% 2.49%
Transportation $9576 15.9% 13.02%
– Vehicle Purchase $4054 6.74% 5.51%
– Fuel (Gas) $1968 3.27% 2.67%
Healthcare $4928 8.2% 6.7%
– Health insurance $3414 5.68% 4.64%
Entertainment $3206 5.33% 4.36%
Personal care $762 1.27% 1.04%
Education $1491 2.48% 2.03%
Cash contributions $1873 3.12% 2.55%
Personal insurance $6771 11.27% 9.2%
Pensions, Social Security $6353 10.58% 8.63%
Miscellaneous $2010 3.34% 2.73%

Also, here is a glossary of BLS vocabulary. I had to look up what a bunch of different items meant, like cash contributions. Those are payments to persons or organizations and includes things like alimony as well as charitable contributions.

I calculated both columns because I wanted to but it's the last column that I really want to pay attention to. I chose to calculate it as a percentage of income before taxes because most of think of our income as our “salary.” It's not what we take home.

I also chose before taxes because it's a little cleaner of a calculation. Everyone's tax situation is different and you could have more tax deductions, etc, but it's all roughly similar at similar incomes. If it's a big issue for you, it's a simple adjustment.

Here are the major budget categories and percentages of income:

  • Food: 10.5%
  • Housing: 27%
  • Transportation: 13%
  • Healthcare: 6.7%
  • Personal Insurance: 9.2%
  • Retirement (pensions, SS): 8.63%

Key Takeaways

Here were some key takeaways I found interesting.

Food is 10%

We all need food to survive and it was interesting to see that the average American spent 10% on food with an even split between going out and cooking at home. The BLS' summary data table didn't include one breakout item, which was $558 per year on alcoholic beverages. That one was in the bigger Excel tables if you care to download them. I suspect (OK, I'm certain) we spent more than $558 on alcoholic beverages annually and that may highlight the risks of leaning too heavily on population data like this one!

I was surprised the spend on food was so close to even between cooking at home and going out. That said, I think our budget is similar though the number of meals cooked at home vastly outnumbers the number eat out (all breakfasts and most lunches and dinners are at home). Still, it's surprising.

Housing is 30%

This all started with the idea that a key money ratio was keeping housing costs below 30%. We saw that the average spent on housing was $19,884, or 27% of the average income before taxes.

Obviously, the less you pay (within reason), the better. But 30% as a benchmark is not unreasonable if you are in a typical situation. This is affected a bit by those who live at home (and pay no rent) and those who live in a very high cost of living areas with a relatively low-income job, but the average of the population seems to make the 30% rule an attainable one.

The next two pieces of that 30-20-50 money ratio are that you should save at least 20% of your income (or use it to pay down debt)and reserve the remaining 50% for other expenses. (interestingly enough, those who which to retire early and financially independent often seek to save 50%+ of their income)

You can play with those numbers but limiting your housing to 30% means the other numbers are bigger.

But the challenge is that you can't always control your housing costs. The Pew Charitable Trusts analyzed the Bureau of Labor Statistics Consumer Expenditure Survey (we use the same data) and saw that lower-income households spent more, as a percentage of income, than middle and top incomes. Lower-income households spent 40%, compared to 25% for middle and 17% for the top.

It's hard to get ahead when you're spending 40% just on where you live.

Transportation – 13%

For many Americans, owning a car is almost part of the American dream. The freedom of movement is incredible and it's one of the best ways you can invest in yourself as you move up the economic ladder. Not having to rely on public transportation, especially in non-urban environments, can save you a ton of time.

I was, however, surprised that this typically consumes 13% of one's income. That strikes me as a large number. Much of it goes towards the auto loan, which is something folks carry for 3-5 years, and it correlates with the advice that you should be driving a car as long as possible. After the purchase, much of the rest is on fuel and maintenance. If you keep buying new cares, you're paying 5% of your income every year and that's like carrying another mortgage. On a depreciating asset.

“Retirement” of 8.63%

I called this category retirement but it covers pensions, and I assume defined contribution plans like 401(k), and Social Security, which is mandatory for W2 income at 6.2%.

If you take everything at face value, that means people are only contributing 2.03% towards pensions. This kind of matches up a little with the overall savings rate, tracked by the St. Louis Federal Reserve. The savings rate for November 2018 was 6%.

The only thing we can say about that is 2% towards retirement is often the bare minimum. That's not nearly enough.

Personal insurance of 9.2%

Personal insurance covers any insurance of the person besides health insurance. This includes life insurance, mortgage guarantee insurance, personal liability, umbrella, accident, and disability. It doesn't include insurance on home or auto.

9.2% of income on premiums seems like a very high number considering it excludes two of our biggest insurance line items – homeowners and auto insurance.

I'm sure there are more interesting statistics to keep an eye on but these were the ones that jumped out at me.

What do you think? Does anything surprise you?

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Jim Wang

About Jim Wang

Jim Wang is a thirty-something father of three who is a frequent contributor to Forbes and Vanguard's Blog. He has also been fortunate to have appeared in the New York Times, Baltimore Sun, Entrepreneur, and Marketplace Money.

Jim has a B.S. in Computer Science and Economics from Carnegie Mellon University, an M.S. in Information Technology - Software Engineering from Carnegie Mellon University, as well as a Masters in Business Administration from Johns Hopkins University. His approach to personal finance is that of an engineer, breaking down complex subjects into bite-sized easily understood concepts that you can use in your daily life.

One of his favorite tools (here's my treasure chest of tools,, everything I use) is Personal Capital, which enables him to manage his finances in just 15-minutes each month. They also offer financial planning, such as a Retirement Planning Tool that can tell you if you're on track to retire when you want. It's free.

He is also diversifying his investment portfolio by adding a little bit of real estate. But not rental homes, because he doesn't want a second job, it's diversified small investments in a few commercial properties and a farm in Illinois via AcreTrader.

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  1. DNN says

    A few good things I’m happy about:

    1. I don’t drink any alcohol anymore
    2. I don’t smoke cigarettes
    3. I cut out fried foods
    4. I do more cardio
    5. I think positive
    6. I’m striving to live frugal

    Today, I’m watchful about spending money. I know millions of dollars await to be made online and the money I use for miscellaneous purposes, I could use for extending the reach of my online businesses. The household spending budget in overall is “in check.” 🙂

  2. Anderson says

    Maybe the alcohol rate was lower than expected because people buy at the grocery store and it gets lumped in with food…as opposed to buying drinks out at a bar or restaurant. This was a very interesting read! Thank you! Kate

    • Jim Wang says

      Ohhhh… maybe. Or maybe the population of folks who do not partake (or do so very sparingly) affects the figures. Who knows! Data is beautiful!

  3. David Ryan says

    Hi Jim. Good discussion. My wife and I are both working and both 60+\-. We are very fortunate to have been able to stay employed and even save through the last several recessions. It put us in the position of having no debt and no mortgage. Everything is on a cash basis including cars. Our ratios are quite a bit different as you would expect. Property taxes + insurance + utilities + outside maintenance runs us less than 10% of income. So giving and savings goes up while being able to maintain a decent but modest lifestyle with cars, food and travel. The key lesson for me was to build equity. I have always worked for others so the process took over thirty years but now we could walk away from employment and be self-sufficient. We are working because we want just a “little bit more” … admittedly not a noble aspiration. A growing number of grandchildren is giving us the compelling reason to trade money for more free time. All the best.

  4. Mighty Investor says

    Interesting data, and not something I’ve read elsewhere. I agree the alcohol numbers look low.

    The data on gas consumption just highlights how much American culture revolves around cars. Spending money on cars, spending time in cars, gas, etc. Always sort of boggles my mind since I’ve lived a huge chunk of my life in other countries where this is not the case.

    Keep up the great writing.

  5. Eric says

    Nice numbers,

    Of course the alcohol numbers may look low to those it applies. For this group it averaged down by those that are full time teetotalers,designated drivers,or just prefer not to partake. Tobacco Ditto. So now you also know where to get a little more money to put into savings. Also your lungs,heart and liver will be grateful as well as they will feel better in retirement as well.

    Eric

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