I frequently claim that the average American family spends roughly $53,000 per year. A few folks have dropped a line to ask how I came up with that number. Simple. Whenever I cite figures about American earning, saving, and spending, I get them from the U.S. government. In this case, I used the Consumer Expenditure Survey (or CEX) from the U.S. Bureau of Labor Statistics.
Here's how the BLS website describes the Consumer Expenditure Survey:
The Consumer Expenditure Survey program consists of two surveys, the Quarterly Interview Survey and the Diary Survey, that provide information on the buying habits of American consumers, including data on their expenditures, income, and consumer unit (families and single consumers) characteristics. The survey data are collected for the Bureau of Labor Statistics by the U.S. Census Bureau. The CEX is important because it is the only Federal survey to provide information on the complete range of consumers' expenditures and incomes, as well as the characteristics of those consumers.
The Consumer Expenditure Survey is the only reliable source I've found about actual spending habits. Most similar projects have much smaller sample sizes and/or provide theoretical numbers. The CEX is a great way to develop a descriptive budget (one that deals with real behavior) instead of a prescriptive budget (one that pushes an agenda).
Naturally, the CEX has its drawbacks. As always, averages (and medians) only provide a limited view of a dataset. Plus, what might be true for an entire population (a country, in this case), probably isn't true for a small subsection (your state or city, for instance). Still, for looking at the Big Picture, nothing I've found beats the Consumer Expenditure Survey.
Let's take a closer look at the CEX — and what we can learn from it.
Decades of Data
If you visit the BLS Consumer Expenditure Survey page, you'll likely be overwhelmed by the amount of information available. When I first found the site, I had to sort through the various reports until I found the one most useful for my work: the “age of reference person” table, which splits spending info based on the age of the person surveyed. (This is the base report I use when I collect stats.)
I also like the “Announcements” section at the top of the page, which provides links to recent reports and analyses of the data. Here for instance are several recent articles:
- A closer look at the spending habits of older Americans
- Expenditures on cellular phone services have increased significantly since 2007
- Using gasoline data to explain price inelasticity
To a money nerd like me, this stuff is golden!
Like most federal government agencies, the BLS has an excellent website. They've collected all past CEX data onto a single page! (Well, almost all past CEX data. Recent years aren't yet listed.) Turns out the government performed this survey once during the early 1960s, once during the early 1970s, then made it an annual things starting in 1984. That means there are now roughly fifty years of stats for money geeks to sort through. (Plus, the site provides access to a “forgotten” expenditure survey from the early 1940s!)
A couple of weeks ago, I went through these surveys and grabbed data to make a spreadsheet that tracks how spending has evolved over time. Rather than bury myself (and you) in a flood of information, I decided to look only at ten-year intervals. I figure by skipping a decade we get a more meaningful look at shifting habits. That means I used expenditure tables from 1961, 1973, 1984, 1994, 2004, and 2014 — the most recent year for which data is available. (All of those links lead to PDFs.) For fun, I also included data from the “forgotten” 1941 survey (which is much less comprehensive than later reports).
Note: For our purposes, I cut a lot of crap. These are complex statistical reports, and they're filled with numbers we don't care about (do we need to know the standard deviation for everything?) and jargon that just confuses, such as “consumer unit” (which we'll call “household”) and “reference person” (which we'll call “head of household”). Here's a complete glossary of CEX terminology. Also, I'm not going to break down every little subcategory. The “Food at home” subcategory has 25 sub-sub-categories beneath it, including “bakery products”, “fish and seafood”, and “processed fruits”. I'm just going to stick to the primary categories and subcategories.
The following tables provide a run-down of the data I collected. After I show you the numbers, I'll discuss a few things that stood out to me about how American spending has changed with time.
Tables 2 and 3: Attributes of the average American household
Note that estimated market value of home is inflation-adjusted
Table 4: Income, taxes, and spending (actual)
Table 5: Income, taxes, and spending (inflation-adjusted)
Table 6: Spending by category (actual)
Table 7: Spending by category (inflation-adjusted)
Take some time to browse this info. Let it soak in. Look for patterns. Look for changes. What surprises you about how Americans spend their money? Where do we spend less than you thought we would? Where do we spend more?
Before I point out some of the things I find interesting, you should know a couple of things:
- First, the tables from the 1961 Consumer Expenditure Survey contain wildly contradictory information. Different tables supply different numbers. Sometimes when you add subcategories, the total is greater than the parent category. Where there's contradictory info, I used table B-17 as my guide (since it most closely resembles later CEX reports). Another problem? Sometimes the scanned pages are difficult to decipher. Is that a three or a five? A six or an eight? I think the numbers here are accurate, but there could be errors.
- I'm a little puzzled by the tax numbers. Throughout the history of the CEX, taxes have remained relatively constant. Then, for whatever reason, the numbers jumped in 2013 and 2014. I'm not sure why this is. There was a new top marginal tax rate introduced in 2013, but that seems unlikely to have caused a jump like this. (Impossible, in fact.) Maybe there was a change in methodology?
With those notes out of the way, let's dive into the numbers! Let's look at how Americans spend their money — both now and in the past.
A note on inflation: Using 2014 as a base, I calculated a cost-of-living adjustment for each year in order to factor out inflation. (I used the U.S. government CPI inflation calculator to get these numbers.) Looking at Table 1, you can see that prices in 1984 were roughly 44% of what they were in 2014. After computing this number, I converted it to a multiplier to get inflation-adjusted expenses. If 1984 prices were 44% of 2014 prices, that means we have to multiply numbers from the former by 2.28 to get equivalents for today.
How Americans Spend Their Money
We could spend hours sifting through this information to find patterns and trends. Instead, let's just hit the highlights.
First up, note how the size of the average household has dropped from 3.2 people in 1961 to 2.5 people in 2014. Almost the entirety of that drop comes from the fact that we're having fewer children. In 1961, the average household contained 1.2 children; today it contains 0.6 children.
Meanwhile, automobile ownership has boomed. Since 1973, we've gone from owning 1.3 cars per household to owning 1.9, an increase of 46% during the past forty years. Other notable demographic changes:
- Today, there are more full-time earners per household than there were in 1961 (1.3 vs. 0.8).
- We, as a society, are much more educated than we were forty years ago. In 1973, an amazing 21.2% of Americans didn't have a high school diploma. Today, that number is down to 3%. Meanwhile, far more people have attended college.
- Home values have far outpaced inflation. The average home was worth $76,156 in 1973; today, it's worth $160,814. (For more on this, see last week's article on the history of the U.S. housing market.)
Moving on to Tables 4 and 5 (Income, taxes, and spending), you can see that even when adjusting for inflation, household income doubled between 1941 and 1973. In the past forty years, household income has only increased another 10%. My guess is that this change can be almost entirely attributed to women entering the workforce. Dual-income households used to be unusual; today, they're common.
As much as income has increased, spending has grown more quickly. In 1973, Americans spent 85.0% of their after-tax income. In 2014, they spent 91.7% of their after-tax income. (Admittedly, spending as a percentage of income seems to bounce around.)
To make it easier to visualize some of these changes, I created another table to calculate some important ratios and percentages.
In 1941, the average American family spent 31% of its budget on food. In 2014, the average family spent 12.6% of its budget on food. That's a huge decline! That number has dropped every decade on record — despite the fact that we're spending more on “food away from home” (which I take to mean restaurant meals). From 1973 to 2014, restaurant spending increased 24% while spending on food at home declined 36%. Overall, food spending declined 21% in in the past forty years.
But not all of our spending has dropped. As you might have guessed, we're spending more and more on housing as time goes by. As I often note, exactly one-third of the average American budget goes to shelter. The numbers have increased every decade. Do I have to tell you how alarming this is? (I hate how many people are house-poor!)
As bad as the housing numbers are, the transportation numbers are worse! Consider this:
- In 1941, the average household spent exactly as much on clothing as they did on housing. (That's a coincidence, not a typo.)
- In 1973, we spent about three times as much on transportation as we did on clothing.
- Today, we spend five times as much on transportation as we do on clothing.
Our clothes are cheaper, sure, but we've also grown obsessed with cars. After adjusting for inflation, Americans now spend three times as much on transportation as they did in 1941! (Fortunately, spending there seems to be drifting downward.)
Meanwhile, health insurance costs are out of control. They've almost tripled in the past forty years — after adjusting for inflation.
I think it's interesting that spending on most miscellaneous categories has declined with time. We're spending 21% less on alcohol than we did in the 1970s. We spend 28% less on recreation and entertainment, 27% less on personal care, 34% less on gifts, and 60% less on books. (No surprise there. Americans don't read much anymore.)
So, we're spending more on the big-ticket items than we used to, but spending less on the little stuff. Honestly, this is dumb. It's the opposite of how it should be. When you spend too much on the big stuff, there's no room left for the little stuff — and that makes most folks feel squeezed for money.
Looking at these tables, what numbers stand out to you? How does your spending compare to the average American family? What worries you about your spending — and the spending of the country as a whole? (And are there other similar surveys and reports I should take into account when writing about consumer spending?)
Author: J.D. Roth
In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.