How Much is the Average Household Budget?
Updated: Apr 3, 2020
The following is an article “How Much is the Average Household Budget?” by Marc Primo.
It’s difficult to live from paycheck to paycheck. Often times, we wonder where our income goes or if we are allotting the proper amount for our monthly expenses. Are you shopping for too much food? Should you rent a smaller space? Or are you consuming way too much of your utilities? These questions haunt many of us the moment we subtract all our expenses from our monthly salary. Here, we answer the easiest yet most important of all: How much is the average household budget?
As a rule, household expenses are to be limited to only 30% of you monthly salary. While this rule of thumb may not usually work for some, it helps to always keep things in check so you can make the proper adjustments. Should utility expenses increase, you can balance your budget ratio in a way that you won’t exceed your monthly allowance.
That said, let’s review how the average Joe spends for some household expenses on a monthly basis and how you can stretch your budget.
10% on Food. Surprisingly, the average American only spends 10% on food. This roughly translates to $7,203 annually or $600 a month. Try to keep your food budget at a minimum to shoulder the cost for your other expenses. Eating out takes a lot more of your meal allowance and so does consuming pre-packaged food. It would save you more money, not to mention make you a whole lot healthier, to shop for raw organic ingredients and cook them at home.
30% on Housing. According to the Bureau of Labor Statistics (BLS) survey, the average American is comfortable allotting $19,884 for housing costs, regardless of whether they live at home or pay rent. However, problems may arise for lower-income families when cost of living increases as their monthly budget appreciates to 40%. If you belong in this category, it might be a good idea to limit your spending for leisure and pleasure, or look for extra income. Living on almost half of your monthly salary on housing costs will make it difficult for you to save money. What you’d want to do is review these expenses and make the necessary changes to keep it at 30%.
13% on Transportation. Around 225 million Americans are licensed drivers and most households believe that owning a car is a necessity. But a huge chunk of your salary goes to transportation more than food, according to the BLS. Auto loans are paid on a monthly basis in a span of three to five years and you also have gas and maintenance to think about. Buying a new car after you’ve exhausted an old one will also let you pay 5% of your income annually on a depreciating asset. You could lower your expenses by opting to ride via public transportation, carpooling, or signing up in a car share network. These alternatives now offer passenger convenience and comfort at a smaller cost than maintaining your own vehicle.
8.63% on Retirement. Retirement money is important and 21% of Americans have nothing saved for the future, while one of three only have $5,000 for it. The most common cause for this is that wages have barely increased in decades. This means that the average American’s purchasing power continues to drown in inflation leaving less for retirement savings. You may want to start saving up now and automate your retirement savings so that the money you allot for it won’t get wasted on purchases. Household expenses will likely continue to increase in the coming years, so add more for your retirement savings to ensure your security and peace of mind in the future.