7 ms·

How The Average U.S. Consumer Spends Their Paycheck

48 points by kqr2 17y ago

Xichekolas 17y ago
Interesting thing to note: The average 'consumer unit' spends 4.8% of their income on gas/oil. So when the price of oil goes up about 20%, it requires roughly 1% more of their annual income... and yet people still claim that the price of gas is 'killing them'.
- paulhart 17y ago
  It's not the 1% that's killing them - it's the fact that they're spending at their limit and they don't have that 1% available. "Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery." -- Charles Dickens, 'David Copperfield'
  - nostrademons 17y ago
    I think this point doesn't get enough attention from people whose salaries are big enough to save lots of money. If you make $60K after taxes and spend $30K, then you can easily eat a $300/year increase in gas expenditures. Your savings rate goes from 50% to 49.5%, big whoop. But if you make $31K and spend $30K, and gas goes up $300/year, it's eaten up a whole 30% of your savings rate. And if you make $30K and spend $30K and gas goes up, you're screwed.
- jules 17y ago
  If the price of gas/oil goes up, the price of other goods goes up as well. But that's probably not what they're complaining about ;)
- diego 17y ago
  I met very few people who complain that the price of gas is 'killing them'. What you hear is the voice of a minority who either spend much more on gas or just like to complain about it. Edit: why the downvote? Doesn't it make sense that those who are vocal about how gas prices are killing them are those who spend _way more_ than the 'average consumer unit'? If gas represents 20% of your income instead of 5%, you are much more likely to complain when prices go up. This will be the case for people who make less than average, have long commutes and older cars.
  - olihb 17y ago
    Maybe it's because people make such a big deal about it. You see the price of gas a couple of times each time you got to work and news anchors will do a story about the price of gas each time it goes up a couple cents. In contrast, we never see the price of bread or jam as often as we see the price of gas. I guess it's an observational bias.
- gojomo 17y ago
  An effective 1% pay cut you weren't planning for could be a big deal. But also: we've seen swings of +95% within the past 3 years -- so at the peak, people were complaining about an effective 5% pay cut. And not everyone complains. I have a tiny commute, a professional job, and live in an expensive city where housing costs dominate -- so even double the gas price is a curiosity ("OMG I've never seen a tank cost that must") rather than a serious pain-point. On the other hand, many people are far above that 4.8% average spend. They have long commutes and fuel-inefficient cars. Poor people, especially, tend to spend relatively more of their income on gas. So when the price of gas goes up 95% (as it did from Jan-2006 to Jun-2008), and you have an older car and above-average commute -- you may have just taken a 10%-plus pay cut, when you may have been living hand-to-mouth already. Such people are honest about higher gas prices "killing them".
  - Xichekolas 17y ago
    Fair enough. And it's true that poorer, or more rural, drivers spend a much higher percentage of income on gas. See excellent graphic by the NYT on this: http://www.nytimes.com/interactive/2008/06/09/business/20080609_GAS_GRAPHIC.html http://www.nytimes.com/interactive/2008/06/09/business/20080... I think I was reflexively lashing out against some people I know that constantly complain about gas, yet choose to drive large trucks and definitely aren't struggling to make ends meet. For them I suppose it's just another topic for small talk, much like the weather.
    - biotech 17y ago
      Maybe those people should buy oil futures, or stock in energy companies then. That way, when oil prices rise, they can cash in on their investment and cancel out the higher gas prices. If they have some financial leeway, they don't have to be a slave to gas prices.
- anamax 17y ago
  > The average 'consumer unit' spends 4.8% of their income on gas/oil. That's only counting direct expenditures. Gas/oil is an expense for almost every other cost as well, especially food.
edw519 17y ago
Any coincidence that this is a government publication and that it doesn't show taxes?
- dexen 17y ago
  Yes it does. `Income before taxes: $63,091', `AVERAGE ANNUAL EXPENDITURES: $49,638'. Computes to $13.453 paid in taxes. That's about 21% of gross income, and compares to expenditures as about 27%. It is my understanding taxes aren't considered expenditures or `costs' anyway. The ring breaks down the expenditures, not the gross income. Whether this is fair or not is up to a democratic debate ;)
  - nopassrecover 17y ago
    Wow US tax rates are low (compared to Australia at least).
    - DanielBMarkham 17y ago
      This varies heavily by location. Several percentage points or more. It would be a lot more in, say, New York or San Francisco, whereas it'd be a lot less in, say Tampa or Austin.
      - nopassrecover 17y ago
        Okay cool. Australia doesn't have state taxes on income (see: http://en.wikipedia.org/wiki/South_Australia_v_Commonwealth http://en.wikipedia.org/wiki/South_Australia_v_Commonwealth). Instead states taxes tend to be particular levies for works or "stamp duty" on purchases (e.g. cars/houses). However, when I put the figures through using current exchange rates, AU income tax would be $14,352 US on that amount (around 29% compared to the original 21%) and our tax rates and thresholds have dropped quite significantly recently.
        whatusername 17y ago
        Don't forget the 10% GST/VAT on almost all purchases.
elcron 17y ago
Full sized imags: http://www.visualeconomics.com/wp-content/uploads/2009/07/wheredidthemoneygo.jpg http://www.visualeconomics.com/wp-content/uploads/2009/07/wh...
DanielBMarkham 17y ago
Interesting that they chose not to consider taxes an expense, even though many things around taxes are decision-based (such as whether to defer income, what types of investments to make, etc) If they had shown taxes, by my calculations it would be the second biggest expenditure, just after housing.
- nazgulnarsil 17y ago
  ~25% straight off the top (obviously changes depending on income). In CA another 10% for sales taxes. The 6-7% the employer pays that you don't even see. On top of that the government inflates the currency every year by 3-5% this isn't even taking into account the fact that producers of goods pay all these taxes as well, so that tax gets factored into the price we pay for the item even before sales tax. I'd say that another 5% for this is being conservative. all told taxes suck 50% of our productivity out easily. if you got a 50% raise tomorrow you think you couldn't afford private security, private schools for your kids and replacements for all other government services with greatly increased quality and lower prices?
  - jusob 17y ago
    "On top of that the government inflates the currency every year by 3-5%" Do you mean the inflation? Is so, this is more around 2%, and not directed by the government.
    - nazgulnarsil 17y ago
      um...the federal reserve directly controls the interest rate paid by banks, which affects how much money is injected into the system. via the money multiplier new money disseminates out into the economy, causing inflation. how is it not government?
      - jusob 17y ago
        The federal reserve does not control the price of oil for example. Controlling inflation is one of its function. Again: controlling it, not setting the inflation rate. For example, there are/were fear of deflation when the inventory was high, and the demand low. With a interest rate set at pretty much 0%, there is not much else the reserve bank can do. So I stand by my statement, the government does not "inflate the prices by 3-5%" a year.
vaksel 17y ago
$457/yr for liquor seems pretty small for a family with 2 adults. And why is tobacco counted for the "average" person? I'd think the average person wouldn't be a smoker.
- j_baker 17y ago
  Simple math. If one person in ten spends 10% of their income on tobacco, then the average person spends 1% of their income on tobacco.
- thorax 17y ago
  More families than you think spend $0/yr on liquor.
  - Xichekolas 17y ago
    I don't have a 'family', but I only spend maybe $250/yr on alcohol, and my girlfriend doesn't spend any, and we are in our mid-20s. It's not for any moral reasons. I only drink beer that I think is tasty, and then pretty much only with meals at restaurants. She just really doesn't like the taste of alcohol.
zoba 17y ago
I don't see any debt factored in, such as paying off student loans and the interest accrued from credit cards.
- mojaam 17y ago
  Not to mention if you are a current full time student, you have to swap insurance or housing for education. Heck, I feel like most of that circle should be education.
  - nostrademons 17y ago
    It's an aggregate over all households. People are students for 4 of the ~60 years of their adult lives, so only 1/15 are full-time students. (Perhaps more, as this doesn't count grad school or two college-educated people getting married and becoming one household. But it also doesn't count the people who don't go to college at all, which is an even bigger proportion.)
aristus 17y ago
Very surprising that people spend 34% of their income on housing. I have always thought it unwise to spend more than 25% -- a big reason why I still rent even when people were telling me I was "throwing my money away".
- gjm11 17y ago
  I'll hazard a guess that the 25% figure refers to rent and mortgage payments only. If I'm understanding the chart correctly, that's what it calls "shelter" -- just one part of "housing", which accounts for 20.2% of expenditures.
  - aristus 17y ago
    It's a little unclear from the chart. But if you have a mortgage, you pay lots more in taxes (the "public services" bit), household insurance, and in repairs.
    - tedunangst 17y ago
      If you own a home you mean. If you have a mortgage, the interest is tax deductible, so you pay a lot less in taxes for at least the first half of the term.
      - aristus 17y ago
        It may be different in other parts of the country. In Florida, the property taxes alone were more than the cost of renting a similar place. So for a $300K condo you paid almost $13,000 in taxes to the city to pay for water roads, schools, etc.
        lutorm 17y ago
        How were the people renting out the properties able to do that for less than their property tax?
        17y ago
maukdaddy 17y ago
I'd like to see this adjusted for higher cost-of-living locations. For example, in Chicago 34% on housing might be on the low side.
newsio 17y ago
America's obsession with cars explains the high transportation outlay (currently > 17%). So many assume that they have to buy new cars (preferably luxury brands, which connote status) and change them every x years. They'll buy them on layaway even if they can't afford the payments.
- xenophanes 17y ago
  Also America's size...
yason 17y ago
Interesting. For reference, rough figures from Finland: - housing 28% - transport 15% - groceries 12% - culture and spare time 11% - personal well-being, extra studies, etc. 11.5% Personally, I can confirm that living costs (i.e. rent or mortgage) indeed do chop the most off my salary but food comes already as the second, but then again I eat well :)
oPerrin 17y ago
Can someone from mint.com confirm these figures? Surveys are fine but I trust transactional records more. The figures don't seem far off as I compare to my mint.com breakdown, but I'd like a more comprehensive and modern approach to this data collection.
- gjm11 17y ago
  Two words: selection bias.
lutorm 17y ago
Given that a very disproportionate amount of the average US income is from a few people making a lot of money, I'm not convinced that looking at expenditures averaged over the population is in any way indicative of the situation of someone making median income. (According to Wikipedia/US Census Bureau, 2007 median household income was $50k, quite different from their average of $63k.)

48 points by kqr2 17y ago

Interesting thing to note: The average 'consumer unit' spends 4.8% of their income on gas/oil. So when the price of oil goes up about 20%, it requires roughly 1% more of their annual income... and yet people still claim that the price of gas is 'killing them'.

paulhart 17y ago
It's not the 1% that's killing them - it's the fact that they're spending at their limit and they don't have that 1% available. "Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery." -- Charles Dickens, 'David Copperfield'
- nostrademons 17y ago
  I think this point doesn't get enough attention from people whose salaries are big enough to save lots of money. If you make $60K after taxes and spend $30K, then you can easily eat a $300/year increase in gas expenditures. Your savings rate goes from 50% to 49.5%, big whoop. But if you make $31K and spend $30K, and gas goes up $300/year, it's eaten up a whole 30% of your savings rate. And if you make $30K and spend $30K and gas goes up, you're screwed.
jules 17y ago
If the price of gas/oil goes up, the price of other goods goes up as well. But that's probably not what they're complaining about ;)
diego 17y ago
I met very few people who complain that the price of gas is 'killing them'. What you hear is the voice of a minority who either spend much more on gas or just like to complain about it. Edit: why the downvote? Doesn't it make sense that those who are vocal about how gas prices are killing them are those who spend _way more_ than the 'average consumer unit'? If gas represents 20% of your income instead of 5%, you are much more likely to complain when prices go up. This will be the case for people who make less than average, have long commutes and older cars.
- olihb 17y ago
  Maybe it's because people make such a big deal about it. You see the price of gas a couple of times each time you got to work and news anchors will do a story about the price of gas each time it goes up a couple cents. In contrast, we never see the price of bread or jam as often as we see the price of gas. I guess it's an observational bias.
gojomo 17y ago
An effective 1% pay cut you weren't planning for could be a big deal. But also: we've seen swings of +95% within the past 3 years -- so at the peak, people were complaining about an effective 5% pay cut. And not everyone complains. I have a tiny commute, a professional job, and live in an expensive city where housing costs dominate -- so even double the gas price is a curiosity ("OMG I've never seen a tank cost that must") rather than a serious pain-point. On the other hand, many people are far above that 4.8% average spend. They have long commutes and fuel-inefficient cars. Poor people, especially, tend to spend relatively more of their income on gas. So when the price of gas goes up 95% (as it did from Jan-2006 to Jun-2008), and you have an older car and above-average commute -- you may have just taken a 10%-plus pay cut, when you may have been living hand-to-mouth already. Such people are honest about higher gas prices "killing them".
- Xichekolas 17y ago
  Fair enough. And it's true that poorer, or more rural, drivers spend a much higher percentage of income on gas. See excellent graphic by the NYT on this: http://www.nytimes.com/interactive/2008/06/09/business/20080609_GAS_GRAPHIC.html http://www.nytimes.com/interactive/2008/06/09/business/20080... I think I was reflexively lashing out against some people I know that constantly complain about gas, yet choose to drive large trucks and definitely aren't struggling to make ends meet. For them I suppose it's just another topic for small talk, much like the weather.
  - biotech 17y ago
    Maybe those people should buy oil futures, or stock in energy companies then. That way, when oil prices rise, they can cash in on their investment and cancel out the higher gas prices. If they have some financial leeway, they don't have to be a slave to gas prices.
anamax 17y ago
> The average 'consumer unit' spends 4.8% of their income on gas/oil. That's only counting direct expenditures. Gas/oil is an expense for almost every other cost as well, especially food.

edw519 17y ago

Any coincidence that this is a government publication and that it doesn't show taxes?

dexen 17y ago
Yes it does. `Income before taxes: $63,091', `AVERAGE ANNUAL EXPENDITURES: $49,638'. Computes to $13.453 paid in taxes. That's about 21% of gross income, and compares to expenditures as about 27%. It is my understanding taxes aren't considered expenditures or `costs' anyway. The ring breaks down the expenditures, not the gross income. Whether this is fair or not is up to a democratic debate ;)
- nopassrecover 17y ago
  Wow US tax rates are low (compared to Australia at least).
  - DanielBMarkham 17y ago
    This varies heavily by location. Several percentage points or more. It would be a lot more in, say, New York or San Francisco, whereas it'd be a lot less in, say Tampa or Austin.
    - nopassrecover 17y ago
      Okay cool. Australia doesn't have state taxes on income (see: http://en.wikipedia.org/wiki/South_Australia_v_Commonwealth http://en.wikipedia.org/wiki/South_Australia_v_Commonwealth). Instead states taxes tend to be particular levies for works or "stamp duty" on purchases (e.g. cars/houses). However, when I put the figures through using current exchange rates, AU income tax would be $14,352 US on that amount (around 29% compared to the original 21%) and our tax rates and thresholds have dropped quite significantly recently.
      - whatusername 17y ago
        Don't forget the 10% GST/VAT on almost all purchases.

elcron 17y ago

Full sized imags: http://www.visualeconomics.com/wp-content/uploads/2009/07/wheredidthemoneygo.jpg http://www.visualeconomics.com/wp-content/uploads/2009/07/wh...

DanielBMarkham 17y ago

Interesting that they chose not to consider taxes an expense, even though many things around taxes are decision-based (such as whether to defer income, what types of investments to make, etc) If they had shown taxes, by my calculations it would be the second biggest expenditure, just after housing.

nazgulnarsil 17y ago
~25% straight off the top (obviously changes depending on income). In CA another 10% for sales taxes. The 6-7% the employer pays that you don't even see. On top of that the government inflates the currency every year by 3-5% this isn't even taking into account the fact that producers of goods pay all these taxes as well, so that tax gets factored into the price we pay for the item even before sales tax. I'd say that another 5% for this is being conservative. all told taxes suck 50% of our productivity out easily. if you got a 50% raise tomorrow you think you couldn't afford private security, private schools for your kids and replacements for all other government services with greatly increased quality and lower prices?
- jusob 17y ago
  "On top of that the government inflates the currency every year by 3-5%" Do you mean the inflation? Is so, this is more around 2%, and not directed by the government.
  - nazgulnarsil 17y ago
    um...the federal reserve directly controls the interest rate paid by banks, which affects how much money is injected into the system. via the money multiplier new money disseminates out into the economy, causing inflation. how is it not government?
    - jusob 17y ago
      The federal reserve does not control the price of oil for example. Controlling inflation is one of its function. Again: controlling it, not setting the inflation rate. For example, there are/were fear of deflation when the inventory was high, and the demand low. With a interest rate set at pretty much 0%, there is not much else the reserve bank can do. So I stand by my statement, the government does not "inflate the prices by 3-5%" a year.

vaksel 17y ago

$457/yr for liquor seems pretty small for a family with 2 adults. And why is tobacco counted for the "average" person? I'd think the average person wouldn't be a smoker.

j_baker 17y ago
Simple math. If one person in ten spends 10% of their income on tobacco, then the average person spends 1% of their income on tobacco.
thorax 17y ago
More families than you think spend $0/yr on liquor.
- Xichekolas 17y ago
  I don't have a 'family', but I only spend maybe $250/yr on alcohol, and my girlfriend doesn't spend any, and we are in our mid-20s. It's not for any moral reasons. I only drink beer that I think is tasty, and then pretty much only with meals at restaurants. She just really doesn't like the taste of alcohol.

zoba 17y ago

I don't see any debt factored in, such as paying off student loans and the interest accrued from credit cards.

mojaam 17y ago
Not to mention if you are a current full time student, you have to swap insurance or housing for education. Heck, I feel like most of that circle should be education.
- nostrademons 17y ago
  It's an aggregate over all households. People are students for 4 of the ~60 years of their adult lives, so only 1/15 are full-time students. (Perhaps more, as this doesn't count grad school or two college-educated people getting married and becoming one household. But it also doesn't count the people who don't go to college at all, which is an even bigger proportion.)

aristus 17y ago

Very surprising that people spend 34% of their income on housing. I have always thought it unwise to spend more than 25% -- a big reason why I still rent even when people were telling me I was "throwing my money away".

gjm11 17y ago
I'll hazard a guess that the 25% figure refers to rent and mortgage payments only. If I'm understanding the chart correctly, that's what it calls "shelter" -- just one part of "housing", which accounts for 20.2% of expenditures.
- aristus 17y ago
  It's a little unclear from the chart. But if you have a mortgage, you pay lots more in taxes (the "public services" bit), household insurance, and in repairs.
  - tedunangst 17y ago
    If you own a home you mean. If you have a mortgage, the interest is tax deductible, so you pay a lot less in taxes for at least the first half of the term.
    - aristus 17y ago
      It may be different in other parts of the country. In Florida, the property taxes alone were more than the cost of renting a similar place. So for a $300K condo you paid almost $13,000 in taxes to the city to pay for water roads, schools, etc.
      - lutorm 17y ago
        How were the people renting out the properties able to do that for less than their property tax?
        17y ago

maukdaddy 17y ago

I'd like to see this adjusted for higher cost-of-living locations. For example, in Chicago 34% on housing might be on the low side.

newsio 17y ago

America's obsession with cars explains the high transportation outlay (currently > 17%). So many assume that they have to buy new cars (preferably luxury brands, which connote status) and change them every x years. They'll buy them on layaway even if they can't afford the payments.

xenophanes 17y ago
Also America's size...

yason 17y ago

Interesting. For reference, rough figures from Finland: - housing 28% - transport 15% - groceries 12% - culture and spare time 11% - personal well-being, extra studies, etc. 11.5% Personally, I can confirm that living costs (i.e. rent or mortgage) indeed do chop the most off my salary but food comes already as the second, but then again I eat well :)

oPerrin 17y ago

Can someone from mint.com confirm these figures? Surveys are fine but I trust transactional records more. The figures don't seem far off as I compare to my mint.com breakdown, but I'd like a more comprehensive and modern approach to this data collection.

gjm11 17y ago
Two words: selection bias.

lutorm 17y ago

Given that a very disproportionate amount of the average US income is from a few people making a lot of money, I'm not convinced that looking at expenditures averaged over the population is in any way indicative of the situation of someone making median income. (According to Wikipedia/US Census Bureau, 2007 median household income was $50k, quite different from their average of $63k.)