How the average american spends their cash.

[Rich M]

This is an eye opener.  First note the age on the chart.  That should shock you.



Lets analyze this in a very conservative way, neglecting not so obvious ways to cut the expenses down:

 Housing:  $16895, $1408/ month.  I can understand that for an average house with mortgage and property taxes. etc.  The question however is, for how long?  Average to me indicates a life-long expense.  What I mean by this is the expense has to be much higher for those with mortgages to make up for those who have paid off their houses.

Food: $6372, $531/ month.  Not whole foods shoppers with a family of five for sure.  But not super frugal either.  One should be easily able to chop this down.

Apparel and services:  $1725, $144/month. I guess this is okay for those high paid lawyers making a crapload.  For me, this is &1725 in my investments every year.

Transportation: $7658, $638/' month.....of for an average driver, 55 cents per mile.  Wow. this is a smoking gun.  Half this and you get $3830 in the bank per year.  Ride a bike and one should chop this down to just insurance on a parked used car, costing less that $50/ month, putting 7008 in the bank. every year.  What a windfall.

Healthcare: $3126, $260/month.   Kinda cheap actually. This is a hard one.  But high deductible health plans with living a healthy lifestyle go a long way.  One thing MMM has not addressed is that a lot of people spend money on  health care because society says they should.  A good employer will have a really cheap high deductible plan...in the tens of dollars range- or for nothing.

Entertainment: $2693, $224/ month.   Another WOW.  I guess internet, cable are here.  But this goes to show that those things add up.  Even an addict can cut this in half with no effort.  $1346 in the bank with no thought...and it should be a lot more.

Insurance Pension: $5471, $456/ month.  Not sure exactly what this means.  Part is good, pension. Part is insurance.  I have a hard time lumping pension in with insurance since one is hedging risk and the other is my future income.  To me future income is totally independent of hedging risk.    If even 4000 of this is retirement. Yay.  Wonderful.  That is awesome.  Besides, putting money away is not a expenditure, it's saving.

Everything Else: $5127, $427/month.  This is the slush. So make it $100/month. That leaves $3927/ year in the bank.

The awesomeness would add up to a whopping $18006 minimum in the bank for me if I were this average  based on the expenditures I noted and my savings plan. That doesn't include the unknown variables like the grocery shopping based on the scenario presented.

[LindseyBob]

Great graphic - makes me pleased we don't have to pay for healthcare in the UK! Extortionate price of petrol probably evens that out though!

[James]

Great graphic - makes me pleased we don't have to pay for healthcare in the UK! Extortionate price of petrol probably evens that out though!

Most Americans pay a lot more than that for health care, it just comes out of their check before they get the money since the company is paying much of the premium.  I assume you also pay for health care, but in your case you pay for it with your taxes, and your government does pay a lot less for your health care than we pay.
 
The numbers certainly seem about right for the average I see around me.  I'm so glad that isn't representative of the allocation of my paycheck, but it reminds me how far I have to go since I'm not that far off from some of those numbers.

[shedinator]

Average pre-tax income seems pretty high. I thought I saw a recent graphic that set the median household income at less than $50k.

[zinnie]

Average pre-tax income seems pretty high. I thought I saw a recent graphic that set the median household income at less than $50k.

I thought this too but look at how they're defining consumer units: (1) All members of a particular household who are related by blood, marriage, adoption, or other legal arrangements; (2) a person living alone or sharing a household with others or living as a roomer in a private home or lodging house or in permanent living quarters in a hotel or motel, but who is financially independent; or (3) two or more persons living together who use their incomes to make joint expenditure decisions.

Also, the income question looks like self-report data, as opposed to data coming from the employers. I would imagine this skews it higher.

 I just noticed also that the mean wage for one person in 2011 is $45,000. This is higher than I thought it was (http://www.bls.gov/oes/current/oes_nat.htm#00-0000)

[shedinator]

I just noticed also that the mean wage for one person in 2011 is $45,000. This is higher than I thought it was (http://www.bls.gov/oes/current/oes_nat.htm#00-0000)

While Median and Mean wages are both arbitrary numbers, IMO the Median tells you a lot more about what the "average" person's finances look like, because the mean is heavily skewed upward. If there are 9 people who made $0 for 1 person who made $1,000,000 last year, their mean individual income would be $100,000, even though 90% of them are unemployed. On the other hand, their median income is $0, which better reflects the average person in the group. Since there is a lower limit for income ($0), but no upper limit, and just one person making a large sum can skew the whole group, the median is the more logical measure.
One source (the OECD) in the Wikipedia article on Median household income says the US's MHI was $31,111 last year. The 2010 Census puts it at $49,445. A few years ago, it was reported that single-income households are pretty rare (I think the number was something like 7% of married folks with children were living off a single income), so I'm guessing that that $49,445 reflects more than a single wage earner in most cases, making it pretty unlikely that the median income is anywhere near 45k.

[Rich M]

Yeah.  It's too bad they did use average.  I guess the although the labor dept has numbers on the median income but maybe not on expenditures or something like that.

And yes median is better....and being that the average skews the numbers high, shows that most of the wealth is in a small number of households.  If there was an equal proportion of wealth, then the median and the average could be used interchangeably.

I just noticed also that the mean wage for one person in 2011 is $45,000. This is higher than I thought it was (http://www.bls.gov/oes/current/oes_nat.htm#00-0000)

While Median and Mean wages are both arbitrary numbers, IMO the Median tells you a lot more about what the "average" person's finances look like, because the mean is heavily skewed upward. If there are 9 people who made $0 for 1 person who made $1,000,000 last year, their mean individual income would be $100,000, even though 90% of them are unemployed. On the other hand, their median income is $0, which better reflects the average person in the group. Since there is a lower limit for income ($0), but no upper limit, and just one person making a large sum can skew the whole group, the median is the more logical measure.
One source (the OECD) in the Wikipedia article on Median household income says the US's MHI was $31,111 last year. The 2010 Census puts it at $49,445. A few years ago, it was reported that single-income households are pretty rare (I think the number was something like 7% of married folks with children were living off a single income), so I'm guessing that that $49,445 reflects more than a single wage earner in most cases, making it pretty unlikely that the median income is anywhere near 45k.

[zinnie]

I just noticed also that the mean wage for one person in 2011 is $45,000. This is higher than I thought it was (http://www.bls.gov/oes/current/oes_nat.htm#00-0000)

While Median and Mean wages are both arbitrary numbers, IMO the Median tells you a lot more about what the "average" person's finances look like, because the mean is heavily skewed upward. If there are 9 people who made $0 for 1 person who made $1,000,000 last year, their mean individual income would be $100,000, even though 90% of them are unemployed. On the other hand, their median income is $0, which better reflects the average person in the group. Since there is a lower limit for income ($0), but no upper limit, and just one person making a large sum can skew the whole group, the median is the more logical measure.
One source (the OECD) in the Wikipedia article on Median household income says the US's MHI was $31,111 last year. The 2010 Census puts it at $49,445. A few years ago, it was reported that single-income households are pretty rare (I think the number was something like 7% of married folks with children were living off a single income), so I'm guessing that that $49,445 reflects more than a single wage earner in most cases, making it pretty unlikely that the median income is anywhere near 45k.

I know the difference between mean and median, haha, but I see your point. The data I used was based on wages as reported by employers/ industries, though, not on household or individual yearly incomes, so there are no zeros averaged in there. I still think mean is a valuable measure here, assuming that for the big picture we're also looking at income distribution as well.

I just noticed also that the mean wage for one person in 2011 is $45,000. This is higher than I thought it was (http://www.bls.gov/oes/current/oes_nat.htm#00-0000)

While Median and Mean wages are both arbitrary numbers, IMO the Median tells you a lot more about what the "average" person's finances look like, because the mean is heavily skewed upward. If there are 9 people who made $0 for 1 person who made $1,000,000 last year, their mean individual income would be $100,000, even though 90% of them are unemployed. On the other hand, their median income is $0, which better reflects the average person in the group. Since there is a lower limit for income ($0), but no upper limit, and just one person making a large sum can skew the whole group, the median is the more logical measure.
One source (the OECD) in the Wikipedia article on Median household income says the US's MHI was $31,111 last year. The 2010 Census puts it at $49,445. A few years ago, it was reported that single-income households are pretty rare (I think the number was something like 7% of married folks with children were living off a single income), so I'm guessing that that $49,445 reflects more than a single wage earner in most cases, making it pretty unlikely that the median income is anywhere near 45k.

The same study has the median hourly wage as $16.57, which converts to $34,466 a year.