What do Americans spend their money on you ask?

24/7 Wall St. reviewed how Americans spend(waste?) money. One of the conclusions of this analysis is that consumer spending is relatively alive and well, despite the recession. This may mean that Americans continue to be over-leveraged. I know Canadians certainly are. We Canucks have about 150.00$ of debt for every 100.00$ of income. Not a good statistic.

US citizens have, in general, brought down their indebtedness. However, holiday spending rose substantially from last year, and the extent to which Americans feel poor has declined now that the recession has ended. Americans spend about 15% of their household incomes on things that they do not need to satisfy their vices or to keep themselves amused.

They examined the changes in spending patterns over the course of one generation–20 years. Americans have certainly not cut back on vices because of the recent difficult economy, with the exception of casinos which were hurt badly by the slowdown. Money spent on alcohol and tobacco is about the same as it was two decades ago. Sin apparently is not beaten down by hard times.

Data from the Bureau of Labor Statistics was one of the core sources of information for the 24/7 analysis. We looked at spending habits in 1989 and then again in 2009. The average household expenditure two years ago was $49,000. That is measured against household income before taxes of about $63,000. Real incomes have not risen over the course of the last ten years, something that has not happened in any decade since the Depression. Over the course of the last two decades the increase in real income was only 10%.

The patterns of how people spend money on things has changed. People spend much more on television, radio, and sound systems than they did in 1989. They also spend more on pets and toys.

The BLS divides households into nine income groups. The lowest is households with income less than $5,000 a year. It is hard to imagine how such a household could exist. But, the government definition includes people who rent rooms or other living spaces, so in reality a college student or group of college students would qualify. The highest income group contains households with incomes of over $70,000 a year.

24/7 reviewed how American households spend their money and identified categories in which the expenditures are purely discretionary as a way to set its final list of ways people spend money on unnecessary items. We removed all expenses that could be considered essential to maintain a reasonable living, good health and a steady job. Then, we identified the ten categories of unnecessary purchases which accounted for the largest part of U.S. household expenditures. We also broke the data into several demographics, including income before taxes, regions of the country, and the number of people in each household.

The ten categories of unnecessary purchase can be balanced against the ability of Americans to save money or pay off debts. The “average” American household which has an income of $63,000 spends more than $8,000 on goods and services it does not actually need. The credit crisis might not have been so bad if all that money had been put into savings accounts between 1989 and 2009, but the period would not have been nearly as fun.

Where Do Americans Spend Their Money?

10. Apparel Products and Services
Annual Amount Spent Per Household: $249
% of Total Annual Expenses: 0.5%

This category includes unnecessary purchases such as clothing rentals and storage, dry cleaning, jewelry, and watch repair. Clothing and shoe repairs, which are also included, are rarely considered a waste, but they account for a relatively modest portion of this category. The average amount spent per household is $249. This is slightly down from the 1989 amount, which was $266.

9. Tobacco
Annual Amount Spent Per Household: $380
% of Total Annual Expenses: 0.8%

The average household spends more than $380 each year on tobacco products and smoking supplies, which includes cigarettes, cigars, pipes, and chewing tobacco. It is worth remembering that this average includes households where no one pays for tobacco products. Despite this fact, tobacco’s portion of the average household’s budget, 0.8%, is larger than what Americans spend on fresh fruit and milk combined. A person who smokes a pack of cigarettes a day in New York state will spend more than $4,000 a year, which is roughly 10% of the average American income before taxes.

8. Entertainment Equipment and Services, Nonessential
Annual Amount Spent Per Household: $400
% of Total Annual Expenses: 0.8%

Products in this category include bicycles, trailers, camping equipment, hunting and fishing equipment, sports equipment, boats, photographic equipment and supplies. The average expenditures dedicated to items in this category among all households is $400. The greatest average amount, $870, occurs among households with a husband, wife, and an eldest child age 6 to 17 years. In households with only one parent and at least one child under 18, the amount drops to $188. In 1989, the average amount for all households was slightly less, at $369.

7. Alcohol
Annual Amount Spent Per Household: $435
% of Total Annual Expenses: 0.9%

In 2009, the average American household spent $435 on beer, wine, hard liquor, and mixed drinks. This is more than the amount spent on all non-alcoholic beverages combined. Despite the higher prices often paid in restaurants and bars, the majority of money spent is on alcohol is for drinks consumed in the home. Households consisting only of a husband and wife spent an average of $582, roughly $400 more than single-parent households. On average, household spending on alcohol increased 35% from 1989, but the percent of their total budget spent on drinks is about the same: 1% in 1989 versus 0.9% in 2009.

6. Fees and Admissions
Annual Amount Spent Per Household: $628
% of Total Annual Expenses: 1.3%

In 2009, the average household spent $628 on fees and admissions for sporting events, films, and concerts. This category also includes club memberships and movie rentals. These costs are more than what the average household spent on personal care products. People in the Northeast spent $780 on this category, about $370 more than those in the South. The average annual expenses for these products are nearly double what they were in 1989, when the average movie ticket cost $4, about half of what people spend today.

5. Lodging, Vacation Homes and Hotels
Annual Amount Spent Per Household: $672
% of Total Annual Expenses: 1.4%

The average American household spent more than $670 on vacation homes and hotels. While this is more than the $485 spent twenty years ago, Americans are actually spending less than they used to on their total budgets – 1.7% in 1989 versus 1.4% in 2009. As might be expected, households which make more than $70,000 each year spent far more than the average American: $1,511 in 2009. Households in the Northeast spent $924 on vacation homes and hotels, nearly double what those in the South pay each year.

4. Pets, Toys, Hobbies, and Playground Equipment
Annual Amount Spent Per Household: $690
% of Total Annual Expenses: 1.4%

The average household spent nearly $700 on pets, toys, hobbies, and playground equipment. Nearly 80% of the expenses in this category come from pets, including food and veterinary bills. In contrast, households only spent $140 on toys and games. Families with the oldest child under 6 only spent $670. Families with a child older than 18 spent nearly $1,200. Most of this difference comes from significantly more spending on veterinary services. Households in the Western United States spent $800 on pets, toys and games – 20% more than those in the Midwest. These expenses have increased from 0.9% of household budgets in 1989 to 1.4% in 2009.

3. Television, Radio, and Sound Equipment
Amount Spent Per Household: $975
% of Total Annual Expenses: 2%

In 2009, the average household spent $975 on television, radio, and sound equipment, including cable TV, video game hardware, and movie players. This amount is up from $429 in 1989. For comparison, the average amount spent on reading material, which is another household expenditure category, was only $109. The group which spent the greatest portion of their budget in this category, 2.5%, was those who made between $5,000 to $9,999. The group which spent the least was the group making the most. Households earning $70,000 or more spent only 1.7% of their budget on items in this category.

2. Gifts
Amount Spent Per Household: $1,067
% of Total Annual Expenses: 2.2%

Although Americans spend a great deal of money on unnecessary goods and services for themselves, they also spend a large amount on gifts for others. The average amount spent on gifts (including housing, apparel, and entertainment items) per household in 2009 was $1,067. This amount has increased from $887 in 2009. Households with incomes of less than $5,000 spent an average of $479, while households earning between $5,000 and $9,999 spent an average $261, the lowest amount.

1. Food Away From Home
Amount Spent Per Household: $2,619
% of Total Annual Expenses: 5.3%

Food away from home includes all meals at fast food, take-out, delivery, full-service restaurants, and at vending machines and food carts. In 2009, the average household spent $2,619 on food away from home, compared to an average $1,762 in 1989. The group which spent the most in this category, relative to household income, are those which make less than $5,000 a year. This group spent an average 6.2% of their total budget on food away from home. Those making between $5,000 and $9,999 spent 4.7%.

Pretty eye opening. I know friends of mine who spend a lot more per year on television and cell phones. I don’t know how they do it.

So if you were wondering what do Americans spend their money on, there it is.

It is not how much money you make, it is the decisions you make with the money you do have that matters the most.

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32 thoughts on “Top 10 Things: What Do Americans Spend Their Money On?

      1. In normal circumstances, on fees and admissions, I would say yes. But I’ll only be in New York for another three weeks, and I’ve done quite well at taking advantage of all the free stuff in the past year, so I don’t feel too bad at buying admissions for the remaining stuff I really want to see.

        Alcohol is 100% indulgence, so absolutely yes, I could cut back.

        Food, ah. That could be a whole blog post in and of itself. I don’t eat much, and usually it’s watermelon or a deli sandwhich, so if I get really hungry every couple of days, I get restaurant food. I don’t cook because I don’t own any cookware, and couldn’t bring myself to buy any knowing I’d only be here for a year. Either way, it all costs about three times more here than it did back home. I hate buying food, period. ha ha.

  1. When my children were still at home we spent quite a bit on movie rentals, as they were cheaper than going to the movies, we also spent a large percentage on meals out for a period. Since I changed the way I live, I would have to say gifts would be where I spend the most of my disposable income. I buy all my clothes used and rarely buy much in clothing, I quit eating out, etc so my expenses would be for gifts. My two children grew into a family of spouses and grandchildren now totaling 7 people. I do keep a limit though. Birthdays stay at $20 or less Valentines day, Easter and the like I keep it to under $10 per person and only do for the little ones. Christmas is where I spend the most. I limit the adults to $20 most years and the little ones at $40.

  2. I always take lunches and dinner to work and rarely buy takeaway food… my biggest expense is events (running and fitness) but alot of the time the money is for charity. I bought a MTB to compete in these as well, I try to keep costs to a minimum (being a single parent) but you have to still enjoy life!

  3. I’m glad I inherited my grandpa’s cheapness or should I say “frugality”? I still only pay $30/month for my cell phone because I can’t see the point in getting a smart phone when I am paying for internet on my computer, I mean what is so important that I can’t wait until I either get to the office to check it on my computer there or get home to check it there? A smart phone would at least double my cell bill :O we don’t have cable, we rarely go to movies (unless it’s one I really really want to see and it’s something that I feel would be better on a big screen) – really our only splurge is eating out once a week – so I am ok with that.

      1. For me it was driving on the highways alone in Saskatchewan, if my car ever broke down I figured it would be a very long walk to get help – so I initially got one for that reason. Now I still have one because pretty much everyone else I know has one and they say “text me”, no one ever wants to be just called on the phone any more – I am one of the few people I know with a land line still, but I use it to call my parents and grandparents to chat and my bf does the same, it’s nice. Ditto for the internet replacing the cable, when I had a female roomie we had cable and there was never any thing on – it was such a waste of money.

      2. Unless you are really into reality tv – then there is always some thing on 😉 my parents have cable, so last time I was home I watched a few episodes of this show my coworkers are crazy about, I can’t remember the name of it now – but basically these people go around and bid on storage lockers in hopes that there will be something valuable in them, and this is a whole show! I couldn’t believe it, lol! At Christmas my dad showed me this one where this guy gorges himself on all of these different types of food for “entertainment” – I think that was Man vs. Food – what ever sells though right? They keep making these shows because people keep watching them.

  4. I am kind of surpised that taxes did not make the top ten. 28% income tax, 8.3% sales tax, on any thing I buy, then Property tax, ownership tax, oh and then there is the gas tax. Well over 40% of my income. I guess though, people don’t think about that, it’s all part of the cost of what you buy right? So if you buy a candy bar for $5 and $4.50 is tax, the candy bar cost $5

  5. Oh, and I forgot about interest. We buy stuff on a credit card and then pay interest on top of what we bought. We buy a house and pay more in interest then what we paid for the house. So I think this report is highly inaccurate. Americans spend more money on taxes and interest then anything else.

  6. Wow, just this week I came to the realisation that I spend FAR too much on eating out. Given I spend about 3-4% of my take home pay on food from grocery stores, which is incredibly low, there means a lot of money is going on ‘easy’ food out.

    I reckon on gifts I’d compete – I spend easily $800 at Christmas, and then there’s birthdays (when I feel particularly stingey usually)

    Great post – thanks so much!

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