Are you spending too much on "normal" expenses?
When I look at my expenses, I am shocked at how much I spend to make it through a month. I often ask myself, "Is this much spending normal? Do other people spend this much on expenses such as food, housing, clothes, and cellphones?" I decided to find out.
The Bureau of Labor and Statistics (BLS), part of the U. S. Department of Labor, surveys the population to collect detailed data on how much people spend on consumer expenses. They do this by collecting about 7,000 consumer spending surveys per month and by gathering 14,000 detailed spending diaries per year. This is exactly the kind of data I need to figure out whether my expenses are normal or not.
Of course, "normal" expenses vary a lot based on your income level and the size of your household. The Consumer Expenditure Survey from BLS provides data for 10 different income bands called "deciles." It is interesting to look at this data to see how households with really high income spend their money as well.
I sorted through this data to find some of the most relevant expenses so you can compare your spending with others at a similar household income level. The income levels presented in the tables are from the 2nd, 4th, 6th, 8th, and 9th deciles to provide a range of income levels before taxes.
Comparing your spending to "normal" levels for households of similar income and family size can be a great way to spot areas for improvement in your budget. If I found out that I was spending twice as much as normal on food, cutting back on food expenses would likely be an easy way to bring my spending down. If the average household can find ways to spend less on food, than I should be able to as well! (See also: 11 Budgeting Skills Everyone Should Master)
House Payment: $623 Per Month
The average housing payment is $623 per month for households that own a home considering households of all income levels and family sizes. I combined data from a few categories to calculate the bill for principal, interest, property tax, and home insurance that many of us are used to paying each month. There was no data available for home insurance expense, so I used a figure of 0.5% of the property value per year to calculate typical insurance cost.
Of course, housing costs are much more expensive in some locations than others.
How does your housing cost compare to "normal" based on your household income and your home's market value?What to Do If Your Housing Expenses Are Not Normal
A drastic move to reduce housing costs would be to consider downsizing. If you are paying for more house than you need, you could move to a smaller house and save a significant amount of money. I once downsized to a house that cost half as much as my previous home and saved a ton of money. Another drastic solution is to move to a less expensive area. This would involve major lifestyle changes including finding a new job and placing kids in a different school.
Vehicle Purchase: $275 Per Month
There is a huge difference between making $800 per month payments on a new SUV, and owning an old car and having no car payment expenses at all. The average household spends $275 per month toward vehicle purchases, with households at higher income levels spending much more.
What to Do If Your Vehicle Expenses Are Not Normal
Consider trading in your expensive vehicle and getting a less expensive model. I did this and saved hundreds of dollars every month. A car that runs and is paid off beats a car that runs and is not paid off!
RELATED: 18 ways to save $100
Food: $796 Per Month
With all of the great options for dining out and lots of high-end grocery products for sale at your local market, it is easy to spend too much on food. Do you spend more on restaurant meals than normal? Is your grocery bill higher than normal?
The survey data breaks food spending down into two categories: Food At Home (Groceries), and Food Away From Home. The average total food bill for groceries plus restaurant dining is $796 per month.
It was surprising to me that the average household spends more on food than on their house payment!
What to Do If Your Food Expenses Are Not Normal
The quickest way to cut your food bill is to reduce spending at restaurants and make meals at home instead. Admittedly this is more work, but the savings add up quickly. Next, cut back on expensive prepared foods purchased at the grocery store. Just because you buy it at a grocery store doesn't make it a good deal.Cellphone Bill: $80 Per Month
Just today I heard a couple of friends comparing their cellphone bills, and both were lower than mine! Is your cellphone bill above average? After looking at the data, I have to admit that my cellphone bill is above average. My family has four smartphones, all with data plans.
What to Do If Your Cell Phone Bill Is Not Normal
You may be locked into a contract, but look for a better cellphone deal as soon as your contract is up. Depending on how much you rely on your cellphone, you may be able to find a discount carrier that meets your needs for about half the cost of a premium service.Clothes: $149 Per Month
The clearance rack has been good to me — I just scored a $4 shirt that I can wear to work several times a month (or even more if my wife doesn't notice). Some of the clothes I wear are 20 years old. I feel like my spending on clothes is exemplary, but is it?
What to Do If Your Spending on Clothes Is Not Normal
This spending problem is pretty easy to fix — stop buying clothes! Recycle clothing catalogs without opening them and stay out of clothing stores. Set a date a few months or even further in the future as the next time you will consider buying clothes if you think you need something.
Entertainment: $227 Per Month
Some people spend a lot of money going to movies, sporting events, and concerts. Is your entertainment spending out of control?
What to Do If Your Entertainment Spending Is Not Normal
Start by setting a "normal" entertainment budget. Decide on a reasonable, limited amount that you want to spend on entertainment. You will still be able to buy tickets and go to some events, at least until your budget has been spent. Try to limit the really expensive events to only a few per year. You can also save money by skipping the food and souvenirs and just focusing on the event itself.
Alcohol: $39 Per Month
Spending on alcohol varies a lot from one household to the next. Some households are teetotalers that don't drink at all, while other households may spend $100 on booze during one weekend of going out. Is your spending on alcohol normal
What to Do If Your Spending on Alcohol Is Not Normal
This is another spending problem that is easy to fix — drink less! Set a reasonable budget for alcohol, perhaps the average consumer spending amount, and stick to it. Put this much money in an envelope to buy alcohol for the month and stop drinking when the booze money is gone.