Wouldn’t you like to know how you stack up to your friends and neighbors? What if we all just spoke freely about our income, about how much we spend each month, or about our charitable habits? Have you ever wanted to see if you spent about the same percentage of your income as others? Not that you are nosy, but you just want to make sure you are not making some big mistake that you can’t recover from.
Well, I am not sure we will ever get to the point of freely sharing our deep financial secrets, but an annual survey by the Bureau of Labor Statistics can give you a little insight on how you compare to about 125,000 of your fellow Americans. You will find numbers like average income ($74,664), average amount spent on housing ($18,886), average amount spent on health insurance ($3,160), and more. You can see past reports at https://www.bls.gov/cex/csxreport.htm.
Here are some of my observations:
• Those surveyed spent 41% of their income on housing. This includes mortgage or rent payments, upkeep, furniture and other things inside the home. This feels like a large number to me. I can’t help but think that if someone is spending almost half of their pay on their home, things must feel financially tight. It really doesn’t leave a lot of room for those unexpected things that will come up. Don’t be house poor. Try to limit your overall housing to a lower 25% or so.
• Food is not cheap…but going out to eat is more expensive than eating at home. The average Food at Home expense was $4,049 and the average Food Away from Home was $3,154. If you want to cut your food bill, try eating out fewer times per week. Make eating out special. One night out on the weekend and a bonus after a hard day during the week is possible. Try it and you might find your food bill dropping.
• Transportation was the second largest expense behind housing at 16%. I wonder how this will trend once we see more driver-less cars. Can you imagine yourself not owning a car? Reduce your expenses like your car payment, auto insurance, upkeep, gas and parking and you might find that you could be ahead of the game even after paying someone like Uber or Lyft for your rides. Oh yeah, and no more needing to wash your car on the weekend.
• People don’t just give away that much money. Cash contributions averaged 3% and I think that is low. I have always said that you should consider giving away 10% of what you make. There are always others that need it more than you and giving money away helps reset our natural selfish tendencies. You might also find that the more you give the better you end up doing financially. It is a pretty cool phenomenon.
• Healthcare is expensive. This category averaged 8% of income and it is getting more expensive. Healthcare costs for the bottom quartile of income earners rose 11.7% from 2015 to 2016 and rose 8.9% for the highest wage earners for the same time period. Anyone that needs to budget almost 10% of their income for healthcare may find themselves having to cut back on something else. What is scary is that some are putting off doctor’s visits to save money. Please don’t do this. Cut back on your pumpkin spice lattes instead of your physicals.
So how do you stack up? If you feel that you are not where you should be, start with some basics. Create a budget, automate your savings, and track your expenses. The act of thinking and focusing on your finances can lead to changes that will make big differences for you and your family!
Want some help with your overall financial plan? Go to http://doingmoneyright.com/cbc to set up your FREE, one-on-one, Confidence Booster Call. Byron W. Ellis, CFP®, CLU®, ChFC®, CRPC®, is a CERTIFIED FINANCIAL PLANNER™ professional and Managing Director of United Capital Financial Advisors, LLC, a Financial Life Management firm. The information contained in this article is intended for information only is not a recommendation, and should not be considered investment advice. Please contact your financial advisor with questions about your specific needs and circumstances. The opinions expressed herein are those of Byron Ellis and not necessarily those of United Capital Financial Advisors, LLC.