Buying a house is likely one of the biggest expenses you'll make in your life and usually requires years of planning and budgeting. In many cases, putting a down payment on a house consists of paying tens of thousands of dollars for the privilege of becoming a new homeowner.
The three biggest budget items for the average U.S. household are food, transportation, and housing. Focusing your efforts to reduce spending in these three major budget categories can make the biggest dent in your budget, grow your gap, and free up additional money for you to us to tackle debt or start investing.
Key household budget statistics
Significant expenditures were housing, transportation and food.
Housing covers the money you pay to keep a roof over your head. This includes everything from rent or mortgage payments to property taxes, HOA dues, and home maintenance costs. For most budgeters, this category is by far the biggest.
We don't put enough attention on taxes.
For most people, it is the single largest expense of your entire life. We tend to overlook this because it feels outside our control, but there are things we can do to optimize our tax burden, and it can be high-return work.
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
The most recent data from the US Bureau of Labor Statistics shows that American consumers spend the most money on housing. In 2023, the average US consumer spent $25,436 on housing, which made up close to one-third (32.9%) of their total annual expenditure.
The average monthly expenses for one person can vary, but the average single person spends about $3,405 per month. Housing tends to consume the highest portion of monthly income, with the average annual spending on housing at $1,885 per month per person.
The average person spends about $3.3 million in their lifetime. Housing is the biggest expense, making up about 44% of lifetime spending. Transportation costs can add up to nearly $470,000 over a lifetime. Healthcare and insurance can cost around $290,000 throughout life.
Major expenditure categories are healthcare, Social Security, and defense; income and payroll taxes are the primary revenue sources.
The average household retirement income in the United States is $27,617, according to an analysis by Wisevoter of data from the U.S. Census Bureau's American Community Survey. However, depending on where you live, your local average may be much higher or lower.
If you choose to follow the 50 30 20 rule, you should aim to save 20% of your salary after tax each month. Once you have paid off any existing debts, this can then be split across your saving pots, pensions and any other investments you may have.
Overall, housing accounted for the largest share of total expenditures (32.9 percent), followed by transportation (17.0 percent), food (12.9 percent), personal insurance and pensions (12.4 percent), healthcare (8.0 percent), and entertainment (4.7 percent).
The average net worth in 2022 was $1,063,700, while the median net worth was $192,200. There's often a strong correlation between income and net worth, and higher earners tend to have much higher net worth.
Monthly expenses list. According to the same 2022 BLS study, the average American's monthly expenses are $6,080, 1 which is about 77% of the average monthly income before taxes. This list of expenses covers everything from housing, health insurance and food to entertainment, personal care products and books.
Maintaining a single-person household still costs more than 50% of a two-person household. This effect is known as the “singles tax” — it's more expensive to be single than it is to share costs with a significant other. Most notably, the cost of housing.
Housing is by far the largest expense for Americans. Monthly housing expenses in 2023 averaged $2,120, a 5% increase from 2022. Over the course of 2023, Americans spent $25,436 on housing on average.
The same study also reveals that Americans feel that being wealthy in the U.S. means having an average of $2.5 million, an increase on $2.2 million from 2023 and 2022. Baby boomers believe this figure should be slightly higher at $2.8 million, but Gen Z and Millennials believe they could feel wealthy at a lower figure.
Mandatory spending, also known as direct spending, is mandated by existing laws. This type of spending includes funding for entitlement programs like Medicare and Social Security and other payments to people, businesses, and state and local governments.
While this figure can vary based on factors such as location, family size, and lifestyle preferences, a common range for a good monthly salary is between $6,000 and $8,333 for individuals.
Ideally, you want to have 20% of your take-home pay left over after paying all of your bills.
It is recommended that you spend 30% of your monthly income on rent at maximum, and to consider all the factors involved in your budget, including additional rental costs like renters insurance or your initial security deposit.