The Typical American Household Budget

Many Americans face the challenge of managing their household budgets, as they strive to keep a roof over their heads, food on the table, and transportation available. In addition to these basic necessities, other common expenses include education, child care, health care, retirement savings, and entertainment. However, the impact of inflation has made it increasingly difficult for consumers to allocate funds towards savings and debt repayment.

Inflation reached a 40-year high in 2022, driven by factors such as increased demand, low interest rates, and government spending. While inflation has since cooled, prices remain elevated on various goods and services, leaving many Americans with less disposable income. According to Bankrate’s Financial Success Survey, more than half of Americans now associate financial success with living comfortably rather than achieving millionaire status or having a high-paying job.

The average American household earned $101,805 in 2023 before taxes and spent $77,280, according to the Consumer Expenditure Survey by the U.S. Bureau of Labor Statistics. Housing, transportation, and food were the most significant expenditures for households. Housing expenses accounted for 32.9% of total expenditures, followed by transportation at 17% and food at 12.9%.

In response to rising costs, many Americans have turned to budgeting as a way to manage their finances effectively. According to Debt.com, approximately 90% of Americans reported budgeting their money, with many attributing this practice to helping them avoid debt or get out of debt. Additionally, having a side hustle has become a popular way for individuals to earn extra income to cover living expenses.

When it comes to specific expenses, utilities, food, and housing are among the top budget items for most households. The average monthly cost for utilities, including electricity, natural gas, water, trash, and sewer services, amounts to around $380, totaling $4,560 annually. Food prices have also been on the rise, with the cost of food eaten at home increasing by 8.2% over the past year.

Housing expenses, which increased by 4.7% in 2023, remain a significant financial burden for many households. Property taxes, rent, and other housing-related costs contribute to the overall housing expenditure. Additionally, the cost of education, including back-to-school expenses and college tuition, poses a financial challenge for families with children.

Transportation costs, including the purchase and maintenance of vehicles, also impact household budgets. The average price of a new car in June 2024 was $48,401, while the average price of a used car was $25,251. Ongoing expenses such as insurance, maintenance, and gasoline further add to the overall transportation budget.

To effectively manage their household budgets, individuals are encouraged to create a budgeting method that works for them, track their income and expenses, and make adjustments as needed. By living below their means and following a budget, individuals can allocate funds towards savings, emergency funds, retirement savings, and other financial goals. Ultimately, budgeting is a key tool in helping individuals navigate the challenges of managing their household finances in the face of rising costs and inflation.