Typical Household Budget
Whether the economy is booming or busting, household budgets have certain needs that require fulfilling. A healthy household budget has less money going out than coming in, leaving a surplus that can be dedicated to savings. Many household budgets not only lack a surplus but have substantially more money going out than coming in, leading to an increase in debt.
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Income Sources
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Most households in the United States bring in the majority of their income through wages earned at jobs. Many of these people are salaried employees, while many others earn an hourly wage. Income is also received through investments, pensions, bonuses and disability checks. A substantial minority of people are paid directly by their customers because they are self-employed.
Size of a Typical Household Budget
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A typical household in the United States is made up of 2.5 residents and grosses $62,857 annually. The average annual expenditure equals $49,067.
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Difficulties
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Every income earner is familiar with the challenge of bringing in more money than he puts out. When he fails at this, he may borrow money to make ends meet, leading to a cycle of debt that may be difficult to escape. Relying on credit cards is particularly dangerous, because their interest rates are significantly higher than other loans such as student, car and home loans. Other challenges include unexpected unemployment as a result of a firing or layoff, and increases in the cost of everything from rent to utilities to food.
Costs
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Housing constitutes the largest expense amongst U.S. households, according to a survey done by the Department of Labor. When utilities and furnishings are included in the cost, housing represents approximately 34 percent of the average American budget. Housing is followed by transportation, which eats up 16 percent of the average budget, food at 13 percent, and and pension and insurance plans which add up to 11 percent.
Advantages of Budgeting
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Keeping spending at a level lower than earning leads to many benefits. The extra money can be put toward retirement savings, and its presence helps to reduce mental stress about poverty. Getting into the habit of frugality and building savings can create a spiraling effect that goes in the opposite direction of a growing credit card debt.
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References
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