For many people, the idea of creating a budget for their household expenses has the same appeal as going to the dentist. However, budgeting for your household can help you better manage your money. If you consider what's a typical percentage for the average household versus the percentage of your income you're spending in each category, you can identify areas where you may be overspending and make the necessary corrections.
According to the U.S. Bureau of Labor Statistics (BLS) Consumer Expenditure Survey, the average American household spends 14 percent of its income on transportation (car payments, gas and maintenance). That coincides with what some financial gurus recommend — namely, that your spending on transportation should amount to no more than 10 to 15 percent of your total income.
The average American household also spends 14 percent of its income on food, and financial expert Dave Ramsey suggests that food spending should range anywhere from five percent up to 15 percent of your monthly income. However, both of these figures include meals eaten at restaurants as well as home grocery expenses.
To meet its housing needs, the average American household spends 24 percent of its income according to the BLS Consumer Expenditure Survey. That’s slightly lower than the range that many financial experts recommend. They suggest that you’re doing well as long as your housing expenses range from 25 to 35 percent of your total income.
Utilities (water, gas, electricity, trash removal) have been rising as an expense for many households. Financial experts suggest that your utility expenses should be approximately five to 10 percent of your monthly income, but the average American household is already at the higher end of that scale, coming in at eight percent of the total monthly income.
For all that you hear in the media about the crushing costs of healthcare, most American families spend relatively little for healthcare expenses. Experts believe that healthcare expenditures should range from five to 10 percent of your income, and the typical American family is only spending six percent of its income on healthcare on average. Of course, healthcare expenses are directly related to a family’s level of overall health and fitness.
Entertainment and Recreation Expenses
Almost all households spend something on entertainment and recreation. According to the BLS Consumer Expenditure Survey, the average household spends five percent of its income on entertainment and recreation, a number that seems small to some experts. They suggest that spending anywhere from five to nine percent of your income on entertainment still leaves you in good financial health.
Americans’ indebtedness has skyrocketed in recent years, and the BLS Consumer Expenditure Survey reveals that the average household spends fully 12 percent of its income — twice its healthcare spending — on debt payments for credit cards and other credit accounts. Financial experts say that’s too much. Some recommend that debt payments not exceed 10 percent of a family’s total income.
Charitable Giving, Savings and Investment
Finally, the BLS reveals that American households spend an average of only four percent of their total income on charitable giving. However, they do seem to have a healthy rate of savings and investment, with the average household allocating nine percent of its income to this category.