The above chart is based on data included in the BLS 2015 Consumer Expenditure report. There’s a lot of demographic info to factor in whenever you consider broad economic data. However, it’s no surprise that housing and transportation are the largest expenditures of U.S. households. Factoring in Healthcare (which includes insurance) these three essential items account for nearly 58% of the budgets of U.S. households.
BLS – Consumer Expenditures 2015
I will admit to being occasionally cynical of my fellow Americans spending habits. In my post Compound Interest, He Who Doesn’t Understand it Pays it. I was more than a bit pessimistic about the $12.8 TRILLION of consumer debt owed by U.S household. At first glance this seems irresponsible. I stand by my premise in that post the huge amount of debt owed by Americans is largely due to the fact that most people simply don’t understand how damaging paying interest on consumer debt is to your future wealth. However, the above chart provides a little more nuance on the issue.
In this information there is without a doubt a lot of room for debate on a conceptual level. But, the overview shows average people spending most of their budgets to live in a house, have reliable transportation, healthcare and eat. These 4 categories account for over 70% of the “average” U.S. budget… This mirrors a theme that I hear every day, housing is significantly more expensive now, milk has doubled in value over the past few years and we all know about healthcare. Meanwhile inflation as measured by the “price index for personal consumption expenditures” as reported by the CBO is projected at 1.9% for 2017, and 2% for 2018. I understand that of my 4 categories food is the only one that factors into this metric. However, this is the “core” number that we all hear about and doesn’t really reflect how U.S. households are being squeezed.
Based on this I still feel that U.S. households carry an unreasonable amount of debt. But for those of us that work harder each year to pay more for items that we need to survive I suppose there is some justification.