The Average American Household Spent $61,334 in 2020: How Do Your Expenses Compare?

The U.S. Bureau of Labor Statistics (BLS) just released their latest Consumer Expenditure Survey which showed how the average American household racked up expenses of $61,334 in 2020. That’s roughly $5,111 per month.

How does your household spending compare?

Comparing your expenses to that of the average American household can help you determine if you are spending too much (or too little) in any one area. It’s also a great resource if you are just starting to build a budget.

However, it’s important to remember that most Americans don’t have their finances under control. In fact, only 39% could come up with $1,000 without going into debt if an emergency arose, according to a recent survey. If financial independence is what you’re striving for, you might not want to aim for “normal.”

Nonetheless, it’s still interesting to see how our budget lines up. So, let’s take a look at how the average American household spent $61,334 last year.

The results are in: Americans spent less (and saved more) in 2020!

One of the few silver-linings noticed during the pandemic was that savings rates actually increased, as people cut back on spending amidst the uncertainty and related recession. This shows in the results of this year’s survey. In 2020, the average American household spent $61,334, which was 2.7% less than the $63,036 spent in 2019.

More than half of the major categories of household spending decreased during 2020, with some of the largest decreases in apparel (-23.8%) and personal care products and services (-17.8%). Neither of these decreases should be surprising given the widespread stay-at-home orders and number of workers who began working remotely during the past year.

For context, the Consumer Price Index (a measure of inflation) rose 1.2% and average income before taxes increased 1.8%, over this same period of time.

What is the Consumer Expenditure Survey?

The BLS updates the Consumer Expenditure Survey annually by gathering data from individuals who agree to participate and provide detailed information on spending for public benefit. This information is generally collected via confidential phone interviews or through completion of a diary survey in which every purchase is recorded over a short period of time. This relevance of this survey is at the mercy of willing participants, merely a sample of 132,000 households in America.

Data included herein is from the 2020 survey on average American household expenses which was released on September 9, 2021, unless otherwise noted.

According to the BLS, a household or “consumer unit” includes “1) all members of a particular household…; (2) a person living alone or sharing a household with others …, but who is financially independent; or (3) two or more persons living together who use their income to make joint expenditure decisions.”

The average consumer unit in the most recent study had 1.9 vehicles and included 2.5 people, of which 1.3 were earners, and 0.6 were children. Additionally, the average head of household (“reference person”) was 52.2 years old.

Additionally, the survey slices up the data in various ways, including make-up of “household” unit and income levels if you’re interested in a more direct comparison to your situation. Although, many of the trends were similar across groups.  

Average American Household Expenses by Category

Here’s a breakout of where Americans spent their money in 2020, including a comparison to expenses in 2019 from last year’s survey.

Consistent with recent years, the top three categories were: Housing, Transportation & Food. We’ll go into further detail for the larger categories in the sections below.

Housing – $21,409

The largest expense of the average American household last year was for housing at $1,784 per month, which represents nearly 35% of annual expenditures!  

If you dig into the spending details within the report, you’ll find that the breakdown of housing expenses is a bit skewed. This is because the BLS survey reports average the expenses across all households surveyed. As you might expect, some families are renters while others are homeowners. Additionally, some homeowners have a mortgage, while others own their home free and clear. Because these different populations are all combined into the average, the spending amounts in the subcategories become diluted and less representative of true housing costs. You either own OR rent your primary residence.

Nonetheless, the total housing expenses reported do appear to be a representative of the overall spending in this category.

Why you should spend less on housing

Since most housing related costs are fixed (i.e. property taxes, mortgage) and/or out of your control (i.e. repairs), housing is an important category to manage if you’re trying to save more money. 

A good rule of thumb is to spend no more than 30% of your take home pay on housing and related expenditures. However, if you’re pursuing financial independence, you might want to aim even lower. Housing-related costs currently make up around 20% of our budget, and a much smaller percentage of our annual income. This helps us keep our savings rates high and offers better financial flexibility and peace of mind for when things go wrong. 

Transportation – $9,826

According to the survey, transportation is the second highest expenditure for the average household at $819 per month, which represents an 8.5% decrease from 2019.

As you might expect, the increase in remote work and stay-at-home orders that arose during the COVID 19 pandemic last year, reduced commuting costs (fuel & public transportation) for millions of people.

The second-place ranking did surprise me. However, it makes sense once you realize that the purchase of new or used vehicles, which are lumpy expenditures, is also included in the average.  If we excluded these purchases, average transportation costs would be $1,831 or $153 per month.

Want to know the best way to keep transportation costs down? Buy used, properly maintain your vehicle, and drive it to the ground. Even better, ditch a vehicle all together if you can manage it.

Food – $7,316

Food is the final category in the top three and represents 13% of the average American household’s annual budget at approximately $610 per month.

Spending in this category in this category decreased by over 10% compared to last year, largely due to the significant shift from dining out to cooking more meals at home. Spending on food purchased away from the home decreased a whopping 32.6%!

Understandably, this trend was primarily driven by the pandemic. However, hopefully most families realized how much they saved by making this switch. Making more meals at home is the #1 way to save money on your food expenses. Eating out can be fun on occasion, but remember that every time you eat out you are paying big mark-ups on your food and drinks. If you learn how to master the takeout fake out, you can save a lot of money and still eat fabulous food at home.

Although we spend a little more than the average American household on food, we buy mostly organic and specialty foods, and have drastically reduced our grocery expenses over the past few years.

Personal Insurance & Pensions – $7,246

The average American household spent $604 per month on personal insurance and pensions, which represents about 11% of total spending.

While this category includes premiums for life insurance, personal liability insurance, and disability insurance, the bulk of the spending (nearly 93%) relates to Social Security contributions paid by employees; government retirement and private pension programs; and retirement programs for the self-employed (does not include company 401k plans).

The good news is some of this category represents actual savings rather than spending. Let’s increase savings and take advantage of every retirement program we can! 

Healthcare – $5,177

Healthcare represents 8% of average household spending at $431/month, which is pretty consistent with last year.

Of this amount, approximately 71% or $3,667 goes towards health insurance premiums. The remainder covers everything else, such as hospital charges, doctor’s visits, eye and dental care, lab tests, nursing homes, and prescription drugs.  The health insurance costs are a bit less than what our family of three spends on a high deductible health insurance plan. However, tax credits, Medicare, and Medicaid can keep these costs lower for some households.

Another factor dragging down the average…not everyone in this country has health insurance. Some of the most recent estimates suggest that 10% of Americans went without health insurance for some or all of 2020. Going without health insurance is gambling with your finances. Please don’t do it! Even if your budget is tight, health insurance should be a priority.

Entertainment – $2,912

The entertainment category includes expenses such as fees and admissions, pet care, television, and hobbies. The average American household spent $243 per month in this category last year, a decrease of 5.8%.

The pandemic certainly impacted spending in this category, but the biggest change was a shift in Entertainment spending from fees and admissions (-51.7%) to other entertainment (+48.8%). Presumably, fewer people went to the movies or amusement parts, but spend more to entertain themselves at home.

Everything Else

We discussed the largest categories of spending above; however, the remaining expenses consists primarily of cash contributions (i.e. alimony, donations); apparel, education, personal care, alcohol, and tobacco products, among other categories.

As mentioned above, there was a huge decrease in apparel and personal care products and services, which is to be expected. The percentage is especially high because the actual dollar amount in these categories is fairly low. However, any move to reduce expenses in these areas is a positive one in my opinion. And certainly the pandemic made this easier to do.

We’ve used to spend a lot in these categories but have been trying to cut back by doing our own haircuts, DIY spa treatments, and attempting a no-spend clothing challenge (15 months and counting).

As a lover of craft beer and fine wine, I always look to the alcohol category to see how our spending compares. Although we brought down our budget a lot this year, our annual alcohol expense is still projected to be 3x that of the average American household, who spent $478. Despite all the media about how people were drinking more during the pandemic (we certainly were), this actually represents a 17.4% decrease from 2019.

Want to learn more? You can see further descriptions of the various categories in the CE Glossary. You can also view the full report HERE, which includes further breakouts of each of the categories and more data than I could fit in this blog post.

So, how does your budget compare to the expenses of the average American household?

If you want another point of comparison, check out our household’s spending each month here on the blog.

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