The Average American Household Spent $66,928 in 2021: How do Your Expenses Compare?

The U.S. Bureau of Labor Statistics (BLS) just released their latest Consumer Expenditure Survey, which shows how the average American household spent $66,928 in 2021. That’s the equivalent of spending $5,577 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. If financial independence is what you’re striving for, you might not want to aim for “normal.”

Nonetheless, it’s always interesting to see how our budget lines up with others.

So, let’s take a deeper look at this year’s survey and how the average American household spent $66,928 last year.

Increased savings trends during the pandemic have reversed: Americans spent 9.1% more in 2021!

One small silver-lining of the pandemic is that savings rates briefly increased. This was evident from the results of last year’s Consumer Expenditure study, when average household spending decreased by 2.7%, from $63,036 in 2019 to $61,334 in 2020.

However, as we’ve emerged into these later phases, many of the financial trends from early on in the pandemic have reversed. This is clear from the results of this year’s survey, where we saw an increase in spending, especially within areas that would be considered discretionary, such as entertainment and dining out.

Of course, a portion of this year’s increase in spending is also likely the result of the higher inflation levels experienced during the past year. The Consumer Price Index (a measure of inflation) rose by 4.7% over the same periods. For context, average income before taxes increased by 3.7%, over this same period of time.

Of the 14 major categories examined in the study, only one experienced a small decrease in spending during the current year: Education. The rest of the categories and sub-categories had increases ranging up to 89.9% for the ‘Out-of-town lodging’ sub-category.

Annual percent change in expenditures and selected components, 2020-21

What is the Consumer Expenditure Survey?

The Consumer Expenditure Survey is updated annually by the BLS using data gathered 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. The relevance of this survey is at the mercy of willing participants, a sample of 133,500 households in America.

Data included herein is from the 2021 survey on average American household expenses which was released on September 8, 2022, 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 2.4 people, of which 1.3 were earners, and 0.6 were children. Additionally, the average head of household (“reference person”) was 51.8 years old. These attributes are consistent with those from recent surveys.

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 2021, including a comparison to expenses in 2020.

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

Housing – $22,624

The largest expense of the average American household for the past several years has been housing. In this most recent survey, housing amounted to $1,885 per month.

Housing costs include shelter, utilities, housekeeping, maintenance and furnishings. It represents nearly 34% of annual expenditures!  

You can dig into the spending details within the report; however, the breakdown of the ‘shelter’ portion of expenses is a bit skewed. This is because the BLS survey report averages 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 dollar spending amounts in the subcategories for ‘owned’ vs. ‘rented’ properties is diluted and less representative of true housing costs.

Nonetheless, the combined housing expenses for renting and owning ($12,275) appear to be a better representation of average housing costs. This total is still lower than I would have expected.

Shelter also includes ‘Other lodging’ ($983), which is primarily out-of-town lodging. Although not significant in dollar amount, this sub-category experienced one of the largest increases year over year. I believe out-of-town lodging would be better reflected as a ‘Vacation’ or ‘Travel’ expense. However, the survey doesn’t have a subcategory for vacations, and includes these costs within the line items they best fit.

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 – $10,961

According to the survey, transportation is the second highest expenditure for the average household at $913 per month.

Transportation costs include gasoline, public transportation, vehicle rentals, and other lumpy expenditures, such as new vehicle purchases.

Consistently within the top three spending categories, transportation spending increased by 11.6% in 2021. However, this is after the category saw a decrease of 8.5% last year.

As you might expect, the increase in remote work and stay-at-home orders that arose during the early phases of the pandemic reduced commuting costs and travel (fuel, public transportation, rental cars) for millions of people. These trends seem to have reversed as more people finally left their homes for work or play during 2021.

You can keep your transportation costs down by properly maintain your vehicle and driving it to the ground. Even better, ditch a vehicle all together and walk or bike, if that’s feasible for your life situation.

Food – $8,289

Food is the final category in the top three and represents 12% of the average American household’s annual budget at approximately $691 per month.

After decreasing by over 10% in last year’s survey, spending in this category in this category increased by 13.4% this year.

Understandably, the biggest increase here was in food consumed outside of the home, another reversal of pandemic spending trends. Who else returned to dining out again this year and spent more than usual to make up for lost time? Us, too.

Spending on food eaten away from home in 2021 was $3,030, an increase of 27.6% from the prior year! However, spending in this category remained lower than pre-pandemic levels.

Dining out is one of the biggest areas we cut back on once we got serious about pursuing financial independence. We didn’t do it to sacrifice, but because we finally realized how much money we were wasting on crappy, convenience take-out. By making more meals at home and saving dining out for special occasions, we’ve saved a ton of money and enjoy the experience more.

Despite dining out less than the average American household, we still spend a little more on food (our 2022 budget is $8,900). This is because we gladly splurge on organic and specialty foods. Overall, we’ve still drastically reduced our food expenses since beginning this journey.

Personal Insurance & Pensions – $7,873

The average American household spent $656 per month on personal insurance and pensions, which represents about 12% 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 – $5,452

Healthcare represents 8% of average household spending at $454/month, which is 5.3% more than last year.

Of this amount, approximately 68% or $3,704 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 – $3,568

The entertainment category experienced one of the largest changes this year (percentagewise), increasing by 22.7% from $2,909 to $3,568. That’s an average of $297 per month.

This is another one that was heavily impacted by the pandemic. Many people have been rebound-spending with a vengeance as things opened back up.

The Entertainment category includes fees and admissions (i.e. Disney World), pet care, toys, television, hobbies, and other entertainment services and equipment.  

The biggest changes in Entertainment spending this year were an increase in ‘Fees and admissions’ (+53.9%), which represented a full recovery of the previous declines in this sub-category, and an increase in ‘Other entertainment’ (+60.6%).

The ‘Other entertainment’ sub-category also saw big gains last year, as people spent more to entertain themselves at home. The continued growth in this category represents a $536 increase (+ 138%) over 2019’s spending levels.

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, pretty much all categories saw increases in spending for 2021. Many of which were reversals of the declines observed in last year’s survey, such as the increase in clothing spending by 22.3% after a similar reduction last year.

As a lover of craft beer and fine wine, it’s always interesting to see how our spending compares to the average in the ‘Alcohol’ category. Although we’ve reduced our alcohol budget quite a bit in recent years, we still spend more than 2x that of the average American household ($554). This doesn’t bother me, as it’s one of our value-spending areas.

And then there’s the average household spending on tobacco products and smoking supplies, which astounds me that it’s still at $341 per year! Haven’t you heard? Smoking kills.

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 additional breakouts of each of the categories and more data than I could fit in this blog post.

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

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

Sharing is caring! If you enjoyed this post, please consider sharing it on social media. This helps the blog continue to grow and reach a larger audience. Thank you for your support!

Disclaimers:

The content included in this blog reflects the author’s opinions and personal experiences, which may be different than your own. This blog is not a replacement for, nor is it intended to represent, financial or investing advice.

This post may include affiliate or referral links (blogging isn’t cheap). You can show your support for this blog by using one of my referral links or by making any purchase on Amazon a link on this blog. Using one of these links to make a purchase or open a new account may provide a small commission or referral fee to us (at no additional cost to you). Thank you for your support!!

Rich Frugal Life is a member of affiliate programs for Amazon, Personal Capital, and other vendors. Personal Capital Advisors Corporation compensates Rich Frugal Life for new leads (Rich Frugal Life is not an investment client of PCAC).

Please refer to our disclosure and privacy policy for further details.