Each year the Bureau of Labor Statistics (BLS) updates consumer expenditure data on how Americans collectively spend and earn their money.
These numbers are averages so your personal household budget probably looks different in some ways. Your circumstances — where you live, your standard of living, how much you make, family situation, etc. — often dictate how you spend.
But it can be instructive to look at aggregate spending numbers to see where the most dollars go:
People pay a lot of attention to gas and grocery prices but housing and transportation costs make up 50% of all household spending, on average. Add in food and now we’re close to two-thirds of household spending on necessities.1
It’s the big things that matter when it comes to budgeting. Your daily Starbucks addiction isn’t going to move the needle nearly as much as getting your housing and transportation costs right.
Housing is the big one, of course, but it’s a tough one to pin down on the inflation front. If you locked in a 3% mortgage rate during the pandemic you’ve likely experienced deflation in your housing costs in recent years. Yes insurance and property taxes can rise but that’s a completely different situation than someone trying to buy a house today at much higher prices and mortgage rates.
Renters don’t pay the ancillary costs of home ownership but inflation for the renter class has been a bigger burden in recent years than for homeowners.
Right or wrong, much of the housing inflation this decade has boiled down to luck, both good and bad.
Transportation costs, on the other hand, are more about choice than luck. The all-in costs for transportation — vehicle cost, insurance, maintenance, gas, etc. — were up more than 7% in 2023 after rising more than 12%
