It’s like the more money we come across, the more problems we see.

—The Notorious B.I.G.

When you don’t make much money, your focus is on housing, food, and important things like staying alive. However, as income increases and you can more easily cover living expenses, the extra cash goes elsewhere.

I remember being a poor graduate student, and a friend a couple years ahead of me had been working a six-figure job already. My spending radar was on two-dollar taco night at Rubio’s at the time. So any extra spending money was foreign to me.

I asked, “What do you do with that?”

He replied, “You find ways to spend it.”

But on what? Here’s what people spend their money on in a year, grouped by income level. The numbers are based on estimates from the 2016 Consumer Expenditure Survey, which the Bureau of Labor Statistics runs annually.



Overall Spending

Here’s how different income groups spend their money each in a year. Reading up and down, you get percentage breakdowns, and reading across you get average annual spending.

INCOME GROUP More than $200k $100k to $150k to AVERAGE ANNUAL SPENDING $70k to Less than $15k $40k to $50k to $15k to $30k to Percentage of average income Average dollar amount spent Housing Food and Beverage Transportation Health Care Entertainment Apparel and Services Education Personal Insurance & Pensions Cash Contributions Other $24k $32k $40k $44k $52k $65k $84k $110k $159k AVERAGE TOTAL SPENDING PER YEAR FOR EACH INCOME GROUP AVERAGE ANNUAL SPENDING Percentage of average income Average dollar amount spent More than $200k $100k to $150k to $70k to Less than $15k $30k to $40k to $15k to $50k to Housing Food and Beverage Transportation Health Care Entertainment Apparel and Services Education Personal Insurance & Pensions Cash Contributions Other $24k $32k $40k $44k $52k $65k $84k $110k $159k AVERAGE SPENDING FOR EACH INCOME GROUP



Notice how the averages for total spending for the lower income groups are greater than the upper limits of the income levels? On average, people in these groups spend more money than they make.

Let’s look closer at each of the larger spending categories.

Housing

Buying a house made me feel all grown up suddenly. I expected a similar, sudden jump here. That’s not the case. The growth is pretty steady for spending related to owning a house. As expected, rent spending goes down with income.

INCOME GROUPS Less than $15k $15k to $30k to $40k to $50k to $70k to $100k to $150k to More than $200k Owning One square equals $100. As expected, people with more income spend more on home ownership… $20,700 …and less on renting. Renting $4,700 INCOME GROUPS More than $200k $100k to $150k to $70k to Less than $15k $15k to $30k to $40k to $50k to Owning One square equals $100. As expected, people with more income spend more on home ownership and less on renting. With more property comes higher costs to run and maintain the household. Renting Utilities Household Operations Household Furnishings Housekeeping Supplies Naturally, with bigger and more expensive homes, the cost to run and maintain increases. Utilities, which roughly run at the same rate for most increases more steadily. However, notice the more dramatic increases in household operations and furnishings. Additional services and more expensive furniture can bring spending up. INCOME GROUPS Less than $15k $15k to $30k to $40k to $50k to $70k to $100k to $150k to More than $200k Utilities With more property comes higher costs to run and maintain the household. $6,500 Household Operations $4,800 Household Furnishings $5,400 Housekeeping Supplies $1,100

Food and Beverages

More people spend more on food at home than food away from home, but once you reach the second to highest income level, spending on food away from home takes the lead.

INCOME GROUPS Less than $15k $15k to $30k to $40k to $50k to $70k to $100k to $150k to More than $200k Food at Home One square equals $100. $7,100 Food Away From Home Most people spend more on food at home, but by the $150,000 to $200,000 group, more is spent on food away away from home. $8,900 Alcoholic Beverages $1,600 INCOME GROUPS More than $200k $100k to $150k to $70k to Less than $15k $15k to $30k to $40k to $50k to Food at Home One square equals $100. Food Away From Home Most people spend more on food at home, but by the $150,000 to $200,000 group, more is spent on food away away from home. Alcoholic Beverages

Transportation

The increasing pattern continues with vehicle purchases and maintenance. Spending on travel spikes.

INCOME GROUPS Less than $15k $15k to $30k to $40k to $50k to $70k to $100k to $150k to More than $200k Vehicle Purchases One square equals $100. This is for net outlay, which is purchase price minus trade-in value. $7,500 Gasoline and Motor Oil $2,900 Public and Other Transportation This category includes airlines, and I’m guessing the extra spending comes from travel. $2,900 INCOME GROUPS More than $200k $100k to $150k to $70k to Less than $15k $15k to $30k to $40k to $50k to Vehicle Purchases One square equals $100. Gasoline and Motor Oil Public and Other Transportation This category includes airlines, and I’m guessing the extra spending comes from travel.

Health Care

At this point, you’re probably familiar with the increased spending in each category as you increase the income.

INCOME GROUPS Less than $15k $15k to $30k to $40k to $50k to $70k to $100k to $150k to More than $200k Health Insurance One square equals $100. $6,600 Medical Services $1,900 Drugs and Medical Supplies $1,100 INCOME GROUPS More than $200k $100k to $150k to $70k to Less than $15k $15k to $30k to $40k to $50k to Health Insurance One square equals $100. Medical Services Drugs and Medical Supplies

Personal Insurance and Pensions

Here is the most dramatic difference by far. People with higher incomes have a lot more money to save after they pay for living expenses, percentage-wise and in average dollars.

INCOME GROUPS Less than $15k $15k to $30k to $40k to $50k to $70k to $100k to $150k to More than $200k Pensions and Social Security One square equals $100. After living expenses are covered, people save for retirement, and of course, those with higher incomes can afford to save much more. Percentage-wise, this is the biggest spending difference by far between the low- and high-income groups. $29,800 Life and Other Personal Insurance $1,200 INCOME GROUPS More than $200k $100k to $150k to $70k to Less than $15k $15k to $30k to $40k to $50k to Pensions and Social Security One square equals $100. After living expenses are covered, people save for retirement, and of course, those with higher incomes can afford to save much more. Percentage-wise, this is the biggest spending difference by far between the low- and high-income groups. Life and Other Personal Insurance

Notes