Talking about average monthly expenses in America is a bit like talking about “typical” rock’n’roll albums or “generic” clothing choices in a particular century. There are certainly some recognizable trends and statistics we can discuss, but it’s important to remember that these are averages. Exceptions will be plentiful.

Nevertheless, it’s often helpful to look at the big picture when trying to understand our own financial dynamics, or to assess the direction we’re moving as a nation - at least economically.

We look at these numbers and trends in hopes they can help us identify and highlight areas in which we could be strengthening our own financial choices. We look at the big picture in order to make better decisions about who and what we support politically and commercially.

You Gotta Love Government Statistics

The U.S. Bureau of Labor releases an annual report on U.S. income and spending for the previous year. The most recent report was for 2020 and primarily considers things in terms of “consumer units” (hey, it’s the government), which they explain thusly:

That means that for statistical purposes, each of the following constitutes a “consumer unit”:

• Mr. & Mrs. Carl Johnson and their three kids who own the house across the street

• Your cousin Sara, who lives alone even though she’s hardly there

• Makayla Lawson and her two kids, along with her elderly mother who lives with her and her ex-husband Lloyd who moved back in when he lost his job at the RV plant

• Mico, the “artist” who rents a garage apartment next door, never goes outside and has no discernible source of income

• You and whoever lives in your household right now.

Average Monthly Income

You can’t have expenses without income (or at least, you can’t pay for any of your expenses without income). As of 2020, average income is trending up:

Let’s compare that to average monthly expenses during this same period…

There are at least two things we should keep in mind when looking at these numbers. The first one probably jumped out at you. Look at all that extra disposable income in 2020! I wonder what–

Oh, that’s right. The pandemic hit around then, didn’t it? We couldn’t go anywhere or do anything, which, as it turns out, saved many of us some extra money. It was the first time average monthly expenses declined in quite a while.

Then again, it left many of us out of work, which wasn’t much fun.

That leads us to the second thing worth remembering. Numbers like these are averages. There are plenty of households with good incomes and relatively few expenses which are doing much better than this, statistically speaking. There are also many families lucky to break even some months. Many get a little further behind every time bills come due.

Next, let’s zoom in on a few highlights from the U.S. Bureau of Labor’s 2020 report covering average monthly expenses in America.

Average Monthly Expenses In America: Reality Hits Home

It’s really no surprise that the single biggest monthly expense for the vast majority of Americans is…

Housing. Keeping that literal and proverbial roof over your head. Check this out:

* Purchase prices were pulled from a separate government report

Managing Monthly Housing Costs

It’s no surprise to most of us that the cost of owning a home generally continues to rise in good times and bad. Rental prices tend to reflect this larger trend as well, but because most rentals involve annual leases, they fluctuate less dramatically in the short term.

Monthly mortgage payments, on the other hand, seem designed to keep you on your toes. Property taxes go up (and it’s always “up”) and your house payment increases. Your insurance changes suddenly, and that house payment jumps up again. Interest rates fluctuate, and - you guessed it - your monthly obligation reflects that. Sometimes you even get those terrifying letters saying your escrow account is short a zillion dollars or so and proposing several seemingly impossible ways for you to make up the difference.

That’s why the decisions you make when first buying your home are so critical. On the one hand, you want a home you and your family can enjoy for many years to come; on the other, maybe you don’t really need that pool, that extra game room, or that particular neighborhood. Then there’s the whole process of financing - mostly, you just want to get it over with so you can figure out your moving logistics. Who has time to quibble over a few tenths of a percentage point or read the small print about mortgage insurance or adjustable mortgage rates? Over the years, however, those few tenths of a percentage can mean a difference of thousands of dollars. That small print can cost big dollars. Isn’t it worth a few extra moments to make sure you’re making the best financing decisions you can?

Your home matters – even if “home” is the apartment you’re leasing. Don’t settle for somewhere you know you’ll be unhappy if you can afford to do better. Balance that satisfaction, however, against how good it would feel to be completely out of credit card debt before your house is paid off or how nice it would be to have a real retirement account built up so you don’t have to work until you’re 85.

That’s before we even talk about utilities…

It’s a Matter Of Degrees

Utilities and other in-home services are perhaps the most easily overlooked monthly expenses in America when talking about budgets and financial planning. Any savings we manage seem to come in such small, scattered amounts. It’s not that exciting to save $16 on your electric bill one month and notice a slight reduction in your water bill the next. Plus, those bills change a little every month anyway, so who can even tell?

Check out Americans’ average monthly expenses for utilities in recent years:

These numbers aren’t huge compared to housing, health care, or transportation. For most of us, however, three or four hundred dollars a month is still a big deal. And unlike some average monthly expenses, we have considerable control over what we spend on utilities.

Imagine you were able to use slightly less electricity, slightly less gas, and slightly less water consistently each month. If you could reduce each of those bills by an average of $8 or $9 per month, that would save you over $300 per year on utilities alone. That’s practically a free month of utilities for each eleven you pay for!

And it’s not like it requires inhuman suffering on your part. Your house doesn’t really need to be 74 degrees all day while you’re gone. You’ll emerge just as clean from an 8-minute shower as a 10-minute one, and nudging the steam down a bit will probably help with that dry skin as well.

If $300 doesn’t sound like much, ask yourself how you’d feel if one of your kids told you they’d “borrowed” that amount from your wallet and spent it on video games. Suddenly it’s a LOT of money, isn’t it?

Food For Thought

Another major element of monthly expenses in America is food. Notice anything interesting here?

Until 2020, our “at home” food costs were about 56% of the total - not that much over half. The other 44% or so came from eating out.

I don’t know about you, but even at my wildest, I’m not eating out for nearly half of my meals each day, seven days a week. What these numbers actually reflect is the expense of eating out instead of making food at home.

You see this reflected in the 2020 figures. Let’s assume that most people ate roughly the same amount that year (although personally I think I ate quite a bit more). Total food costs, however, dropped over $70 a month!

I’m not suggesting you should stop visiting local restaurants or ordering from local pizza places. Dining out can be a fun family experience or a welcome relief from the tedium of the daily grind. Ask yourself, though, whether you’re eating out because you’ve made the decision that’s what you want to do, or whether you’re simply driving through or dropping in because you didn’t have a better plan. It’s your money - but there are lots of other things it might be nice to do with an extra $70 a month.

Side Note: if you DO decide to eat out or order in, tip your waiter or driver generously. Odds are, times are just as hard for them as they are for you - maybe harder.

Other Monthly Expenses In America: Take the Wheel

*All Figures Reflect Monthly Averages

Transportation is another biggie – nearly $10,000 per year for the average family. About half of that is the actual cost of one or more automobiles; the rest is fuel and maintenance. Keep in mind that public transportation costs are probably grossly inflated for many of us (who use little or none) and substantially underestimated for others (who may use public transportation more than any other kind).

You know what I’m going to say. Go where you need to go. Do what you need to do. Joyride if you want. But if your goal is to save for your future or get out of debt or find a way to afford other things which are important to you, it starts with small, daily choices. Plan ahead so you can run all of your errands at once. Share rides when possible. Go easy on the acceleration and give yourself some distance so you’re not breaking as often.

Of course, the big things matter, too. Buy the car or truck you need, but think through your options and what you can live without. We tell ourselves that because we’re financing the purchase, a thousand bucks here or there almost doesn’t matter. That’s partly true – because “almost doesn’t matter” is another way of saying “it matters.” And it’s not just a thousand dollars – it’s the additional interest on a thousand dollars, and all the credit card debt you’re not paying off with the thousand dollars, and all the retirement funding that could be building from that thousand dollars, and…

You get the idea.

Average Healthcare Expenses: Enough To Make You Sick

The average American household paid $431 per month in health care expenses in 2020. That was up slightly from previous years, but like several other categories no doubt fluctuates wildly from family to family.

In addition to its personal importance, health care is a major political topic in the United States - especially during election years. This isn’t the place to jump into that aspect of it, but I will risk one personal opinion:

Unlike every other category, I’m not going to suggest you cut back when possible on this one. Get the care you need. Always. Take care of yourself and those in your care. Period. Always.

What you CAN do is pay closer attention to whatever plan you might have through your employer. My wife recently discovered she can get back $20 a month if she uses the free gym membership that comes with her health package. She’s never exercised so often! More and more plans are offering benefits for taking the initiative with preventative care – look into that now, before you think you need it. There may even be partial coverage for counseling, physical therapy – some plans even help out with chiropractic care

Don’t assume every doctor is “in-network” with your plan. Sometimes “in-network” caregivers refer you to specialists who aren’t. Again, do what you have to in order to take care of yourself – going without proper care is never a great way to save money. But if paying attention and asking questions can accomplish the same thing with a different specialist or getting your prescription at a pharmacy preferred by your coverage, you can save hundreds of dollars.

Other Monthly Expenses In America

In 2020, the average American household spent…

• $243 on entertainment each month

• $387 keeping their home maintained, furnished, and clean each month

• $106 on education expenses each month

• $190 on cash donations and other giving each month

• $563 on pensions and Social Security each month

• $41 on personal (as opposed to auto or home) insurance premiums each month

There are more categories we could explore, but you probably get the idea. Life is expensive.

So how do we manage all of these average monthly expenses, not to mention the major surprises which pop up from time to time?

Budget, Can You Spare a Dime?

Most of us would agree in theory that it’s important to have an effective and realistic budget for ourselves or our household, but too many of us mean that the same way we do when we talk about eating less junk food, exercising more often, or reading a book here and there instead of zoning out watching people eat weird foods on YouTube. We support the theory, but – the shame of shames – we’re not actually doing it ourselves.

I get it. I do. But an effective household budget isn’t meant to scold you like you’re a little British child in Pink Floyd’s boarding school. (“If you don’t eat your meat, you can’t have any pudding! How can you have any pudding if you don’t eat your meat?!”) It’s a tool. It’s meant to bring clarity and focus to our spending, and to empower us to make choices about our personal finances, not merely wish things and fret about them when they don’t come true.

Take a few moments today to read (and discuss with any other decision-makers in your household) some of the quality pieces by my esteemed colleagues here at Goalry. They’re pretty sharp, and at least two of them are better looking than me as well. We’ve got a personal financial management app we’re pretty proud of, but the tech is only useful if utilized with a little knowledge and some sincere commitment.

Budgeting Basics Spelled Out: Budgets 101 – OK, I confess that this one is mine. It says everything I could say here, including that most central of budgeting questions: “Where do I start?”

How To Stick To Your Budget Like Superglue – My good friend Kevin Strauss put this one together. You’ll never guess what it’s about. What? Oh, yeah – the title. So… maybe you COULD guess. I have this one bookmarked for easy reference – plus, he includes some insightful options for actual budget creation which I should have stolen.

The Three Types of Budgets Explained in Three Minutes – I’ll be honest, this one took me closer to seven minutes to read, but it was well worth twice that. Brandy Woodfolk is the queen of making complex ideas and difficult choices so accessible and obvious that you can’t help but improve just by reading her.

Effective Budget Management Skills – Grace Douglas recaps the highlights of making and maintaining an effective budget in plain simple English and with a voice, I find so encouraging that I almost wish I didn’t have a personal spreadsheet I’ve been using for years already, just so I could start from scratch with her guidance. This is a good wrap-up after you’ve digested the other three.

Conclusion

We’ve talked a lot here about average monthly expenses in America, and I hope some of it’s been useful. There’s one last thing I’d like you to remember as you push forward boldly and with your eyes wide open…

You don’t have to be "average." You don’t have to be rich or famous or flawless to be way ahead of the curve. Take a deep breath, be ready for a few unexpected emotions, and believe in your ability to make a positive difference in your own future.

And if we can help along the way, let us know.