How Americans Make and Spend Their Money - visualized

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wolf
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How Americans Make and Spend Their Money - visualized

Post by wolf »

"The Average American Household – $53,708 in spending (73% of total income)
The Bottom 20% – $25,525 in spending (100% of total income)
The Highest 20% – $99,639 in spending (53% of total income)"

https://www.visualcapitalist.com/how-am ... end-money/

Lucky C
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Re: How Americans Make and Spend Their Money - visualized

Post by Lucky C »

Note that it's by household so the average is 1.3 income earners, $47.8k salary per income earner, and 2.5 people per household with $21.5k spending per person.

The bottom 20% has only $3663 average salary but only 0.5 income earners per household since it would have so many retirees and part time workers. They spend $16k per person, or still about double an inflation-adjusted Jacob.

The highest 20% spend $32.1k per person which seems lower than expected compared to the average. They save on average $50k every year but have less than $7k per year in "dividends + property" income? I know the averages skew the interpretation here but it looks like the majority of that $50k/yr is tied up in retirement accounts or low-yielding savings accounts. With $150k net and $50k savings per year most could retire early but clearly the top 20% aren't looking to FIRE even though their savings rates on average are pretty good! The high-earning FIRE community and their 90% savings rates must be skewing the average :)
Last edited by Lucky C on Fri Mar 22, 2019 11:37 am, edited 1 time in total.

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C40
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Re: How Americans Make and Spend Their Money - visualized

Post by C40 »

Interesting how little they spend on "Entertainment".

Looking at my numbers, over the last 8 years, I've spent 35% on what I count as entertainment.

To get comparable numbers, I count their cell phone and alcohol as entertainment. Then you get about 10% for every group. Including eating out, makes about 15% for every group.

7Wannabe5
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Re: How Americans Make and Spend Their Money - visualized

Post by 7Wannabe5 »

Very interesting. What stands out to me is how the middle-earners spend and earn exactly what they are informed they should spend and earn. IOW, it seems like there is a fairly strong feedback loop in there driven by standard credit assumptions.

The visualization of how American spending has changed since 1941, which is linked on same page, is also very interesting. The fact that in 1941 food was the biggest budget category even though 15% of the workforce was agricultural might serve as serious hint of what might occur in SHTF situation.

luxagraf
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Re: How Americans Make and Spend Their Money - visualized

Post by luxagraf »

7Wannabe5 wrote:
Fri Mar 22, 2019 5:28 am
The visualization of how American spending has changed since 1941, which is linked on same page, is also very interesting.
Crazy how much housing has jumped in that time span.

And I wonder if the food cost is reflective of shortages in the lead up to the war? How much of our production was going overseas already?

7Wannabe5
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Re: How Americans Make and Spend Their Money - visualized

Post by 7Wannabe5 »

@luxagraf:

I think it is more related to the fact that the artificial production of nitrogen fertilizers was greatly increased after the war as one means of keeping the war-built factories running. There is a lot more happenstance in the history of capitalism than can be revealed in graphic representations.

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Seppia
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Re: How Americans Make and Spend Their Money - visualized

Post by Seppia »

I’m amazed at how the average American spends 8 grand a year on cars.
8 grand!

Nobody realizes how much of a massive money pit cars are.
You have no idea how many people I heard
“Oh I can’t afford to live in Milan, I have to be in the suburbs and commute”
Then the difference is like 200€ per month in rent and they would not need to own a car in Milan.

tonyedgecombe
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Re: How Americans Make and Spend Their Money - visualized

Post by tonyedgecombe »

C40 wrote:
Thu Mar 21, 2019 7:34 pm
Interesting how little they spend on "Entertainment".
I suspect entertainment gets crowded out by essentials like housing and food for lower earners.

luxagraf
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Re: How Americans Make and Spend Their Money - visualized

Post by luxagraf »

7Wannabe5 wrote:
Fri Mar 22, 2019 7:13 am
I think it is more related to the fact that the artificial production of nitrogen fertilizers was greatly increased after the war as one means of keeping the war-built factories running. There is a lot more happenstance in the history of capitalism than can be revealed in graphic representations.
Interesting, I did not know that.

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C40
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Re: How Americans Make and Spend Their Money - visualized

Post by C40 »

luxagraf wrote:
Fri Mar 22, 2019 7:03 am
Crazy how much housing has jumped in that time span.
Housing square foot per person has went way up. I can't recall the actual numbers, but it's something like going from 300 sqft to 900.

Lucky C
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Re: How Americans Make and Spend Their Money - visualized

Post by Lucky C »

Yeah a typical house "back in the day" used to be 1000 sf (with more family members). Now the average is 2400 sf and it's tough to find a 1000 sf house on the market because people keep getting additions put on, but the people who don't add on tend to be older couples who aren't moving!

theanimal
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Re: How Americans Make and Spend Their Money - visualized

Post by theanimal »

I like reading Morgan Housel's writing and he wrote a little about the psychology of the perceived differences between now and the perceived glory days of the 50s in his most recent post.

https://www.collaborativefund.com/blog/ ... er-things/
Life guarantees:

1. A perpetually moving goalpost

Median family income adjusted for inflation was $29,000 in 1955. In 1965 it was $42,000. Today it’s just over $62,000.

There’s widespread belief that the 1950s and ‘60s were peak time for middle America to secure a good-paying job. But it’s a quantitative fact that the median American household earned more in 2018 than they did at any point in the 1950s or 1960s, adjusted for inflation. That’s true for hourly wages too.

Part of the disconnect between feelings and reality can be explained by the shift in expectations over the last 60 years.

To generalize only a little: In the 1950s camping was an acceptable vacation. Hand-me-downs were acceptable clothes. A 983 square foot house was an acceptable size. Kids sharing a room was an acceptable arrangement. A tire swing was acceptable entertainment. Few of those things would be acceptable baselines by most households today.

But – and this is the important part – they were acceptable back then because other median households accepted it.

John D. Rockefeller never had penicillin, sunscreen, or Advil. But you can’t say a low-income American with Advil and sunscreen should feel better off than Rockefeller, because that’s not how people’s heads work. People gauge their wellbeing relative to those around them. Everyone does. And goalposts move both ways: Sebastian Junger’s book Tribes details the long history of comradery during shared disasters, like soldiers during war and neighbors during natural disasters. Hardship is more palatable when everyone around you is in the same boat.

You can be an optimist and say living standards will keep improving, which I think is likely. But you can’t say that people will feel proportionally better off, because the goalpost will always move up with improvements in living standards. There is a correlation between money and happiness, but it diminishes with each additional dollar gained. This is especially true at the micro level where people live their day to day – the hedge fund manager who makes $100 million a year compares their life to other hedge fund managers who make $100 million per year, so their life doesn’t feel nearly as amazing as others imagine. Their goalpost moved to the next town over.

If the 1950s and 1960s felt like a better time, it’s because there was less dispersion between income groups, with fewer extremely wealthy people inflating the lifestyle aspirations of everyone else. But that highlights the point here: when you watch other people live a better life, your benchmark for normal and acceptable rises. The goalposts moves. This isn’t necessarily bad or good, and I don’t have a solution; it’s one of those things that just is. Like death and taxes.

Jason

Re: How Americans Make and Spend Their Money - visualized

Post by Jason »

Seppia wrote:
Fri Mar 22, 2019 7:36 am
I’m amazed at how the average American spends 8 grand a year on cars.
8 grand!
I believe that as retail destinations are now primarily limited to restaurant and service locations, being that a generation has grown up shopping without leaving their home or needing to go the mall to scope out sexual partners, there is the first indication that the average American's dependence on an automobile, or multiple automobiles, is becoming for the first time, a discussion.

classical_Liberal
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Re: How Americans Make and Spend Their Money - visualized

Post by classical_Liberal »

@theanimal
Completely agree with the text. A concept I have floated around on this forum in a few places, but have not developed well, is the idea that we get to choose who our comparison groups are and how we are comparing ourselves to them. ERE may be the wrong place to bring this up, most ERE'ers seem to take pride in being a bit contrarian. Hence social standing is probably less important to most here. Still though, it's human nature to make comparisons.

The problem with this concept is it's hard for a Westerner to compare themselves to the average developing world person, for example. There just isn't enough context in day-to-day life. As a matter of fact, I think most people compare themselves to unrealistic media or social media depictions of what "middle class" reality is today. Which, of course, makes people feel they are behind the curve.

We are, however, able to make changes to where we live, and the type of people we spend our free time with. We can also shut off the TV, Instagram and FB feeds. We are also capable of comparing ourselves in different ways to others when in circumstances which little choice exists (ex coworkers). If I choose to compare myself with the living situations of my coworkers, I may feel like I'm behind. If I choose to compare myself to them by the amount of time spent traveling, or how much agency over time (two things important to me), I'm well ahead of the the group. Maybe it's just a psychological trick, but I think we very much create our own reality in this realm.

IlliniDave
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Re: How Americans Make and Spend Their Money - visualized

Post by IlliniDave »

I guess lumping everyone into three categories makes it a little difficult for an individual to compare themselves. Other than saying I spend a lot less on nearly every category than is average for my income cohort it's hard to make much of the data despite it being interesting. I'll be switching cohorts when I retire, and I did note that the high side of what I estimated my spending could be is close to the average for my future cohort (would be considerably higher on a per-person basis). More data suggesting maybe I'm being overly cautious.

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