The Average US Home in 2020 Spent $61,334. How Much Did We Spend?
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It’s not how much you earned, it’s how much you spent
One day, we will look back and just shake our heads at 2020. Do you remember the run on toilet paper? The dystopia style grocery stores, complete with socialist hours for the elderly. It was kinda nuts in retrospect.
Neighbors didn’t trust neighbor. The mailman was a possible carrier, pun intended. I could go on but you get the drift. The positive for what it’s worth; the average US savings increased to 33% in one month while total expenses started going down.
Without the daily visual cues to look better than others, the game of spending tumbled. For my household, we kicked paying off credit cards, renovations and wedding planning into overdrive.
Sometimes you have to make lime juice with no sugar. 2020 was that kind of year.
Years from now, We will look back at 2020… SMH
The average American Household spent $61,334 in 2020. Average annual expenses decreased from 2019 to 2020, down 2.7% overall.
Food away from home dropped over 32% while alcoholic drinks down 17%. People were forced to keep their money instead of throwing it on vices and distractions. Entertainment overall was down the most at almost 52%.
While closing and retail tanked almost 24%; all of which are understandable. An estimated 9.4 million businesses being closed – some temporarily and some permanently.
Turns out average income did not go down, it increased by 1.8% due to government intervention and society-wide changes. For what it is worth, we were spared.
The average US home took in $84,352 while spending:
- 35% on Housing;
- 16% on Transportation;
- Almost 12% on Food and Investing respectively.
Let’s dive into average US household spending during 2020 versus the Neighborhood Finance Guy‘s household to see where we dropped the ball or made decent headway.
Table #1. Average US Household Expenditures for select expenses for 2020
| Spending Categories | Avg. American Household | Percent of Total Avg. Expenses | TNFG Household | Percent of TNFG Household |
| Housing | $21,409 | 34.91% | $20,120 | 13.06% |
| Transportation | $9,826 | 16.02% | $3,143 | 2.04% |
| Food | $7,316 | 11.93% | $5,689 | 3.69% |
| Healthcare | $5,177 | 8.44% | $1,524 | 0.99% |
| Entertainment | $2,912 | 4.75% | $1,053 | 0.68% |
| Cash Contributions | $2,283 | 3.72% | *$0 | 0.00% |
| Apparel & Services | $1,434 | 2.34% | $3,168 | 2.06% |
| Education | $1,271 | 2.07% | $5,602 | 3.63% |
| Personal Care | $646 | 1.05% | $1,699 | 1.10% |
| Other and/or Miscellaneous | $1,814 | 2.96% | $29,169 | 18.93% |
| Personal Insurance, Investments & Pension | $7,246 | 11.81% | $82,950 | 53.82% |
| Total Spending | $61,334 | 100% | $154,117 | 100% |
Based on the Spending Stats, What Does It Mean?
Based on the numbers the average 35-44 year old spends close to $58,784 in 2019 which basically means that most millennials are creeping up on that $61,334 average household spending in 2020.
Mind you, these fine details are still outstanding so take it with a grain of salt.
Secondly, when people compile stats; millennials tend to live in densely populated and high cost of living urban areas on the coast, which by definition leads to higher than average expenses. Unless, they are bankrolled by their parents.
To the right is a graphic created by SmartAsset that shows how generations spend their money in 2019.
Finally, Table #2 shows the percentage variance between how the average household spent their money vs the TNFG home.
Negative generally means that TNFG spent less in that category and reallocated in other areas. In some instances, a non-negative is inversely positive like Investments since it means we invested more.
Table #2. Comparing Household Expenditures
| Spending Categories | Diff. by Percentage for Avg. vs TNFG | Wealth Notes |
| Housing | -62.60% | Housing costs should be limited to less than 25% of take home pay after taxes. It should include utilities, insurances, and even HOA fees |
| Transportation | -87.27% | Transportation costs should be limited to less than 8% of take home pay after taxes. It should include gas, maintenance, insurances, etc.. |
| Food | -69.05% | Food costs should be limited to less than 5% of take home pay after taxes. This can save your health and waistline. |
| Healthcare | -88.29% | Try looking into Health Savings Accounts. Triple-Tax advantages. |
| Entertainment | -85.61% | Learn to do more with less. There is no sign that equates fun with spending all your money. |
| Cash Contributions | -100% | N/A – since I do pre-tax donations and generally don’t track this. For most people, this is money to family, church and charities. |
| Apparel & Services | -12.07% | Not to bad |
| Education | 75.39% | My student loans will start taking $1k per month starting February 2022. I can’t escape this for now with the Pandemic forbearance. |
| Personal Care | 4.65% | Not too bad just over 4.65% from the average. |
| Other and/or Miscellaneous | 539.93% | This other category captured Travel, engagement, and etc. It should be back to normal in 2021 since the wedding was 2020. |
| Insurance, Investments & Pension | 355.58% | This is the only non-negative that’s a positive since we are investing way more than the average household. |
So What Can You Do to Improve your Household Spending?
First and foremost, create a plan for your home. Just breathe and focus on what you can accomplish even if you are single. Start budgeting with the goal of investing for the future:
- Use tax efficient assets if you have access such as 401k, 403b, or 457b at work. Double check your allocations because if it’s not nearly +9%, it might be a problem.
- Set money goals per month where you make more than you are spending. Nothing is better than increasing your cash-flow.
- Buy a home and stay in your home as long as possible. Those who sold every 4 years are generally losing in interests. And stay with your car as long as possible. Bonus, if you upgrade your car; go EV for tax breaks.
- Focus on being financially secure versus trying to hedge education cost. You will be a better service to your kids as a not broke parent.
If you done this correctly, you should be well on your way to becoming a millionaire or multi millionaire by retirement. It is always better to be actionable versus waiting for someone else to take action for you.
Take Away
Remember, the average American household made $84,352 before taxes in 2020. You have to make at least $140,000 by 2040 to remain competitive. You have to get active because unfortunately, no one will do it for you.
My wife and I are shooting to be debt free by 2036. At least that will help lower unnecessary costs. Far too many people go into their 30s with credit card debt issues. Others in their 40s pick up too much lifestyle expenses. While too many go through their 50s and 60s with mortgage expenses.
Knock out spending issues through all your years. The rest will come easier.
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