American Households in 2022 spent $72,967. How much did we spend?
According to the US Bureau of Labor Statistics, in 2022, the Median American Household brought in $94,003 and spent $72,967.
While there is some confusion with this number, this boils down to a survey of nearly 135 million households. Before you lose your cool with the numbers, there are two more caveats to consider. Surveys, like these typically exclude extreme outliers like Jeff Bezos or Oprah since they would dramatically skew the numbers. The data isn’t intended to make you feel good or bad; it’s merely here as a spot check.
This helps shape policy and direction for the present and the future.
Following the BLS 2022 report (1st week in September), the US Census Bureau reported on Income and Poverty in the United States: 2022 (2nd week). They found that before taxes, real median household income declined 2.3% to $74,580 and the poverty rate (11.5%), as measured by the official poverty measure, was not statistically different from 2021.
Table of Contents
Why the difference in reporting?
The US BLS looked at the raw data while the US Census factored into inflation with a focus on poverty and health care. Later in 2023, we will get another report from the Federal Reserve chronicling the Survey of Consumer Finances Median Wealth in the US for the last three years (2019-2022) (publication releases by mid-October).
This will give us a rough draft of where the US Middle class is headed.
Why all this data?
Turns out, the raw and refined data tell us a lot about consumer spending, mindset, and long-term planning. It’s the basis for Financial Fluency and the means to get ahead of the curve. Most people in the financial advisory field or the financial social media punditry have no clue where the numbers are coming from.
This puts you ahead of them. You need every advantage you can get to beat the average.
So What about our household Again?
If you are brand new to this blog, I’m known as the Neighborhood Finance Guy.
My wife and I break down our numbers so that you can learn, adapt, and become wealthy. This post is about reviewing the last year. The goal is to compare and contrast to see where we dropped the ball and where we could stand to improve. Why does it matter?
We became millionaires in six years by using these techniques (From Jan 2018 – Aug 2023). So we’d recommend it. And we didn’t have to eat just beans and rice nor skip any joys in life. We merely focused on what we NEEDED to do (i.e. invest) which made more room for what we WANTED to do (travel).
It’s all about being intentional with money.
Nonetheless, it was a difficult year flanked with a lot of quality time. We started off with the student loan pause extensions which saved us $1k per month. Followed by my sister-in-law’s wedding, a trip to California, and Canada; and, then things got harder.
By July, we had plumbing leak repairs, new tenants out of state, and medical expenses due to fibroids. It was pretty rough. We also threw in a new puppy in the mix. All of this led to a serious family emergency which cost a lot of money and stress. In the end, we closed out the year with a very rewarding trip to Portugal and Spain.
We spent a hard $25,000 on all things travel and almost $7,000 on health care. Sometimes a lot of life happens. The $25k tells us we prioritize travel and family. In order to meet those criteria, we cut back on stuff we don’t care for. That’s the secret to our success.
Wow 2019 seems like a lifetime away
Back then, the median American Household spent $63,036 in 2019.
The annual expenses increased from 2019 to 2022 for all 14 categories. Those elements include housing, food, apparel and services, transportation, healthcare, personal care products and services, education, and cash contributions.
The report from the Bureau of Labor and Statistics is not all doom and gloom. Turns out, median income before taxes increased by 13.45%. Goes to show you that people are getting paid.
The question is how you are using your time.
How we use money is likely the culprit of living paycheck to paycheck.
Most families are saving less than 10% of what they earn. While the 401k is one of the best available retirement saving options for many people, only 32% of Americans are investing in one, according to the US Census Bureau.
According to this survey by the Transamerica Center for Retirement Studies, the median retirement savings by age in the U.S. is:
- 40 year olds: $63,000
- 50 year olds: $117,000
- 60 year olds: $172,000
According to the results of Fidelity’s Q4 2022 analysis, Average retirement account balances have increased from the third quarter of 2022.
- IRA balance was $104,000 in Q4 2022, a 2% increase from last quarter and a 36% increase from ten years ago.
- 401(k) balance increased to $103,900 this quarter, up 7% from Q3 2022 and up 34% from ten years ago.
- 403(b) account balance increased to $92,683, up 6% from last quarter and a 56% increase from ten years ago.
While positive for now, if these trends continue, most households will not survive the high tide of inflation.
Especially as the average living expenses are slated to increase to over $100,000 per year. With that being said, The Neighborhood Finance Guy‘s household is all about working less and investing more today.
Let’s dive into some more numbers.
Table #1. US Real Median Household Expenditures for select expenses for 2022
| Spending Categories | Avg. American Household | Percent of Total Avg. Expenses | TNFG Household | Percent of TNFG Household |
| Housing | $24,298 | 33.30% | $41,405 | 25.23% |
| Transportation | $12,295 | 16.85% | $3,874 | 2.36% |
| Food | $9,343 | 12.80% | $9,134 | 5.57% |
| Healthcare | $5,850 | 8.02% | $6,603 | 4.02% |
| Entertainment | $3,458 | 4.74% | $2,673 | 1.63% |
| Cash Contributions | $2,755 | 3.78% | *$0 | 0.00% |
| Apparel & Services | $1,945 | 2.67% | $6,797 | 4.14% |
| Education | $1,335 | 1.83% | $205 | 0.12% |
| Personal Care | $866 | 1.19% | $4,654 | 2.84% |
| Other and/or Miscellaneous | $2,080 | 2.85% | $7,136 | 4.35% |
| Personal Insurance, Investments & Pension | $8,742 | 11.82% | $81,619 | 49.74% |
| Total Spending | $72,967 | 100% | $164,100 | 100% |
While We Did Spend more, We are Investing 834% More than the Median
In order to keep mathematical equivalence, Table #1 shows the reported Real Median US household expenditures and the percentage, in which that category is represented in the Total Spending. So in short, the typical American household paid 33.30% of their take-home pay for housing, whereas the TNFG home spent about 25.23%.
Keep in mind, that’s 25% for two households (primary + rental).
This subtle difference translates to a Wealth of future opportunities. On top of this, note that there is a rental real estate property mortgage on the TNFG’s side. In essence, mismanaging money merely adds more work to your life.
This was no way easy
To make this abundantly clear, getting to this point is not easy. Personally, my wife and I didn’t know that we would be at this point.
When we started, I was making $23k before taxes which ended up being $1k per month (paid monthly no less) while she took a sales job making $44k before taxes.
So if you are looking at your checking and notice more months than money, we completely understand. It’s a journey.
We cut back on what was hip, trendy, or cool for peace of mind. You really get to decide what kind of life you want to live, from this moment forward.
Below Table #2 showcases where our dollars went vs. the average. I even added notes for your consideration.
Table #2. Comparing Household Expenditures
| Spending Categories | Diff. by Percentage for Avg. vs TNFG | Wealth Notes |
| Housing | +70% | *Housing costs should be limited to less than 25% of take-home pay after taxes. It should include utilities, insurance, and even HOA fees. In this case, our expenses were up because we have two households (primary and rental). |
| Transportation | -68% | Transportation costs should be limited to less than 8% of take-home pay after taxes. It should include gas, maintenance, insurance, etc… |
| Food | -2% | Food costs should be limited to less than 5% of take-home pay after taxes. This can save your health and waistline. |
| Healthcare | +13% | Try looking into Health Savings Accounts. Triple-Tax advantages. Due to medical care, surgeries, and other emergencies. |
| Entertainment | -23% | Learn to do more with less. There is no sign that equates fun with spending all your money. |
| Cash Contributions | N/A | N/A – since I do pre-tax donations and generally don’t track this. For most people, this is money for family, church, and charities. |
| Apparel & Services | +249% | Non-negative means that my household spent more in this category. Which is not good. |
| Education | -85%% | My student loans will start taking $1k per month starting February 2022. I can’t escape this for now. |
| Personal Care | +162% | *Plus Petcare Expenses. Way too damn much. I’ll blame it on the wife. But not sure what we are doing here. It will be interesting to see the difference in 2020. |
| Other and/or Miscellaneous | +509% | Lots of travel – 2 international and 9 domestic flights. That would break the bank. |
| Insurance, Investments & Pension | [834%] | This is the only non-negative that’s a positive since we are investing way more than the median household. We max out our retirement accounts and add more in our after-tax. |
If you want to make changes to your spending?
Don’t skip talking to your family. First of all, you might feel anxious or embarrassed but it’s part of the steps of building confidence.
Secondly, create a SMART plan for your home, filled with fun dreams and hobbies that fuel you without leaving you feeling drained.
Finally, decide what’s important to you and what feeds your future versus starving the life that could have been for temporary joy today.
Quick steps to track your spending:
- Use Mint.com or Personal Capital. Both apps are free and will help you understand the full picture of your wealth.
- Start listening to financial podcasts. There are many podcasts covering money mindset without judgment, investing, retirement planning, and even family money. If you are afraid to talk to others about money, it’s OK to listen.
- Stay creative and resourceful. The finish line is not going anywhere. The question is are you going anywhere? The resolution to that is to get active and play a pivotal role in your life.
No matter if you are in the Dave Ramsey debt-free journey, the wealth snowball, or the FIRE Movement; the finish line is not spending. The starting line is living.
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