Housing. Transportation. Food. But let’s dive deeper.
Most people’s largest expenses are housing, transportation, and food (in that order). Of course variables like having a larger family to feed or being able to bike to work might change the order of precedence for some folks, but for most, this is the case. We’ll consider these mandatory expenses.
Housing
Housing expenses include things like mortgage or rent payments, insurance, wifi, water, gas and electric, trash, and HOA fees. These expenses are the most difficult to make rapid changes to of the three categories we’ll look at, seeing as most living situations come with a time restriction and moving can be a challenging task.
Transportation
Transportation expenses include vehicles, gas, oil, maintenance, and things like public or private transportation tickets, and rideshare services. It’s easier to get rid of your expensive car and get a cheaper one than it is your house, and shopping around for insurance is always an option, but we don’t have control over gas prices so its certainly easier to adjust your personal spending in this category than your housing expenses.
Food
Food is all your groceries not including going out to eat and is by far the easiest category of mandatory expense that we can control! Simply put, a filling, tasty, and nutritious meal can very easily be put together for under $5 where as the average fast food meal costs $11.56! There is no such thing as a $5 footlong anymore! Meal prepping isn’t as hard or time consuming as you think and will not only save you tons of money, but you will almost certainly improve your health by preparing food yourself rather than eating ultra-processed fast food.
Let’s look at some numbers…
All the data we’re working with is derived from census beaurau and DOT reports and is reflective of an average American household.
- The median household salary in 2024 was $83,730 or $6976 per month.
- The average cost of housing in 2024 was $21,108 or $1759 per month.
- The average transportation cost in 2024 was ~$13,314 or $1110 per month.
- The average grocery (not eating out) expense was ~$11,064 or $922 per month.
| Yearly | Monthly | Percentage | |
| Income | $83,730 | $6976 | 100% |
| Housing | $21,108 | $1759 | 25% |
| Transportation | $13,314 | $1110 | 16% |
| Grocery | $11,064 | $922 | 13% |
| Remainder | $38,244 | $3185 | 46% |
So that means…
46% of the average income should be left over after mandatory expenses and that’s pretty good, right?
Well, yes… BUT we are not factoring in other regular expenses like investments (which you should absolutely be making regularly), cell phones, subscriptions, and hobbies! All of which can vary extremely in cost. So understand that the remaining 46% is quickly whittled down.
Many suggest that setting aside at least 20% of your income for investments and savings every single month is a good target to start with, which works out to $1395 if we use the numbers from our table, and $1790 for discretionary spending (fun money). Whether or not you should be spending more on hobbies than investments and savings is a topic for another article, so, you do you.
Here’s how you can use this data:
Regardless of where your household income falls in comparison to the averages in the table, it’s extremely important to take a look at your income and expenses and see where your money is going, paying particular attention to the percentages in relation to your income. Once you have determined what percentage you’re spending in those categories, it makes it easier to spot glaring trends in your spending and thus makes it easier to start course correcting to a more financially responsible lifestyle.
In summary…
- If your savings are just not growing like you want them too, or you have a hunch you’ve been spending too much on eating out, take a look at your expenses and see where they stack up compared to the average!
- When you arm yourself with a good understanding of where your money is going, it makes it easier to spot trends and adjust to make more efficient use of your money.
Thanks for reading! Click here for more topics in the finance category.
