24/7 Wall St. reviewed how Americans spend money. One of the conclusions of this analysis is that consumer spending is relatively alive and well, despite the recession. This may mean that Americans continue to be over-leveraged. US citizens have, in general, brought down their indebtedness. However, holiday spending rose substantially from last year, and the extent to which Americans feel poor has declined now that the recession has ended. Americans spend about 15% of their household incomes on things that they do not need to satisfy their vices or to keep themselves amused.
We examined the changes in spending patterns over the course of one generation–20 years. Americans have certainly not cut back on vices because of the recent difficult economy, with the exception of casinos which were hurt badly by the slowdown. Money spent on alcohol and tobacco is about the same as it was two decades ago. Sin apparently is not beaten down by hard times.
Data from the Bureau of Labor Statistics was one of the core sources of information for the 24/7 analysis. We looked spending habits in 1989 and then again in 2009. The average household expenditure two years ago was $49,000. That is measured against household income before taxes of about $63,000. Real incomes have not risen over the course of the last ten years, something that has not happened in any decade since the Depression. Over the course of the last two decades the increase in real income was only 10%.
The patterns of how people spend money on things has changed. People spend much more on television, radio, and sound systems than they did in 1989. They also spend more on pets and toys.
The BLS divides households into nine income groups. The lowest is households with income less than $5,000 a year. It is hard to imagine how such a household could exist. But, the government definition includes people who rent rooms or other living spaces, so in reality a college student or group of college students would qualify. The highest income group contains households with incomes of over $70,000 a year.
24/7 reviewed how American households spend their money and identified categories in which the expenditures are purely discretionary as a way to set its final list of ways people spend money on unnecessary items. We removed all expenses that could be considered essential to maintain a reasonable living, good health and a steady job. Then, we identified the ten categories of unnecessary purchases which accounted for the largest part of U.S. household expenditures. We also broke the data into several demographics, including income before taxes, regions of the country, and the number of people in each household.
The ten categories of unnecessary purchase can be balanced against the ability of Americans to save money or pay off debts. The “average” American household which has an income of $63,000 spends more than $8,000 on goods and services it does not actually need. The credit crisis might not have been so bad if all that money had been put into savings accounts between 1989 and 2009, but the period would not have been nearly as fun.
10. Apparel Products and Services
This category includes unnecessary purchases such as clothing rentals and storage, dry cleaning, jewelry, and watch repair. Clothing and shoe repairs, which are also included, are rarely considered a waste, but they account for a relatively modest portion of this category. The average amount spent per household is $249. This is slightly down from the 1989 amount, which was $266.
The average household spends more than $380 each year on tobacco products and smoking supplies, which includes cigarettes, cigars, pipes, and chewing tobacco. It is worth remembering that this average includes households where no one pays for tobacco products. Despite this fact, tobacco’s portion of the average household’s budget, 0.8%, is larger than what Americans spend on fresh fruit and milk combined. A person who smokes a pack of cigarettes a day in New York state will spend more than $4,000 a year, which is roughly 10% of the average American income before taxes.