Budget Perspective

June 2, 2019

by Steve Stofka

How does your spending compare with others in your age group? Working age readers may compare their budgets with widely published averages that are misleading because they include seniors as well as those who are still living at home with their parents or are going to college. Let’s look at spending patterns classified by working age consumers 25-65 and seniors whose spending patterns change once they retire.

The Bureau of Labor Statistics collects data on consumer behavior by conducting regular surveys of household spending (Note #1). These surveys provide the underlying data for the computation of the CPI, the Consumer Price Index. Social Security checks and some labor contracts are indexed to this measure of inflation.

The BLS also provides an analysis of consumer purchasing by household characteristics, including age, race, education, type of family, and location (Note #2). Spending and income patterns by age contained some surprises (Note #3). The average income of 130,000 people surveyed in 2017 was $73K. Seniors averaged $25K in Social Security income. Younger workers aged 25-34, the mid-to-late Millennials, earned $69K, near the average of all who were surveyed. Following the Great Financial Crisis, this age group – what were then the early Millennials in 2010 – earned only $58K, so the growing economy has lifted incomes for this age group by 20% in seven years.

Home ownership is around 62% for the whole population, but far above that average for older consumers. 78-80% of people 55 and older own their own homes. More than 50% of those have no mortgage but too many seniors do not have enough savings. In many states, property taxes are the chief source of K-12 education funding and older consumers have the fewest children in school. Older consumers on fixed budgets resist higher property taxes to fund local schools and they vote in local elections at much higher rates than younger people. Since 2000, per pupil spending has grown more than 20% but most of that gain came in the 2000s.  In the past twelve years, real per pupil spending has barely increased (Note #4). Below is a chart from the Dept. of Education showing per pupil inflation adjusted spending.

Graph link: https://nces.ed.gov/fastfacts/display.asp?id=66

Saving is an expense and working age consumers aged 25-65 are saving 9-12% of their after-tax income, twice as much as the 5.6% average. Wait – isn’t saving the process of not spending money? How can it be an expense?  Call it the imaginary expense, as fundamental to our life cycle as i, the imaginary square root of -1, is to the mathematics of cyclic phenomena. Let’s compare today’s savings percentage with the panic years of 2009-10 just after the financial crisis. Workers in the 25-34 age group – who should have been spending money on furniture and cars and eating out – were saving 20% of their after-tax income (Note #5). That age group will probably carry the lessons – and caution – learned as they began their working career after the financial crisis.

Workers 25-65 spend 28-32% of their after-tax income on housing. Until they are 65, people spend a consistent 12% of their income on food, both at and away from home. Seniors spend less on food but most of that change is because they spend less money eating out at restaurants. Working age consumers spend more on transportation than they do on food – a consistent 15% of after-tax income.

People 65 and older are entitled to Medicare but they spend more on health insurance than working people and the dollar amount of their spending on health care rises by 50%. As a percent of after-tax income, seniors spend 15% while people of working age spend about 6%. Ouch. I’m sure many seniors are not prepared for those additional expenses.

Those of working age should compare their budget averages to other workers, not to the national averages, which include older people and those under 25. Summing up the major expense categories: workers are averaging 30% for housing, 15% for transportation, 12% for food, 11% for personal insurance, pensions and Social Security contributions, 10% for savings and 6% for healthcare.

As Joey on the hit TV show Friends would often say, “So how you doin’?”



  1. Explanation of Consumer Expenditure Survey
  2. Consumption patterns – list Table 1300
  3. The most recent detailed analyses available are for 2017.
  4. Dept of Ed data
  5. Spending and income levels for those aged 25-34 2009-2010.

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