Finance

How Americans' Spending Habits Have Changed Over a Decade

New data shows how much people have spent each year on health care, housing, transportation, education and retirement since 2004.
by | October 2, 2015
When it comes to housing, Americans have spent more on renting and less on owning since 2004. (AP/Richard Vogel)

Where consumers end up spending their money each year fluctuates for a number of reasons.

It isn’t solely a matter of personal preferences. Costs for goods and services may change, and demographic shifts further influence spending habits.

The U.S. Department of Labor has published updated data estimating consumer spending for several different expenses. Here’s a summary of a few key trends for larger areas of spending.

Health-Care Spending

Americans have been spending more and more of their money on health expenses, and the latest federal data suggests a major hike in spending took place last year. Consumer units (a definition similar to households) spent an average of nearly $4,300 last year, up 16 percent from 2013 after adjusting for inflation.

The most obvious explanation for this is the Affordable Care Act mandate requiring most people to obtain health insurance, which went into effect last year. One major caveat to note here is that the Labor Department also introduced a change to its methodology. To improve accuracy, the agency started calculating how much consumers are paying each quarter rather than relying on survey respondents to do so from their insurance bills, affecting comparability to prior years.

This chart shows average health spending per consumer unit, including insurance, medical services, supplies and drugs:

Healthcare CPI adjusted

Homeownership, Rental Spending

Housing costs represent another major area of spending. One trend highlighted in the data illustrates the result of more Americans opting to rent rather than buy houses. In many markets, the housing stock hasn’t met the demand for rentals, driving up prices. Meanwhile, costs for homeowners have continued along a steady decline since 2007.

Rented dwellings expenses vs Owned dwellings expenses

Note that spending categories shown above include costs like interest on mortgages, property taxes, insurance and repairs. They don’t include utilities, appliances and furniture or equipment-related expenses.

Transportation Spending

Last year, Americans spent an average of $9,073 on all expenses related to transportation. This figure has ticked up a bit after declining during the recession, but it’s still down from pre-recession levels after adjusting for inflation.

Breaking down the data further shows how spending for individual types of transportation expenses have fluctuated.

Gas and motor oil, Public and other transportation, Vehicle purchases (net outlays) 

Education Spending

College tuition prices have climbed significantly over the last 40 years. However, the Labor Department data on education spending, which also includes expenses for elementary and high schools, does not depict a steady upward curve. Part of this is explained by the fact that households with no education expenses are included in the averages (and most households don't have children in college). Research by the College Board also notes that increases in what students actually pay to attend college aren’t as high as increases in published tuition prices after grants, tax benefits and other aid are taken into consideration.

This chart shows changes in spending for married couples with children (regardless of age):

Education Spending

Retirement Spending

Finally, retirement-related and life insurance contributions account for another large area of consumer spending. Social Security contributions and payments made to employee pension systems account for the vast majority of spending in this category. Over the past 10 years, real spending in this area has dipped just over 5 percent.

Personal insurance and pensions (total) CPI adjusted

Data Notes

The Consumer Expenditure Survey estimates average annual expenses per consumer unit, a definition similar to a household or family. Not all consumer units purchase items in a given category. For this reason, averages for categories such as vehicle purchases and education are significantly higher for only consumer units that made purchases. Also, some spending may result from non-work-related income, such as gifts.

Refer to the Labor Department website for definitions describing each expenditure category. See our prior report on consumer spending for data for larger metro areas.

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