There is a unique financial situation for everyone. Your location, lifestyle, job, and family size affect your monthly expenses. When creating and managing a budget, you need to be aware of these factors.
As such, it can be challenging to see how you stack up against others—especially when it comes to monthly budgeting.
If you compare your monthly expenses with those of the average American, you can understand where your money is going and if you are on track. If you make a plan to reduce your spending, you will be able to save money each month.
The average monthly expenses for a single person is explored in this article. We will look at the most significant factors that contribute to your spending amount.
How Much an Average American Spends
According to a recent Consumer Expenditure Survey from the U.S. The average American household spends $5,100 a month. Depending on the size and demographic of the household, this figure can be vastly different. That is about $61,000 a year. A variety of important projects could be funded by this.
The cost of housing is the most expensive for most people, with an average cost of around $1,647 a month. Before deciding on a place to live, it is important to budget carefully and consider all financial implications.
Roughly 15% of the average household income is spent on transportation, which costs an average of $800 a month. It’s important to think about ways to save on transportation costs.
These are the top spending categories.
Average Living Expenses by Category
- Housing Costs
- Food Costs
- Transportation Costs
- Communication Costs
- Entertainment Costs
- Debt Costs
- Saving and Investing
1. Housing Costs
You have to pay for housing if you want to live in an inherited home or with your parents. Renting or buying a home is often the biggest expense in a person’s budget. Chances are it is your highest monthly cost. It should not be taken for granted that you have a roof over your head.
If you want to keep your costs down, you need to be careful about where you live. The progression of your first apartment should set you up to move to a nicer apartment. You can buy an apartment after that. Depending on your budget and lifestyle, you may want to consider renting an apartment or condo. Eventually, you will be able to buy a house.
If you go over budget on your first apartment, you could end up in debt for the rest of your life. Before signing a lease, make a realistic budget and stick to it so that you don’t end up overspending.
Housing is important. Everyone should have access to this basic human need. You should be happy where you live. It is important to have a sense of security in your home. If you have a good job, you may be justified in spending more money on housing. It’s a good idea to consider the amount of savings you have and whether you can afford to live in a more expensive area.
The rule of thumb is that housing should not take up more than 30% of your gross earnings or what you make before taxes. The rule is meant to be used as a guideline and not a strict requirement. This includes rent or mortgage payments, property taxes, homeowners insurance, mortgage insurance (if you can’t afford a 20% down payment), renters insurance, utilities, and maintenance and repairs.
2. Food Costs
You have to eat to survive. It is important to find ways to save money on food when grocery shopping. Most people put 10% of their money into their food budget. It is important to remember that the amount of money allocated to food can vary depending on individual needs and preferences If you’re spending more than this on food every month, you should reconsider your grocery shopping strategy and look for ways to cut back.
There are some small things you can do to save money. Start shopping around for the best prices on groceries and compare store brands with name-brand items to save money. For example, you can use coupons or buy in bulk from a wholesale club like BJ’s, Costco, or Sam’s The club wants to lower the cost of food. If you want to stop eating out, you can limit the amount of take-out you order on a monthly basis. You can make a grocery list so that you don’t have to rely on take-out.
Again, you don’t want to skimp on this area. Investing in quality materials and tools will ensure that your project is done correctly and efficiently. You should be able to buy enough food on a budget to last you through the month if you shop wisely. You can stretch the food budget even further by using leftovers and creating a grocery list.
Your food budget should stay in check because you should eat healthy and be smart about ordering out. Before you go to the grocery store, make a list and stick to it.
3. Transportation Costs
You have more say in how much you spend on transportation on a monthly basis. If you want more flexibility, you may want to consider a car. Regardless of the option you choose, be sure to factor in the cost of maintenance and fuel.
Many people drive cars that are too expensive. It can be an unnecessary luxury for some people to drive to work or run an errand. By making small changes to your lifestyle or routine, you can potentially cut back on transportation costs and put more money back into your savings and investments. By taking the time to think about your current habits, you can identify areas where you could make budget-friendly adjustments that would lead to both financial and environmental benefits.
Don’t buy a car if you live in a city. There are alternatives to owning a car that can save you money, time, and stress. Use public transportation, buy a bicycle, or use other methods to get around. You could walk whenever possible. It is possible to reduce your carbon footprint by taking public transportation whenever you can.
According to a recent study, the national average commute is more than 52 minutes each day. You may want to look for a job that will allow you to work from home so you don’t have to travel.
Either way, you should try to keep transportation costs at roughly 10% to 15% of your total budget. Car payments, insurance, parking, maintenance and repairs are included. When buying a car, it is important to budget for all of the costs.
If you want to fast-track your financial freedom, I recommend spending less than 5% of your monthly income on transportation.
4. Communications Costs
If you are like most people, you rely heavily on communication for everything from work to staying in touch with friends and family. Communication is important for everyone in the modern world and can be a powerful tool.
Communications costs may include high-speed internet, mobile service, and television. You might need a phone for work. It’s important to have a landline telephone if you work from home.
Most people spend between $70 and $100 per month on their cell phones and internet and cable. Additional fees, such as taxes and surcharges, can add to the overall cost. Break down your costs and look for ways to lower your bill if you spend more than $200 per month on communications. If you can switch to a cheaper phone plan, there are ways to reduce the amount of data you use. You could be paying too much. You don’t want to end up paying too much if you shop around.
It is worth looking at additional communications expenses that may be eating into your budget. You might need to upgrade your technology or invest in more marketing services. You might be paying for cloud services, an Office365 subscription, or apps. You might be paying for services like website hosting. Make sure you don’t throw money away carelessly by doing a communications audit.
5. Entertainment Costs
If you are like the average American household, you are most likely spending too much on entertainment, which is about 4% of a family’s monthly income. It’s important to be aware of your spending and make good financial decisions.
You can probably cut back on this cost. It is possible to find cheaper alternatives for the same items. It’s possible that you don’t need Prime Video or Hulu if you have Netflix. If you want to maximize your streaming options and have access to a wide variety of content, then subscribing to multiple streaming services may be the right choice for you. It might be time to stop spending so much on video game equipment. Investing in other activities such as sports, music lessons or art classes can be a great alternative to spending money on video games.
You can put yourself in a good financial position by capping your entertainment budget and spending less on frivolous fun. By looking for ways to make extra money, you will be able to build a strong financial future. If you invest and save an extra 5% of your budget—or even just 4%—you will likely add tens of thousands to your net worth over the next ten to twenty years.
6. Debt Costs
If you’re in debt, you need to get out as soon as you can. To figure out how much debt you have, check your credit cards and student loans. A plan to pay off your debt should be created once you have a total number. If you have multiple accounts with high interest rates, you should treat it as a financial emergency and start making aggressive payments. Creating a budget that allocates more money to paying off high-interest debt is one way to make sure you stay on track.
Depending on your debt load, how much you put towards debt is largely dependent on it. It is important to balance the amount of debt you can afford with other priorities. You may want to put 20% to 25% of your income toward debt if you are in deep.
It may also be a good idea to consider a private loan to pay off your credit cards and consolidate your payments. It is easier to pay down multiple cards each month than it is to receive a lower interest rate. If you consolidate your credit card debt, you can improve your credit score.
Paying down high-interest debt will usually give you a better return than putting your money into a high-growth account. Saving or investing if you lose money each month to debt payments is pointless. Paying off debt before investing or saving will help you make the most of your money.
Don’t lose sight of the light at the end of the tunnel. Even if you can’t see them, remember that there are brighter days ahead. You can get out of debt if you are in debt. Make a plan to pay down your debts as soon as possible by taking control of your finances. Even if it hurts in the short term, you need to make it a priority. If you want to reach your financial goals, you will have to sacrifice some of your current luxuries.
7. Saving and Investing
It’s also critical that you prioritize saving and investing when determining your monthly expenses and setting a budget.
If you’re living paycheck to paycheck, you may not like the idea of putting money into the bank for an emergency fund. Even if it means cutting out your entertainment expenses or reducing your transportation costs, it is worth it. The long-term benefits of saving money outweigh the short-term annoyance of changing spending habits.
Young people don’t save and invest as much as they should. Saving and investing is an important part of financial planning for the long-term, not something to worry about in the distant future. They end up paying for it with time. It is hard to come by and even harder to recover from missed opportunities and lost growth potential.
When planning for the future and growing money, time is the most important factor. In order to maximize your earnings potential, you need to make wise decisions and invest wisely. It is impossible to get back lost time for saving and investing. Time is a precious commodity, and it is important to use it wisely when considering your financial options. The better off you will be in the long run if you put away more for growth today.
Tips for Controlling Expenses
Consider Using Budgeting Rules
There are several budgeting frameworks you can follow. Zero-based budgeting, 50/30/20 budgeting, and envelope budgeting are some of the most popular budgeting frameworks.
You should spend at least 50% of your income on necessities like food and shelter according to the 50/30-20 rule. The other 50% of your income can be used for savings and personal expenses. You can put 20% into savings and debt after that. Basic necessities like food, rent, and utilities should be used of the remaining 50%.
The 70/30 budget rule says you should put 70% of your monthly earnings into monthly expenses, 10% into savings, and 10% into donations. While giving back to the community, this approach can help you achieve financial security.
You can modify these rules to fit your lifestyle and budget. A framework is a great place to start because you need a plan. Creating a plan will allow you to work more efficiently and achieve your goals.
Check out some of the best budgeting apps for 2023.
Start a Side Hustle
When you are young, save as much as you can and work as much as you can. You are setting yourself up for a prosperous future by doing this. There are so many different side hustles to choose from to supplement the earnings from your full-time job.
You can do a lot of things, such as babysit, paint houses, manage social media, or wait tables. You can use your skills to make money in any of these fields. You can also choose to deliver groceries for a service like Instacart. These jobs allow you to work when you please.
The more you make, the easier it is to handle monthly expenses and still meet your savings and investing goals.
Consider Roommates
It can be very expensive to live on your own. It is important to have a budget in order to make living on your own manageable. If you have roommates, you can split bills evenly, which will reduce your monthly expenses and give you more money to put aside. You can enjoy the company of your roommates and have someone to talk to when you get home.
If you have a two- or three-bedroom apartment, you may want to consider renting it out. It is recommended that you speak to an experienced property manager who can provide guidance on how best to rent out your space, as some cities may have restrictions on who you can rent to. This strategy is called house hacking.
Consider your Location
There are many advantages to living in expensive cities like San Francisco, New York City, and Los Angeles. The cost of living in these cities can be a challenge for residents. The cost of living in these places is very high.
If you’re looking to save money, it may be a good idea to consider moving to an area where your dollars will go further, or find a job that lets you work from home full-time.
Low housing and food costs can be found in states with little or no income taxes. The overall tax burden, as well as property taxes, sales taxes and other fees, should be considered when researching states with a lower cost of living. It may be easier to get by in a town that is in line with your budget. It is possible to find one that fits your budget by researching the cost of living in different cities.
Frequently Asked Questions
Are childcare costs expensive?
If you are expecting a child, you need to save as much money as possible. It is possible to create a financial plan to save for your baby’s future. Kids can cost as much as $1,000 per month for all the care and servicesthey need. When budgeting for child care, it’s important to take these costs into account. You have to consider putting money aside for their future as well. It is a good idea to have at least two sources of income to make sure the child is well cared for. It’s important to make sure you have a plan in place for your child’s future. Financing with a kid is the last thing you want to do. It’s important to make sure you have enough money to support your child. You could end up in a tough situation if that happens. It’s important to be prepared for the unexpected if you want to stay ahead of the curve.
How healthy you are, how much you drive, and how much you make a difference. Depending on who you are, the amount of car insurance coverage you need can be vastly different. If you are single and healthy, you don’t need a health insurance plan. It is important to consider the financial risks associated with unexpected medical costs. If you don’t drive a lot, you don’t need a premium car insurance plan. It is wise to invest in a plan that offers more coverage if you drive a lot.
It could come back to bite you if you lower your insurance premiums. Before making any decisions that could affect your financial security, it is important to weigh the pros and cons of the situation. Good insurance can pay off when you need it, even if you don’t. Having good insurance coverage can give you peace of mind in the event of an emergency.
Do I need life insurance?
It depends. You should have life insurance for people who depend on you. Lock it in while you are young and healthy so that you pay less for premiums. If you want the best advice for your needs, you should talk to an insurance agent. You could develop a health issue if you wait too long. Procrastination can have serious consequences, so it’s important to act quickly.
Life insurance is more of a nice-to-have if you are a single person with no dependents. No matter what your family situation is, having life insurance can give you peace of mind. You can self-insure if you are in a position to save a lot of money. It is possible to save money and put it into an emergency fund.
Think of it this way: Let’s say you save over $1,000,000 in investments. After you pass away, these funds will be passed down to your loved ones. It is important to plan in advance so that your loved ones are taken care of after you pass away. Life insurance is a little unnecessary because of this. Life insurance can provide financial security and peace of mind to those who might otherwise worry about leaving their family members in a difficult financial position should something unexpected happen. Your life insurance agent might disagree with this opinion.
The Bottom Line
Now that you know what factors into your monthly budget, it should be obvious that your situation is unique to you and you alone, and only you can control it.
Your monthly budget should be based on your household income and expenses. If you want to stay on track with your budget, you can use budgeting tools and apps. You will get closer to long-term financial independence every day if you stick to it. It’s not always easy, but the reward is worth it.
It might seem like you can’t control things, such as where you live and how much you make. It is possible to control how you respond and react to your circumstances. In today’s golden era of remote work and side hustles, you have more power than you think. You can create a lifestyle that works for you if you want to. It might even be as simple as knowing how to negotiate a raise.
Don’t be afraid to look for ways to get ahead. The most creative solutions come from thinking differently. You will be happy that you did it. Taking the steps necessary to achieve your goals now will pay off in the future, so don’t be afraid to put in the work.
