Department of Labor Consumer Expenditure Survey recently (latest version is 2001 which can be found here; 2003 Survey is in the making) is an eye-opener for understanding how average American spends the money.

I was led to the Survey by the December 15 Fool.com story "Is Your Cash Flow Normal?". Besides some key numbers and facts discussed in the story, here are some more you might find interested:

(Note this is 2001 survey so things may change slightly since then)

Income Level

To get to 20% of the consumer units (e.g. households), before-tax income of $71,898 is needed. For top 40%, it's $44,462. $27,177 gets you to the top 60%. And if you are below $13,909, chances are you are in the bottom quintile of the survey.

The Average

The average consumer unit has a before-tax income of $47,507 and spends $41,395. It has 2.5 persons and 2.0 vehicles. On average there are 1.4 bread earners in each consumer unit. 65% of all consumer units are proud homeowners.

Regional Differences

Northeast consumer units earn the most at $50,568/year before tax, followed by $49,960 in the West, $47,665 in Midwest and $44.218 in the South. However, people in the West spends the most at $43,261 per year, followed by $41,169 in the Northeast, $39,548 in the Midwest and $36,285 in the South. (A lot of the spending differences are driven by housing.)

The Sin Product(s)

In most spending categories, households who earn more spend more. The only anomaly is tobacco: top quintile households spend $310 a year in tobacco on average, while the second and third quintiles spend $382 and $373 respectively. On the other hand, top 20% households spend $700 a year in alcoholic beverages vs $431 for the second 20%. Does it mean alcohol is more sinful than tobacco?

The detailed report also tabulates differences among various age groups, # of persons in the consumer unit (1 person, 2 persons and more), consumer unit composition (husband and wife, with children, one parent, etc.), # of earners and a lot more.

On a side note, I cannot completely agree with the assessment from the Fool.com story that "only 40% of Americans live below their before-tax means" (which means have more after-tax income than expenditures). The conclusion is based on the income-level quintile comparison in the report (page 7), which shows, on average, people in the lowest three quintiles have less before-tax income than expenditures.

The problem is average is average. This line of thinking cannot conclude that everyone in the three lowest quintiles is spending more than earned. Most probably there are a sizable pool of people that can still balance their checking account even with low income. Also, the low income brackets are skewed toward retirees, so the golden rule of LBYM does not generally apply.