07- Low-Income Expenditure. High-Income Patterns.
The three largest expenses for most Americans are housing, transportation and food.
In addition to detailing how average and median households spend in these three areas, the BLS’s Consumer Expenditure report (CE) groups US household into groups by income deciles (10 equal intervals, from lowest income to highest) to chart patterns by income.
As seen in the following chart, based on 2016 CE data, while 70.5% of first decile spending is dedicated to these three necessities, top decile households only spend 53.2% on those same needs. The report details how this allows the top 10% to proportionally spend much more on the future, financial security, luxury and comfort.
Looking at my own spending over the past few years, I see a different pattern. Although my income and household expenditures compare more to lower decile households, my percentages have been higher-decile. In other words, although my income and expenses have been low, I’ve been able to spend more money in areas beyond the necessities. Despite my low income, I’ve been able express my personal freedom financially.
In 2015, I quit my job to travel abroad, write and start planning my new passion-based life. Grieving the loss of a dear friend, I returned stateside in January 2016. I split that year between the warmth of friends in New York City and the comfort of family in Dallas. Although my top-three expenses were only about half of that for lowest decile households, my percentage was 2 points less than 9th decile households.
In 2017, I purchased a car, a piece of land and a camper. Because I spent cash, both the dollar and percentage amounts jumped significantly. And while my 2017 dollars were at fifth decile level, my top-three expenditure percentage was six percentage points higher than lowest-decile households.
But because I had no further payments paid for my car, land and camper, my 2018 total estimated expenditures and percentages for these three categories are even lower than in 2015. At only $7,229, I'm spending about 43% of what lowest-decile households spend. And with only 44% of my total expenditures going towards these three categories, I'm spending 9 percentage points less than the 10th decile households.
Now, settled in the one-and-only home that I own, I’m able to grocery shop, eat in and cut my food costs by nearly $1,000 since last year. And even though I’m away from friends and family, I have a place they can visit as well. And because I paid cash for my car, my transportation is very affordable when I do travel, keeping my expenses at 2015 numbers.
While my 2018 estimated housing costs are nearly identical to what I spent in 2015, those costs go to different things. Instead of paying rent, I’m investing money in the upkeep, improvement and value of my camper and land. Likewise, I’m paying property taxes toward the good of my community and insurance to protect my investments.
Looking at the estimated budget for my first full year of simple living, helps me to breathe a little bit easier. If I decided to get a job anytime soon, I would only need to make 28K to cover my lifestyle, savings and investments. While I'm happy living in my camper now, I'd eventually like to build a-400-square-foot house on a foundation here on my property. And because building that home will be full of unexpected turns, I am relishing every moment of the present calm.
What about you? How have you been able to adjust your lifestyle and budget to allow more room for your financial security and emotional calm? Put your your answers in the comments below.