Household expenses cover everything you spend to maintain your house and meet your family’s needs, from your mortgage payments to education costs. Your household expenses also include how much you spend on entertainment and miscellaneous items. You need to know what your daily and monthly household expenses look like to create a budget for your new home.
In this chapter, we’ll share a list of common household expenses and how much a person spends on average to pay their monthly bills, so you know what to expect. You can also use this information to compare your spending to national averages, which can help you determine if you need to cut back.
Lastly, we’ll show you how to use your list of household expenses to form a budget. Having a budget will help you spend money wisely and stay out of debt.
Household expenses are unique to each family and individual. Still, most households have some costs in common, like groceries and utilities. According to the 2019 Consumer Expenditure Survey conducted by the U.S. Census Bureau of Labor Statistics, American households typically have the following costs:
When creating your home’s budget, you’ll need to write down every expense you can think of, which may not be included in the list above. This includes items you buy every day, monthly bills and things you only get occasionally. Make sure to list small purchases, too, like eating out for breakfast a few times a week. Even your daily cup of coffee can add up to hundreds of dollars a year.
The average monthly expenses for a single person depend on where they live and how they live. For example, according to the Family Budget Calculator created by the Economic Policy Institute, a single person living in Franklin County, Missouri, would need to spend an estimated $2,766 a month to live modestly yet comfortably. Included in this cost is $516 a month for housing, $241 for food and $309 for health care.
Someone who lives in Chicago, on the other hand, needs a higher income to enjoy the same standard of living. According to the calculator, a single person living in Cook County, Illinois, would require an estimated $3,076 a month to cover household expenses.
Both of these calculations are based on a person who controls their spending. Someone who leads an extravagant lifestyle or generally spends more than the average person on necessities like groceries and clothes will have higher monthly expenses and need to earn more money to stay out of debt.
If you look at the Consumer Expenditure Survey, you’ll find that all consumer units spent an average of $680 per month on food, including groceries and food away from home. A consumer unit is all household members related by blood, marriage or adoption, a person who lives alone or who is otherwise financially independent, or two people living together who both use their income to pay for joint expenses.
The survey also reports that 13% of households’ annual income went towards food. You might use this percentage to see how your food spending compares to other families.
You can check out the guidelines for food expenses provided by the U.S. Department of Agriculture (USDA) to help you set a budget. These guidelines list recommendations for four different cost levels, ranging from thrifty spending plans to liberal spending plans.
Households of two people might spend between $400 and $800 a month on groceries. You can use this grocery budget calculator to get a quick estimate of what you should be spending on groceries according to the USDA’s low-cost food plan.
Since you might spend more or less than the national average or USDA recommendations, you may want to look at your current spending habits to learn how much to budget for groceries. Review previous receipts or bank statements and see what you’ve spent. Consider if it’s more than you expected or wanted to pay. You might use the USDA’s guidelines to set a new amount.
Once you know how much you spend on groceries and how much you would like to spend, you can reduce your food bills if necessary. Make sure to set your desired monthly grocery amount aside because you’ll include this category in your household budget.
Miscellaneous household expenses are items that don’t fit in other categories. Examples of miscellaneous expenses include costs that are easy to predict but occur infrequently, such as vehicle registrations, credit card membership fees, birthday gifts or subscriptions. The miscellaneous category may also include non-emergency unexpected costs. It’s critical to list all miscellaneous expenses in your budget because even small expenditures add up fast.
To figure out how much you should budget for miscellaneous expenses, take these steps:
You might place money in a separate savings account for miscellaneous expenses to help you stay on track. Be sure to review your costs annually to make adjustments if necessary.
According to the National Endowment for Financial Education, the typical household wastes an estimated 30% of its money by not examining its spending habits. On the bright side, you can avoid wasting money by creating a budget. Your budget will help you practice intentional spending and use money to reach goals in life. Here are the steps to making a household budget:
The first step to creating a household budget is to list your monthly income. Include all sources of income, such as your wages after taxes, job bonuses or tips. Look at your pay stubs to ensure you’re not overestimating your income.
Next, identify all of your monthly household expenses and estimate how much each item costs. Be sure to include an amount for miscellaneous expenses. You might refer to bank or credit card statements from the past three months to help you estimate amounts.
Subtract expenses from your income to see how much you have left. Ideally, you’ll have a positive amount left over, which you might put toward an emergency fund, debt or another type of savings. If you have a negative amount, you’re spending more than your income, and you need to make an adjustment.
If your budget is unbalanced, you may have to eliminate some of the items you want so you can leave room for the things you need. For example, to avoid cutting into your grocery bill, you might need to eat out less often or select a more affordable cell phone plan. You can also focus on increasing your income, perhaps by working overtime or taking a second job.
There are also plenty of ways to save money on essential items, which can help you stay within your budget. In Chapter 4, we’ll share money-saving tips for groceries, utilities and gas. If you realize you’re spending too much on home, car or life insurance, let us know at David Pope Insurance.
If you’re having a hard time identifying your household expenses or would like a more accurate view of your monthly expenditures, consider tracking your spending. After you track your spending, you’ll be ready to create a budget that matches your needs.
There are several ways to track your household expenses, and the best method depends on your personal preference. You might use a household expense tracker application, for example, which can help you record spending on the go. You can also use a computer spreadsheet, budget worksheet, or pen and paper to record and track expenses — whatever works best for you.
Regardless of your method, you can identify hidden costs and use your resources better when you track how you spend your money. As a result, you’ll be on a path to financial well-being.