Follow the Money….

My family, like many families, reviews our spending to see what we need to cut, what new expenses we need to make room for, and basically how we are going to live our lives.  Our choices are impacted by new innovations, our wants and needs, what our friends and family and other “influencers” are doing, and in some ways how we want to demonstrate our values and principles.

“Follow the money” – that’s what the detectives are always instructed.  So, as we try to figure out how consumers will spend their hard-earned money in the coming years, it doesn’t hurt to take a look back at the past.  The U.S. Department of Labor publishes the Consumer Expenditure Survey, and has done so for over 30 years, which provides a great view on how people have spent their money and how that’s shifted over time.  At the risk of making me feel even older than I already am, I’ve chosen to select 2 years – 1986, when I was 15 years old, and 2016, when my oldest son was 15 years old.  What shifts might be hard to tell over a couple years can get pretty magnified when looking across a generation.

In 1986, on average, each of our 94 million households spent nearly $24,000 per year.  In 2016, each of our nearly 130 million households spent over $57,000 (not adjusted for inflation).  As a percentage of our total spending, we’re spending a lot more on healthcare (8.0% vs. 4.8% – no explanation needed!), utilities (6.8% vs. 2.9% thanks to cell phones and electricity), shelter (19.4% vs. 16.7% due to bigger mortgages), and pensions/Social Security (11.9% vs. 8.9% as we reach closer to retirement age).  We’re spending a lot less on cars/transportation (15.8% vs. 20.3%), food (12.6% vs. 14.4%), apparel (3.2% vs. 5.6%), and furnishing our homes (3.2% vs. 4.2%).

 

 

There are some smaller shifts as well – spending more on education (thanks to higher tuition and student loans), pets, and audio/visual equipment and services, and less on reading, entertainment admission fees, and tobacco.  In many ways, looking at these shifts, one could conclude that we as a society are spending a lot more on our “needs” with technology now being a need in today’s world with a lot less leftover for our discretionary “wants.”  It sure seems to line up with the industries that are currently being challenged in today’s economy – and not exactly what all those prognosticators had in mind in the 20th century when they said we would shift to being a society of leisure.

I’d love to hear your thoughts – drop me a line at sdiamond@lapineinc.com and let me know what you’re seeing.


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