When you take a look across America, you have a basket of diversity. There are approximately 350 languages spoken in homes across the United States. We enjoy the company of almost every race, creed, sexual orientation and measure of diversity across our land. With this diversity comes the different socioeconomic backgrounds. There are high cost of living areas (HCOL) and low cost of living areas (LCOL). There are spots of this country with poverty and places of vast abundance. We have food deserts alongside oases, places where jobs are abundant and others where they can not be found. The United States is a diverse country but today we are going to be looking at average finances across the entire nation.
According to the Bureau of Labor Statistics, the median weekly earnings of full-time workers in Q1 2020 was $957. This gives a median income of $49,764 per full-time worker. Using information from the American Community Survey we can see that the median income by household is $61,937 (note this data is from 2018 as that is their most recent release). Using that information, we can say that the median US household has 1.24 full-time workers. An interesting note here, married-couple families have a median income of $91,348 while non-family households have a median income of $37,004.
If we break the data down further to look at it by state, we can see Maryland has the highest median household income of $83,242 while West Virginia has the lowest median income coming in at $44,097. What does this really mean? As we can see from the map above, high income areas are clustered around the northeast and west coast while we have lower income areas particularly in Appalachia and the southeast. Finances are made of more than just income, we need to take a look at median expenditures as well.
The one thing that we can be sure of, is that Uncle Sam will get his piece. For 2020 the Federal Income Tax rates are as follows:
|Tax rate||Single||Married, filing jointly||Married, filing separately||Head of household|
|10%||$0 to $9,875||$0 to $19,750||$0 to $9,875||$0 to $14,100|
|12%||$9,876 to $40,125||$19,751 to $80,250||$9,876 to $40,125||$14,101 to $53,700|
|22%||$40,126 to $85,525||$80,251 to $171,050||$40,126 to $85,525||$53,701 to $85,500|
|24%||$85,526 to $163,300||$171,051 to $326,600||$85,526 to $163,300||$85,501 to $163,300|
|32%||$163,301 to $207,350||$326,601 to $414,700||$163,301 to $207,350||$163,301 to $207,350|
|35%||$207,351 to $518,400||$414,701 to $622,050||$207,351 to $311,025||$207,351 to $518,400|
|37%||$518,401 or more||$622,051 or more||$311,026 or more||$518,401 or more|
Based on the above table we will assume our median worker is filing head of household. This gives them a federal income tax burden of 7,973.92. This is calculated using the below formula:
((63,937-53,700)*0.22) + ((53,700-14,100)*0.12) + (14,100*0.10) = 7,973.92
We also have social security tax and Medicare tax which are 6.2% and 1.45% respectively. When doing calculations we are assuming the median worker is a W-2 employee for arguments purposes. This gives us an additional 3,840.09 and $898.09 respectively.
We also have the average state income taxes. Some states have no income taxes while others have progressive tax systems. So, I went through and averaged the effective tax rates on an income of $61,937 to determine the average state income tax rate of 2.35%. This gives us an annual state tax income burden of $1,455.52.
Next up we have our healthcare costs. For this we are going to keep things simple and use the Kaiser Family Foundation data for the annual employee premium for an employee plus one. This gives us an annual premium of $3,634.
The median home value in the United States is $248,857. We can then go to the American Housing Survey to take a look at median mortgage payments as well. The median mortgage payment in 2017 was $1,100 with a median interest rate of 4%. For the millions of renters across the United States their median rent is $849.
We can also get some other data from the American Housing Survey, such as taxes, insurance and utilities. In 2017 the median monthly real estate taxes was $200.00. The Monthly cost of Homeowner’s insurance was $83. For electricity we have $119, gas is $60, trash is $25, and water we have $50. Now you may not have all of those costs depending on your municipality but again we are going we the median financial situation in the United States.
Using data from Autowise we can look at what the average monthly used care price is as well. Most American’s have a car payment so we are using the used car average payment as a fair average. This gives a payment of $324.22. If you’re more interested in leasing a car I suggest you check out this post we put up about scoring a great lease
Your car requires gasoline to keep going and this data was a little harder to find. However, we were able to find data from CNNMoney stating that the average American spends $368.09 on gas each month. Now that was during 2011 when the national average of gasoline was $4.00. Currently it is closer to $2.00. So, we will take half this price as a fair amount which gives us $184.05.
Next up we have car insurance. According to Nerdwallet the national average for car insurance is $1,427. Obviously, there are lots of factors that go into car insurance but this is a fair average to use for our purposes.
We all need to eat right? According to Consumer Expenditures report in 2018 the average American household spent $7,923 on food every year. That breaks down to $660.25 per month. Hopefully personal care items and the like are included because it seems a bit high for me.
Next up is taking a look at MoneyFit’s article on consumer debt. They really breakdown how statistics can be a little misleading but they draw some great conclusions. Given their numbers the average American household has $3,708 in credit card debt. Given the average APR of 17% that would result in $52.53 of interest per month plus 111.24 of principal if the company requires the typical 3% of the outstanding balance.
The Average Finances of US Households
|Median Household Monthly Income||$5,161.42|
|Federal Income Taxes||$664.49|
|State Income Tax||$121.29|
|Mortgage Payment (Principal and Interest)||$1,100.00|
Just based off of these basic budget payments $4,571.67 of the average monthly household budget is already taken up. Our budget doesn’t have items for things like clothes or personal care items. In this budget we also haven’t listed how much money we are saving. Let alone doing anything fun like vacations. After these line items we only have $589.75 left for the rest of our budget. If we saved every single penny our savings rate would be just north of 10%.
What do you think about these averages and medians? How does your budget stack up? Let me know in the comments below!