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Breaking down Avg American Spend
Old 10-10-2019, 08:32 PM   #1
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Breaking down Avg American Spend

I usually don't like to link to MW but in this case the data came from the BLS Bureau of Labor Statistics. I debated attaching this to the chart of the day so someone feel free if obliged.

Since I know all my ER friends like Synopsis:
There are 2 charts the first is of a typical 78k budget, the second in the MW artical is of a "expensive" city budget of 350k which I totally cannot relate to but know there are some on this forum that can. Debate away, and please for the love of $$$ let's not get this thread shutdown like my past 2 heh.


https://ei.marketwatch.com/Multimedi...0123701_NS.jpg

And here a link to the original MW artical showing a "city budget" that might be typical of some of the Dual Incomers on this forum:

https://www.marketwatch.com/story/wh...ney-2019-10-10

All twitter comments aside from it...I think its probably somewhat accurate. I thankfully do not live in a big city, I live outside it and nor do I commute into it...we pay less for daycare fam of 4 and WILL continue to pay less as we expand to 5.
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Old 10-11-2019, 06:40 AM   #2
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It's a little interesting, but it doesn't do much for me. My income is a little higher, and I'm single, so a much bigger chunk comes right off the top for taxes if I only save the amount listed. And that would include payroll taxes (FICA) that aren't listed in that chart. Obviously, budgets vary widely. Not much time for me to analyze further right now.
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Old 10-11-2019, 07:53 AM   #3
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Quote:
"Since I know all my ER friends like Synopsis:
There are 2 charts the first is of a typical 78k budget, "
Is it? I couldn't tell from what was presented, or I missed it. It looks to me like those are overall averages of everyone. But that doesn't mean that someone with an average income spends the average amount in any of those categories. I'd expect these things to not be a linear relationship. Every word that I saw just talks about "the Average American".

What they would need to do is something more like look at the group of people in the $78,000 income range (maybe $70~80,000?), and break down the spending of that group. If these are averages (which I think they are), I don't think it works.

As an example, since some people buy very expensive 3rd homes, that would show up in the averages. But I'm pretty sure almost no one in the $78,000 income range owns an expensive 3rd home.

Another example:
Quote:
The average family consists of 3.14 persons in 2018, down from 3.7 in the 1960s.
But no family is 3.14 or 3.7 persons.

-ERD50
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Old 10-11-2019, 10:33 AM   #4
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Originally Posted by ERD50 View Post
Is it? I couldn't tell from what was presented, or I missed it. It looks to me like those are overall averages of everyone. But that doesn't mean that someone with an average income spends the average amount in any of those categories. I'd expect these things to not be a linear relationship. Every word that I saw just talks about "the Average American".

What they would need to do is something more like look at the group of people in the $78,000 income range (maybe $70~80,000?), and break down the spending of that group. If these are averages (which I think they are), I don't think it works.

As an example, since some people buy very expensive 3rd homes, that would show up in the averages. But I'm pretty sure almost no one in the $78,000 income range owns an expensive 3rd home.

Another example:

But no family is 3.14 or 3.7 persons.

-ERD50
Totally understood. I am not a fan of averages without the context. Unfortunately its how a lot of data is presented... YMMV.
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FIRE in 2031 @ 50yrs old (+/- 2yrs) w/ a hypothetical $2.5mil portfolio, 3 appreciated homes worth $1.0mil and rental income to fund my gap years until RMD. Assets will go to an inherited IRA where I plan on watching the investments grow until I die or the trust gets executed.
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Perhaps they are adjusting family size for BMI
Old 10-11-2019, 11:02 AM   #5
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Perhaps they are adjusting family size for BMI

Quote:
Originally Posted by ERD50 View Post
Another example:

But no family is 3.14 or 3.7 persons.

-ERD50
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Old 10-11-2019, 11:39 AM   #6
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Average is an interesting term.

Three friends and I were sitting at a bar drinking beer. I estimate we had an average net worth of $82,000. Bill Gates dropped in an joined us. Our average net worth was now an estimated $10,000,000,000.

Note: Since fabulously wealthy people are known for not carrying much cash on them, we had to pay for Bill's beer.
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Old 10-11-2019, 03:58 PM   #7
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Quote:
Originally Posted by ERD50 View Post
Is it? I couldn't tell from what was presented, or I missed it. It looks to me like those are overall averages of everyone. But that doesn't mean that someone with an average income spends the average amount in any of those categories. I'd expect these things to not be a linear relationship. Every word that I saw just talks about "the Average American".

What they would need to do is something more like look at the group of people in the $78,000 income range (maybe $70~80,000?), and break down the spending of that group. If these are averages (which I think they are), I don't think it works.

As an example, since some people buy very expensive 3rd homes, that would show up in the averages. But I'm pretty sure almost no one in the $78,000 income range owns an expensive 3rd home.

Another example:

But no family is 3.14 or 3.7 persons.

-ERD50
I dunno. At 5' 0" and a buck-10, DW is about .7 of a people. Okay, maybe .8
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Old 10-11-2019, 11:33 PM   #8
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Looking at the $350,000 family the child care expense for the 4 year old is extremely temporary and should shortly become significantly less. This should free up $20000 a year in free cash flow for starters.
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Old 10-12-2019, 01:14 PM   #9
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The expense table was lifted from the Financial Samurai article/website and it's had tons of comments as to how unrealistic it is. You need to take it in the context of the original author and his motive. He was trying to show/justify that he was unable to survive on $200,000 of passive income annually...because he FIRE'd in San Francisco in his early 30's with a family of four.

Here is the "original" original article from earlier this year (and I believe that was also updated from an earlier version). Apparently he is getting $50,000 more taxable income today, yet also manages to have almost $500 per month less.
https://www.financialsamurai.com/liv...xpensive-city/

It's laughable that he chooses to spend almost $70,000 a year for his home between mortgage and property taxes.
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Old 10-12-2019, 01:31 PM   #10
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Quote:
Originally Posted by urn2bfree View Post
Looking at the $350,000 family the child care expense for the 4 year old is extremely temporary and should shortly become significantly less. This should free up $20000 a year in free cash flow for starters.
I don't know about freeing up $20,000 at 5 years old. Would likely turn into $25,000 private kindergarten.

Need to think about averages more as I eat (and factor in) my free bag of chips I got for volunteering...
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Old 10-12-2019, 02:20 PM   #11
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Originally Posted by Mdlerth View Post
You are what you eat. Some families eat a lot of pi.
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Old 10-12-2019, 02:24 PM   #12
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It costs a lot to live in San Francisco. Thanks to Google, Facebook, Twitter, Zynga...
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