Couple working on budget together © iStock

How much other people spend, and on what, shouldn’t matter that much to us. After all, even someone who has the same income likely has different obligations and priorities.

But some financial planners find that showing their clients what others spend on housing, transportation and other bills can be a powerful tool in helping them craft a realistic budget.

“It helps to give a client a reality check and a comparison for what is average,” says Dan Serra, a CFP professional with Chevy Chase Trust in Bethesda, Maryland.

A rich data mine

Serra uses the Consumer Expenditure Survey, an annual report by the Bureau of Labor Statistics that breaks down various expenses in detail and offers averages by income, region and family size, among other factors.

Average spending for households

Housing (including mortgage or rent, utilities, property taxes, maintenance and insurance) tends to be a family’s biggest expense.

Households earning $70K+ a year
Category Amount spent Percentage of spending
Housing $26,954 31.1%
Transportation $14,908 17.2%
Personal insurance and pensions $12,614 14.6%
Food $10,084 11.6%
Health care, including health insurance $5,797 6.7%
Entertainment $4,524 5.2%
Apparel $2,860 3.3%
Personal care $997 1.2%
All households
Category Amount spent Percentage of spending
Housing $17,377 33.5%
Transportation $9,104 17.5%
Personal insurance and pensions $5,551 10.7%
Food $6,665 12.8%
Health care, including health insurance $3,919 7.5%
Entertainment $2,560 4.9%
Apparel $1,674 3.2%
Personal care $602 1.2%

Source: Consumer Expenditure Survey Q3 2013-Q2 2014, Bureau of Labor Statistics

Note: Percentages don’t total 100 because not all spending categories are included.

“It is helpful to be more precise in finding the factor that matches the client because a client may relate to it more than just general expense numbers,” Serra says.

Revising priorities

The statistics also help start conversations about the clients’ “goals and dreams and values,” says CFP professional Betty Hedrick of Mercer Island, Washington.

BLS statistics show, for example, that housing comprises about one-third of most people’s spending. Clients who spend half of their money on housing may not realize they’re spending significantly less than others on travel, dining out or other discretionary purchases, Hedrick says.

“If you value travel more than you value sitting at home, your spending needs to reflect that,” Hedrick says.

Start by tracking spending

To see how their spending compares, people first have to track where their money goes, planners say. They can do that the old-school way, writing down expenditures in a small notebook, or by using account aggregation software such as Quicken or sites like Mint. Once they have a few months’ worth of transactions, they can use a calculator or spreadsheet to determine the percentage of their total spending that goes toward each of the major categories such as housing, food and transportation.

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