American Budgets: Average Household Vs. Federal Spending

Budgets. We all have them. From every individual household to local municipalities, to state governments, to the federal government, decisions must be made as to how the money will be spent. While budgets may not be so exciting to talk about, they are necessary and must be dealt with—whether they have been balanced or not. So how do you spend the money in your personal budget and how does it compare to the typical US household? How does the government spend the taxpayer dollars they collect from you in their budget? And how does the way you spend money differ from the state?

How Do American Households Spend Money In Their Personal Budgets?

Let’s first take a look at the “average” American family. The most recent numbers that we have, for June 2015, show the average income before taxes was $68,662, up 6.6% from the average income for 2014. During this same period, average annual expenditures went up by 5.9%, with the payments for necessities, such as transportation, housing, food, and health care accounting for most of the increase.

Budgets: Where The Average Household Spends Most Of Their Money

The largest percentage of income for the average household goes toward housing ($17,798) 26.6% of income, in fact. Transportation costs have gone up over the last few years and represent 13.6% of an average household income. Food, also a major component of every budget amounts to 10.1%.

Budgets: Where The Average Household Spends The Least Money

The least money is spent on items that are expendable, especially during times of financial restriction. Coming in at the bottom of the budget are apparel and services, cash contributions, and entertainment. It would stand to reason that these items account for the least because they are not necessary. These are the items that come into play when there is discretionary income—the income that is left over each month after all the essential bills are paid.

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The amount of money that a household makes also affects their spending habits. For example, the lowest wage earners had to allocate a higher percentage of income toward food and housing than the highest wage earners did. Conversely, the highest wage earners contributed a much higher percentage of income to personal insurance and pensions, than did the lower wage earners, presumably because the higher wage earners have more discretionary income with which to allocate money to these types of items.

2015 HOUSEHOLD BUDGET

 us household spending 2015 by income

Source: Bureau of Labor Statistics

The Federal Budget

Any governmental budget is drastically different from a personal budget, in that the money being spent is not earned income. Government budget spending is derived from the money collected from income taxes. There are many different viewpoints on how and what the government should be spending its discretionary money on—even over what is a “discretionary” expense of government. However, there are certain items that a federal government has the responsibility to provide for the nation with said tax money that most people agree on, such as, national defense, infrastructure, and of course, providing compensation for elected officials.

Original Intent Of Tax Money, As Laid Out In The Constitution:

The Congress shall have The Power to lay and collect Taxes, Duties, Imposts, and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States; but all Duties, Imposts, and Excises shall be uniform throughout the United States

  • To borrow Money on the credit of the United States
  • To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes
  • To establish a uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States
  • To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures
  • To provide for the Punishment of counterfeiting the Securities and current Coin of the United States
  • To establish Post Offices and post Roads
  • To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries
  • To constitute Tribunals inferior to the Supreme Court
  • To define and punish Piracies and Felonies committed on the high Seas and Offenses against the Law of Nations
  • To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water
  • To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years
  • To provide and maintain a Navy
  • To make Rules for the Government and Regulation of the land and naval Forces
  • To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions
  • To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress
  • The President shall, at stated times, receive for his services, compensation, which shall neither be increased nor diminished during the period for which he shall have been elected, and he shall not receive within that period any other emolument from the United States or any of them.
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 The Federal Government’s Budget Today

Since the inception of our country, the government’s budget has greatly expanded from the original intent of tax money. Taking a look at the federal budget for today, we can see the additional areas that is has grown to include:

Over time, the federal government’s budget has become more closely related to an individual’s budget as it now has programs to redistribute money back to citizens. It now includes many programs, such as social security, medicare, welfare, housing, and healthcare.