Americans Spend Less Now Than in ’73

Even with the added cost of smartphones and other technology, American families spend less of their total income today than 40 years ago, according to new research.

But people aren’t saving that extra money.

The average person spends 81.2 percent of his or her post-tax income on food, housing and other expenses, according to ConvergEx Group, a New York brokerage.

That’s down from the 85 percent that Americans shelled out for mandatory and discretionary items in 1973.

The analysis doesn’t fully explain how and where Americans spend their money. It’s based on a consumer expenditure survey by the Labor Department that doesn’t capture where every dollar goes.

The roughly 14 percent of unaccounted-for income today may go toward expenses such as debt, but it’s impossible to be sure, said Sarah Millar, the author of the report.

Still, it’s clear that Americans aren’t socking away the extra money for the future.

“In short,” the report says, “spending — and saving — among American consumers is changing, and not necessarily for the better.”

The U.S. saving rate is a fraction of what it used to be: 4.6 percent today versus 13 percent four decades ago, according to the report.

“Where are we putting the extra money? Not into retirement accounts, stocks or bonds, clearly,” the report says. “The 1973 households surveyed are still more or less in decent financial standing today; we’ll see how it works out for those of 2012.”

The analysis provides an interesting snapshot of American spending habits.

In 1973, according to ConvergEx, the average American had post-tax income of $9,700. Annual spending was $8,270, or 85 percent of income.

Income has risen to about $63,000 today, but per-person expenditures average only 81.2 percent.

That may seem counterintuitive given that smartphones, Internet access and ubiquitous pay TV didn’t exist in the era of Watergate and the Arab oil embargo.

Americans spend about the same percentage on phone service today (2.4 percent) as they did in 1973 (2.2 percent), according to the report. Phone companies have raised cellular rates, but that’s been offset by consumers scrapping their land lines.

Overall housing costs have risen to 32.8 percent of income from 30.8 percent.

But the cost of so-called shelter, an owned or rented dwelling, has jumped to 19.2 percent from 15.9 percent. That’s due partly to an increase in average home size, to 2,700 square feet from 1,400 square feet in 1970.

A notable cost reduction has come in food, according to the report.

The average family shells out 12.8 percent at grocery stores and restaurants today, versus 19.3 percent in 1973. Smaller average family size — 2.5 people today versus 2.9 people in 1973 — explains part but not all of the difference.

Overall spending on transportation has fallen to 17.5 percent today from 19.3 percent in 1973, as vehicle purchases and expenses have declined to 6.6 percent from 9.5 percent.

But the cost of gas and motor oil has increased notably. It’s at 5.4 percent today from an elevated 4.2 percent during the 1973 oil crisis.

One surprising cost-saving: “floor coverings,” which went from 0.5 percent in 1973 to nothing today. How to explain it? “The death of the shag carpet,” Millar surmises in the report.

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About thenoelteam

As a Broker with RE/MAX Alliance, I work energetically for my clients whether they are a buyer or seller. I help you achieve your goal of owning a home or getting the best price for your home in the shortest time possible. After graduating from UCLA with a degree in communications and finance, I was licensed in 1977 and since then I have sold over 3600 properties amounting to over $1 billion in sales. I currently rank in the top 10 in home sales for Colorado. I offer the same quality of service and superior communication to all clients, ranging from starter homes to multi-million dollar estates, commercial and income properties, relocations and foreclosures My goal is to provide you with the best representation possible whether you are buying or selling. Over the years, one of the things that I've discovered is that there is a difference in the way individual Realtors do business. For me, I have always felt that honesty and personal integrity are the foundations upon which a successful business and career are built and sustained. I have an extensive background and knowledge base in real estate, including financing, which has enabled me to provide outstanding, quality advice and service not found with many agents today. My commitment to communication creates a positive relationship between my client and myself that results in a successful property sale or purchase. My passion for real estate, commitment to my clients and personal integrity has helped me to achieve success placing me in the top 1% of all brokers in nationwide. In my career, I have earned a number of awards and received considerable recognition for my success but the most significant recognition comes from the fact that over 75% of my business comes from past clients. My success is a true measure of my client satisfaction.
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