June 20, 2014

Budgeting Statistics: By the Numbers

Read more about How to Get Out of Debt

Impulse purchases used to be limited to grabbing a candy bar at the checkout line or picking up a CD at the mall. Now, we can sit on the couch and order the latest iPad with just a click or even buy a movie and start watching it a second later.

Little wonder then that many of us have trouble keeping track of our money. It’s so easy to let go of and yet so hard to know exactly where it’s gone. Here’s where we bring in the B word. When you budget, you can stem those impulse purchases – whether made from your laptop, your new iPad, or a swipe of your credit card at the store down the street.

But who’s actually budgeting and to what extent? CreditDonkey set out to find the answers by gathering the latest statistics on the topic.

Keep Track, Save Money

The fact is not many people do it. According to a 2013 Gallup poll, only 32 percent of U.S. households prepare a monthly budget.

Whether or not you budget may depend on your education. While 38 percent of college-educated folks practice the budgeting habit, only 26 percent of those with a high school education or less do it.

CreditDonkey, which tends to attract visitors with an interest in personal finance, did its own survey and found of those people who budget, 70 percent take the time to check their spending against it at least once a week.

Related: No Savings

What We’re Buying

So, how does the content of our budgets look? According to the U.S. Bureau of Labor Statistics, in 2012, an average household with 2.5 people and 1.3 earners spent a total of $51,442 per year. The biggest single piece of that spending was on housing, about 33 percent of the total. Another $8,998 went to transportation, and $6,599 was for food, including $2,678 spent on eating out. The next largest categories were personal insurance and pensions at $5,591, health care at $3,556, and entertainment at $2,605. People also donated $1,913 to churches, charities and other causes.

The content of Americans’ budgets has changed tremendously over the years. The BLS reports that back in 1901, when the average family’s expenditures added up to just $769 per year, 42.5 percent of that spending went to food and 23.3 percent for housing. That means more than two thirds of spending was on these basic necessities, compared with less than 50 percent today.

Related: Household Spending Statistics

Rainy Day Funds

Of course, a major reason people keep a budget is to make sure they can set aside money for the future. According to Bureau of Economic Analysis numbers compiled by the St. Louis Fed, Americans saved an average of 4.3 percent of their incomes as of the start of 2014. Americans’ personal savings rates were typically above 10 percent in the years between 1960 and the mid-80s, but they’ve plummeted since then. Interestingly, boom years, when households might be well advised to set aside money for a rainy day, tend to have the lowest savings rates. In July of 2005, the rate was only 2 percent.

The CreditDonkey survey found that 29.2 percent of respondents say they aren’t saving any of their income, but 10.8 percent are saving more than 20 percent.

Many people find a good way to save money is to have specific goals in mind. Building up a reserve equal to six months of income can help guard against financial disaster if the unexpected happens. And saving for a house, putting money in the kids’ college accounts and preparing for retirement can provide motivation for skipping that extra dinner out or new electronic toy.

Related: Monthly Savings Plan

How We Do the Numbers

So, how do we make sure we’re saving as much as we want? Among households that keep a budget, CreditDonkey found that 70.7 percent use a bank account website, while 31.7 percent plug their numbers into a spreadsheet, 20.8 percent use a checkbook, and 29.2 percent use either a mobile app or computer software (obviously, there’s some overlap in the numbers).

The Gallup survey, meanwhile, found that 30 percent of respondents make a long-term financial plan for how to save or invest their extra cash. For people with a high school degree or less, the number is 20 percent, while college grads tend stand at 38 percent. Among households with incomes of $75,000 or more, 43 percent have investment and savings plans, but only 18 percent of those pulling in less than $30,000 have such funds.

Of homes that plan for savings and investment, 24 percent use an accountant or certified financial planner, while 32 percent use a computer program.

These days, many bank, credit card and credit union websites automatically break down customer’s debit and credit card purchases by category. And, with mobile apps, it’s an even easier matter to track every purchase, including those made with cash.

In some ways, modern technology can make us more likely to go over budget by falling for that enticing, impulsive buy. But, at the same time, it also provides a way to focus on long-term plans and keep those impulses under control.

Related: Best Budgeting Apps

More from CreditDonkey:

Infographics: Grocery Shopping Plan

How to Save Money on Groceries

How to Save Money on Gas

What do you think will happen if you can't pay your debt?

Survey: Bankruptcy Statistics

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